This is post #28 from the 30 Day Personal Finance Challenge: Boost Your Financial Health with a Daily Tip!
Once I knew how much I spend and for what, I could see what my biggest expenses are. The best way to approach cutting your expenses is to face the biggest pains first and then optimize the rest.
My biggest expenses
This includes all utilities, such as water, electricity, heating, internet). I couldn’t do much optimizing here.
I already live in an affordable city, in a central but not so expensive neighborhood. – Kate App
The rental contract for my apartment has been running for about 5 years now. Due to rent regulations in Germany, once you rent an apartment, no matter how the real estate market develops, the price stays relatively stable. Unreasonable rent raising is rare. Even if the landlord wanted to majorly increase the rent, they would have to introduce a major improvement in the flat.
Moving to another place wouldn’t make sense for me. Even if I found a better price which is almost impossible because prices are through the roof in recent years in Berlin (no pun intended), I would have had to make a compromise on my quality of life.
It depends heavily on how often I eat out.
I started bringing my own lunch to the office. I experimented with reducing groceries shopping bills by buying supermarket own brands. I don’t see much of a difference in quality anyways.
I reduced my latte factor, a term popularized by David Bach to show the high cost of small, periodic spending. For example, I was buying a mega-delicious almond milk flat latte for €4 several times a week on the way to work. Over a long period, the amount grows up and you would be surprised how much money you spend on ‘lattes’. Try out this latte factor calculator to see it for yourself.
Unfortunately, the savings are not massive in this category. Even if I saved €10-15 weekly on my groceries shopping bill, it wouldn’t have made such a difference.
I love my freshly baked bread, fresh fruits, veggies, and fish! – Kate App
I wouldn’t sacrifice healthy eating for a small saving. Plus, the groceries bills increased anyways when I started to cook my own lunch.
Vacation & Leisure: €0-2000
Depending on the month, this could have gone up to €2000 when planning a big trip. This happens usually once a year. Honestly, I enjoy travelling, and I have not been very frugal when it comes to finding better deals and economic destinations. This is something to work on in the future.
I am lucky that I live in Berlin which is a very public transport friendly city. I am double lucky that my company covers my monthly public transport card.
Transportation usually makes a big dent in most people’s budgets. I have never owned a car, never needed to service a car, etc.
More tricks to reduce expenses
- I love second hand and vintage shops! They are cheaper, provide unique outfits and are good for the environment. I rarely buy new clothes.
- I don’t drink. On the 14th Feb 2016 after being intimidated by the wine list and my inability to choose, a brilliant thought came to my mind:
Why do I feel obligated to drink anything?!
It’s almost an unconscious reflex to order a drink once you are out of dinner. I went for a 30 Day No Drinking challenge. I never went back to drinking again. As a consequence, I don’t go out for drinks so often, and even if I do I don’t end up spending tons of money on cocktails. Best of all, I spare myself the hangover the next morning.
- I have tried to do my own waxing and beauty treatments. These are time-consuming and the result is not the same as visiting a professional. Every now and then I spoil myself with a visit to the beauty salon. It’s more of a treat now since I don’t do it so often.
- I ride a bike as often as possible.
- I learned how to cook and found easy, quick and healthy recipes I can prepare at home.
- I paid for my overdraft.
- I am always on the lookout for things I don’t use any more but are in good shape. I sold my old camera which was laying around anyways. I tried selling some great pieces of clothing – it was really hard to get them sold! This made me go shopping even less often.
- I track everything in Toshl – it gives me extra visibility and it’s easy and delightful to use.
- I use a 2013 model Samsung phone. I don’t own a tablet or fancy tech gadgets. The fanciest thing I own is my photo camera.
- I don’t buy lavish Xmas presents and I rather give experiences as gifts.
- I do my own laundry and house cleaning. I have a Roomba robot which I have mixed feelings about.
Possible next optimizations
- Taxes, taxes, taxes! I pay heart-breaking 40% of my income into taxes. So far I haven’t found a (legal) way to reduce my taxes. Next step is to find a good tax advisor.
- Research travel hacks. I usually buy plain tickets full price and stay at Airbnb and smaller hotels. I know travel hacking is a whole universe of its own, but I need to dig in deeper to find out what I can do.
Some of my approaches won’t work for you, but the main thing is to identify the biggest pain point in your finances and start from there. You don’t have to get it right straight away, and it will never be done anyways.
Financial freedom is about the journey, not the destination! – Kate App
It has been a life-long process for me. One thing led to the other, and I am now able to build on top of a solid foundation.
Do you have any more ideas? Let me know in the comments section below.
Photo by Nicepik
Header made with Canva
Elke Moritz says
Take a look at your subscriptions (online like audible, amazon, or spotify, gym memberships, magazines etc) and insurances. Insurance is important, but companies do not tell you if they have recently added a new cheaper product with a slightly different coverage or if you can save a bit of money by changing some variables. For example my “Hausrat” Versicherung (renters insurance) includes my bike and glas (ceran stove, doors), and considering how long I’ve now been paying this, I could have easily paid for any damages instead of paying the increased premium.
When I was a student and needed to save money, I always tracked my expenses in an Excel sheet. I had certain categories and every time I bought something that didn’t fit in any of these categories, I questioned myself if I really needed this item. Plants are an example for this or decorations and candles.
Kate App says
Thanks for the tip Elke!
I share the same view – cut the crap and buy only what you really love and use: