Many people in different stages of life want to know how they can lower their expenses to save more money for their financial goals and build their desired lifestyle. While budgeting and cost-cutting might not be the most attractive part of your financial journey, it can profoundly impact your plan’s overall success.
This article will review several topics, tools, and concepts that will help you live below your means, free up cash for your financial goals, and live a sustainable lifestyle without damaging your quality of life. We’ll begin with familiar strategies to keep more money in your pocket and then discuss some less obvious techniques.
Buy in Bulk
In most situations involving economic transactions, the purchaser tends to pay less per unit as the volume of the purchase increases. This fundamental truth leads to the first frugality tip: buying in bulk. Buying your necessities in bulk takes more planning than buying as the immediate need arises, but that extra effort can save you a lot of money. You can start by taking note of items you use consistently. Items you could buy in bulk include household staples like detergent, cleaning supplies, toiletries, and shelf-stable foods.
To expand on the example, unless you consider upgrading to a bidet–which is not a bad thing to consider–you’ll (hopefully) be using toilet paper consistently. Take note of how much toilet paper you use in a month. Take that amount and multiply it by three. That’s roughly how much toilet paper you use every quarter. With that knowledge, you can buy more toilet paper in bulk once a quarter instead of making a minor purchase monthly. You will be getting more for your money, and you won’t have to purchase as frequently, freeing up that bit of mental energy.
You can scale this up and buy a yearly supply of toilet paper if you want. The key is noting how much toilet paper you use and purchasing the necessary amount in bulk to save you money and last longer. With shelf-stable items like toilet paper, all things equal, you’re usually better off buying in bulk and getting the savings because if you buy too much of something you use every day, that means you won’t have to buy more for a longer time.
Consider Cost-Per-Unit
When shopping in general, especially in bulk, comparing prices based on the cost-per-unit is essential. The unit will depend on the product. For example, a toilet paper unit would be one roll, whereas a beef unit would usually be one pound.
If you have the option between two steaks of the same cut and quality, if one is 12oz and costs $15, and the other is 18oz and costs $20, which is the best value? In this case, comparing the steaks by ounce is easier—the 12oz steak costs $1.25 per ounce, and the $20 steak costs $1.11 per ounce. All else equal, the $20 steak is the better value.
Determining value can be tricky with liquids, as it may be harder to measure them by eye. The cost-per-unit method is essential here, as you will likely compare costs by fluid ounce. Luckily, many retailers provide cost per unit by default, saving you the calculation effort.
My Favorite Ways to Buy in Bulk
Not every outlet is designed to sell in bulk, or at least in the volume you want to get the lowest price per unit. To save more money for your efforts, seek out retailers specializing in selling in bulk. Here are some examples of programs I love:
Amazon Subscribe and Save
Amazon Subscribe and Save is the program I use most frequently for bulk shopping. It offers a hefty discount on competitively priced products and is a subscription-based service. This helps free up mental energy because once you figure out how quickly you use household staples, you can set up a recurring subscription. All the items on your subscription will be in one place, and you can adjust them as needed for your next order. Your orders can be set as frequently as once every two weeks or every six months. I have most of my items set to order quarterly.
Having at least five items in a given order can unlock a maximum savings of as high as 15%. While not every item offers up to 15% savings, many do, and you can often find different versions of the same item with varying savings because they are coming from a different seller.
In addition to the convenience and potentially massive savings you can get through Amazon’s Subscribe and Save, Amazon is already a competitively priced marketplace. That means the items I would buy anyway are usually cheaper (but not always; do your research) on Amazon even without Subscribe and Save. Add the ability to have bulk orders delivered straight to my door and big savings, and you can see why this service is one of my favorites.
Costco/Warehouse Clubs
I like warehouse clubs, specifically Costco, which is another way to buy in bulk. These retailers keep razor-thin margins, barely making a profit on the items they sell you. This allows them to pass bulk savings on to their customers. They make most of their money from membership subscriptions, enabling members to shop there.
I’m biased towards Costco because of how they run their organization, the quality of their Kirkland brand and other products, their legendary food court, and their massive suite of additional services and deals. Some other Costo benefits are savings on tires, car buying, prescriptions, and gas; they are even looking into providing health insurance. Costco superusers can upgrade their membership and get 2% cashback on eligible purchases up to a limit. These benefits can stack big for people who do a lot of business with the company.
Even though warehouse clubs can offer significant savings, that doesn’t always mean they are economical. I mainly use Amazon Subscribe and Save over warehouse clubs because I don’t need to buy perishable food in bulk. I can save a lot of money on household staples from Amazon, never going into a physical store or paying for a subscription. Considering how I would use it, the cost of my warehouse subscription may not be paying for itself. That’s why a detailed cost-benefit analysis is vital to ensure you get the best deal for your needs.
Buy Generic
Buying generic is an underrated way to save a lot of money. For much less, many generic products have become as good or even better than their name-brand counterparts. I always look for the store or generic brand when grocery shopping. On rare occasions, I find the generic doesn’t match the quality of the name brand and is not always the best priced (considering sales or other things), but the generic ends up being the best for my needs 95% of the time.
Some people feel attached to the name brand or feel their quality of life is better when purchasing name-brand products. While this psychological effect may be valuable for some, it’s important to consider the actual cost-per-unit difference. Paying more for everyday items adds up to a lot of money over time—that money could be used to meet your financial goals and improve your quality of life in other areas.
Utilize Couponing, Sales, and Clearance
Another tried-and-true way to save money and meet your financial goals is to utilize sales and clearances for the best prices. You can opt into that retailer’s marketing communications to keep track of who is having a sale on what items. Consider creating a separate email to receive these communications so they don’t flood your inbox.
Also, consider making planned purchases during big sales. Most things are on sale during Black Friday, Cyber Monday, Christmas, New Year, and other holidays. There are also typical times when certain items go on sale or clearance—for example, winter jackets in spring, swimsuits in the fall, etc.
If you already target affordable retailers, you can go even further by searching for their clearance deals. Many retailers offer big discounts, like 50% off, on inventory they want to get rid of quickly. If the retailer is already affordable, this can net you huge savings.
Use Digital Tools to Save:
If you need an expensive product like a laptop and can’t wait for Cyber Monday or a random sale, shop around for the best price. Google the model you are looking for to see which retailer offers the best price. You can often compare top retailers’ prices in a standardized format with Google Shopping.
Free apps like Honey can track price changes, apply coupons, and offer cashback on purchases. Its browser extension automatically searches for the best coupons and prices while shopping.
Capital One Shopping, Ibotta, and ShopSavvy are other apps and services you can use to save while shopping. I use a variety of these free apps to make sure I am getting the best deals available.
When searching for sales and using couponing apps, keep in mind that retailers offer these deals to get you to spend money you weren’t planning on spending. Would it be helpful if you saved 20% on an item you never needed? The goal is to stay disciplined with your budget and find deals on what you would purchase anyway—use these deals to your advantage and not to line the retailer’s pocket.
Seek Cashback/Rebates
Similar to the last section about bargain-hunting and couponing, there are often ways to get cashback on purchases you plan to make. This cashback often stacks on top of other deals and discounts.
Credit Card Cashback
One of the easiest ways to get cashback on purchases is to use credit cards. Credit card companies charge retailers for the convenience of using their payment system and will incentivize buyers by offering back some of those fees in credit card rewards. Many cards offer up to 2% cashback on all purchases or even bigger amounts on select categories. You can read more about different credit cards and how to maximize cashback here.
Please exercise caution when incorporating credit into your financial strategy. While credit can bring great rewards, it can also come with risk and fine print.
Schedule an appointment with me today to get help maximizing the benefits of credit cards. As a part of my comprehensive review of your financial plan, I will analyze your budget in depth and recommend the best credit cards for your needs. Based on my analysis, I will also project how much money you can save annually through optimal credit card use.
