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New Year Resolution – Saving Money, Reducing Costs

Happy New Year to my invisible and loyal followers. I thought I’d start out the new year (week 1 gone already), with a really simple way to save money and reduce costs annually. It’s a methodology that I learned in my consulting days that we helped to implement at large, global organisations. I believe it works and is applicable not only at the corporate level, but also at a personal level. Steps are simple, but the work, time and patience (as always) is what makes it effective. Here are the steps to follow:

 

1) Identify what your biggest cost drivers are on a monthly recurring basis. On a personal level this could be your car payment, rent/lease payments, mortgage, cable bill, entertainment, food, eating out, cell phone bill, etc.

 

2) Group these cost drivers as ‘Necessary’ and ‘Luxury’. This will help you identify what you really need vs. what is just excess waste. Excess waste in my mind would be cable bill, entertainment, eating out, etc.

 

3) Now that you have your cost drivers split between ‘Necessary’ and ‘Luxury’, first take a look at your ‘Luxury’ list. Which one’s can you do without? These monthly recurring ‘Luxury’ costs you can rid of, will now be costs going into your savings. Best way is to automatically deduct this from your paycheck into an account you don’t see or use often. I like to use an online savings account, like ING Direct or Ally, just to name a few. Just Google ‘Online Savings Account’ and I’m sure you’ll find a few. Also check out, bankrate.com.

 

4) Next, take a look at your ‘Necessary’ list. I would assume that costs that show up here would be rent/lease, mortgage, car payments, gas, electricity, water (i.e. if these utilities are not included in your rent or assessments), food, etc. With this list, we should focus on the ‘Quick Hits’, such as food, water, electricity, gas, and even rent. It’s quite basic but with your utilities, just make sure you are using what you need and not wasting. Simple steps to take such as turning your lights off, adjusting your thermostat, turning off your thermostat when you leave your house/apt, etc. can significantly impact your utilities costs. With rent, you can be creative and work with your landlord. If you have some money saved up, perhaps you offer him to pay 2-3 months rent upfront at a discount of 5%. You pay more upfront; however, over the term you agree, you’ll pay less. A win-win situation. Your landlord gets the money and you end up paying less.

 

5) Finally, the remaining costs in your ‘Necessary’ list may take a bit of work.For example, if you’re looking at your mobile phone bill, you may be able to reduce your monthly cost by going to a pay-as-you go phone or a lower monthly plan. Take a look at how many texts you send vs. voice calls you make vs. data. What do you use most? If you’re like me and a heavy user of text and data, look for a plan that has more text and data usage. Always, call your provider and speak to a representative to discuss alternative plans and options. Better yet, if your contract is coming to an end soon, you have lots of leverage by stating you will leave if you don’t get a lower monthly rate. You know best what you want to spend and what you want, so tell them.

 

These are 5 simple steps you can take in the beginning of the year to assess ways to Save Money and Reduce Your Costs.

 

Happy savings! (And as always, let me know if you have any questions!)

 

Cheers!

Category: Written Journal