Both individuals and business owners can benefit from eliminating wasteful spending to save additional money. The following ten tips provide easy strategies to start saving money now:
Tips for Individuals:
- Ask for discounts and use coupons. Select non-branded products, which are often found at a lower price than name brand goods. Check for a trial price or return/refund guarantee. You can never be sure that a product is truly beneficial until you try it.
- Buy major purchases using credit cards that offer product assurance guarantees and make filing disputes easy. If a product is defective or damaged, you may be able to get it repaired or replaced for free.
- Monitor your transactions via statement review, online account or financial aggregators to verify that there are no automatic charges that are being billed to your account for services that you are no longer using. A $5 charge per month for a service that you are no longer using is equivalent to throwing away $60 every year.
- Contact service providers/vendors to verify that there are no contracts that offer lower monthly service charges. Many companies offer varying service levels and contracts at different prices. They will not tell you of the changes in contract costs until you ask. For instance, avoid paying $190 for cable service when you can pay $75 for just the channels that you frequently watch. Too many people are overpaying for cable and cellular services.
- Segregate your monthly spending plan into two groups: discretionary and non-discretionary. Then, set up two accounts for deposit: one for regular monthly bills and one for discretionary spending. With two separate accounts, you can manage and monitor your discretionary spending. Arrange for regular bills to be paid by a bill-pay service or electronic fund transfer (EFT). Conversely, use a debit card or check for personal spending. You can closely monitor the discretionary budget each week and reduce personal spending as needed.
Tips for Business Owners:
Profitability impacts business value and loan covenants. Business value impacts succession planning. It is critical for a business owner to complete a periodic audit of expenses to reduce unnecessary spending and improve profitability.
- Ask employees for areas where they think costs can be reduced. Where do they see wasteful spending?
- Review your invoices and ask vendors for discounts or promotional pricing.
- Review your operational spending and see where you can reduce costs. For example, firms frequently overspend on copier costs and office supplies. Additionally, many firms choose to expand their rental space without first verifying the efficient use of the current space. Are there ways to reduce energy expenses and wasted materials from production?
- Are you effectively leveraging your employees? Can you cross-train employees so that more work can be shared and overtime expenses can be reduced? Maybe some employees would prefer to be classified as part-time, but at a higher pay rate, rather than receive fringe benefits. These changes could reduce overall labor costs. Lastly, are there positions that are not productive or profitable and should be eliminated?
- Are your marketing dollars truly being spent productively? Do you know your return on investment? Spend money on effective marketing, rather than on ads that you have simply done in the past.
In my experience, about 10% of both personal and business spending is wasteful and inefficient. About 10% of budgets can be cut without a change in lifestyle or business effectiveness. A third party can often help to complete an audit and discover expenses that can be reduced or eliminated. My fellow CFP Board Ambassadors offer many articles that can help you monitor and reduce your spending.