Rebate App Cashback
Another way to earn cashback with everyday purchases is through rebate apps. In this article’s “Couponing, Sales, and Clearance” section, I’ve mentioned some apps that may offer cashback. My favorite cashback app is Rakuten. I find them to generally have the most generous offers on the widest selection of retailers. Along with other sales and deals, I’ve used Rakuten to compound the savings on clothes, groceries, shoes, and more. In this article, I go into detail about using the Rakuten app.
Some apps are mainly dedicated to offering cashback on gas. My favorite gas app is Upside. I’ve also written an in-depth about using the Upside app here.
One of the most exciting parts about using these cashback programs (am I the only one excited about this?) is that they often stack. For example, if I find a great deal on Rakuten offering 10% cash back at my favorite retailer and make the purchase with my 2% cashback credit card, that’s already 12% cashback! That’s huge! Now, consider that this retailer may offer a clearance sale of 50% off, and you can see how these savings stack up.
To maximize savings using cashback offers, check the shopping apps when you know you’re going to make a purchase, install browser plugins to avoid missing an offer, don’t spend money you didn’t already plan to spend, and make sure you are shopping for the best prices.
Take Advantage of Payment Plans
Payment plans like buy-now-pay-later (BNPL) have gained notoriety in the past few years for offering pizza financing. While this scrutiny is well placed, like many financial strategies, there’s a proper way to use these tools and an abusive way to use them.
BNPL is a type of short-term credit that allows you to break select purchases into installments. A significant benefit is that many financing options come with no additional fees. Like other forms of credit, this can be abused if people use it to spend money on things they cannot or should not afford. If they couldn’t/shouldn’t have afforded it now, it won’t be more affordable by stretching it out over installments.
For those who know how to use credit properly, BNPL can be a powerful way to access free debt. Consider this scenario: I need to purchase a new washing machine. After finding the best model and deals for my needs, I settled on a machine costing $600. I already have the money set aside for this particular purchase in a money market account yielding 3%. Instead of paying the entire $600 up front, I can stretch it out into six installments of $100 per month with no additional fee. That means the money I set aside for the purchase can keep accruing interest over that time instead of being removed from my account immediately.
For those wondering, in that scenario, I would have profited about $7.50. This is not a life-changing sum but a healthy return for doing practically nothing. That’s an essentially free 1.5% return just for financing. The longer the term you can choose, the larger the theoretical return.
The scenario I gave shows how you can profit from free and cheap debt, but using debt as a strategy is a double-edged sword. It’s essential to be honest about managing debt, understand the fine print of any lending agreement, and make your payments on time and in full.
Also, many credit card companies offer in-house installment financing on more significant purchases. Instead of being free, many of these offers include a flat-dollar monthly fee. These flat-dollar fees may seem less scary than a percentage fee, but when you add them up, the flat-dollar fees can be much more expensive.
Take the same $600 washing machine purchase. My credit card company lets me finance this purchase over six months for a flat $5 monthly fee. Over these six months, I will pay $30, or 5% of the purchase price in fees, an annualized 10% APR. That’s not a cheap loan; it costs much more than I get from my money market!
When used correctly, free or cheap debt through BNPL programs can easily extract excess value from planned purchases. Just remember always to use debt responsibly.
Understand the Impact of Payment Modes
Many types of subscription payments can be made in different modes (e.g., monthly, quarterly, yearly). This applies to streaming services, other subscription-based services, and insurance premiums.
Similarly to the economics of the bulk discount, there is often a discount for paying for a yearly subscription rather than a monthly one. Providers may discount less frequent payment modes because they save on administrative expenses and have more guaranteed income if you pay for a year upfront rather than month-by-month.
The downside to paying for a longer subscription upfront is that it may be harder to get a refund if you no longer need the subscription or if it’s not what you expected.
When considering these factors, use free trials to get a feel for the product or service you are considering subscribing to. Note any money-back guarantees and the fine print governing them. Also, if a free trial requires entering your credit card, they will start charging you automatically once the trial period ends. Remember to cancel your trial if you don’t want to purchase before that happens.
With subscriptions you know you will use regularly for a long time, consider subscribing for as long as possible, assuming the length is reasonable for your needs. Lifetime subscriptions can also come with immense value, assuming you will use the service enough to justify it. You’ll have to pay more upfront, but you can save a lot over time if you are a frequent customer.
Lastly, monitor your subscriptions to ensure you only pay for the ones you use. Freemium apps like Rocket Money can track your subscriptions and even negotiate bills on your behalf. A premium subscription can unlock more features like budgeting, credit score, and concierge services. Remember that when negotiating bills on your behalf, these companies will take a percentage fee of what they manage to save you over the next 12 months.
If you prefer to monitor subscriptions yourself, review several months of your credit card and bank statements and locate any recurring charges for services you don’t use. Do a cost-benefit analysis and consider canceling these services if the savings are worth it.
Negotiate Bills
As I mentioned in the last section, negotiating your bills is an underutilized way to keep more cash in your pocket. While companies like Rocket Money will negotiate bills on your behalf for a fee, you can also try doing it yourself.
You can negotiate bills like internet, phone, utilities, gym memberships, and more. Call the company’s customer service and ask about retention offers or ways to reduce your bill. If you want to bring more oomph, find a competitor’s promotion and ask your current company if they can match it. Check out this NerdWallet article for an in-depth guide on negotiating your bills.
Mitigate Risk
When you think about insurance, you probably imagine a product such as a health insurance plan or life insurance policy. While these are quite literally insurance policies, consider a more abstract concept of insurance for a moment. Fundamentally, insurance is all the methods to mitigate the hazards and losses we face.
With that understanding, you’ll see that you practice insurance daily without a contract or a policy. Examples of this are not parking next to a poorly parked car, driving defensively, washing your hands after using the bathroom, avoiding unhealthy foods, attending preventative dental appointments, getting your vehicle maintained, and more.
These are all examples of insurance or an effort to mitigate risk so it doesn’t turn into a costly event. Washing your hands is an activity that costs next to nothing in time and effort and may save you hundreds in doctor’s bills if it prevents you from getting sick. Taking 30 seconds to park away from the awkward vehicle can prevent your car from getting dented as it pulls out.
We practice insurance every day without thinking about it. Consciously investing small amounts of money and energy into mitigating daily risks can save you big, long-term bucks, and many of these solutions involve practicing good habits. The more you connect these good, risk-mitigating habits with the money you’re saving (by preventing expensive issues), the more motivated you’ll be to continue them.
Most people don’t consciously think this way about insurance, but identifying and practicing low-investment forms of insurance in your daily life can save you many thousands of dollars in avoidable expenses over a lifetime.
Understand the Importance of Credit Scores
The value of a strong credit score cannot be understated. Your credit score will decide what house you can buy, how much interest you’ll pay on a loan, and even what jobs you can get. When you understand how vital personal credit is in our society, you will see that building and maintaining an excellent credit score can make or break your financial plan. Check out my comprehensive guide to credit scores to learn how they work and how to build, repair, or maintain your credit score for long-term financial success.
Conclusion
The easiest and least painful way to cut expenses is to pay less for what you already buy. In this article, I presented several free and low-cost ways to keep more money in your pocket without sacrificing your lifestyle or consumption needs.
If someone uses all the available tools and gets a conservative average of 5% savings on all their expenses, they are effectively increasing their net worth by that same amount. Considering the compounding effect, saving 5% on costs can add up to a million dollars or more over a lifetime. These techniques can make you materially wealthier by spending mere moments of your time!
Schedule a consultation today for an in-depth, personalized analysis of your budget and how to save the most possible. This is one of the services I provide as a Certified Financial Planner™. From there, I will show you how your budget and savings will power your comprehensive plan.
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