Cutting expenses drastically does not mean giving up everything you enjoy. It means going after the few large costs that decide your budget, then tidying up the small ones. Housing, transportation, food, insurance and debt make up most of what a typical household spends, so that is where a real cut has to come from.
This guide goes through every major area of your budget in the order that saves the most. Each section says what to do, what it takes and where to read more. If you are cutting because money is tight right now, start with how to budget on a very low income and our guide on how to prepare for a recession.
Where to Cut First
Work down this list from the top. The first three rows are worth more than everything below them combined for most people.
| Area | What to do first | Effort |
|---|---|---|
| Housing | Renegotiate rent, get a roommate or downsize | High, but the largest saving |
| Insurance | Requote car, home or renters and bundle them | One afternoon |
| Debt | Lower your interest rates and stop new balances | A few phone calls |
| Transportation | Drop a car, refinance the loan, spend less on gas | Medium |
| Food | Plan meals, cook at home, use cash back apps | Weekly habit |
| Bills and subscriptions | Call providers, cancel what you do not use | An hour |
| Everyday shopping | Shop with a list, buy used, wait 48 hours | Daily habit |
Start by Finding Out Where the Money Goes
You cannot cut what you have not measured. Pull the last two months of bank and credit card statements and put every charge into a category. Most people find that two or three categories are far larger than they guessed.
A spreadsheet works. So does an app that pulls in your accounts and sorts the charges for you. We compare the options in our guide to the best budgeting apps. Once you can see the totals, set a target for each area below.
Cut Your Housing Costs
Housing is the largest expense for most households, so a small percentage here beats a large percentage anywhere else.
- Get a roommate. Splitting rent and utilities is the fastest way to cut your largest bill, and it does not require moving.
- Negotiate at renewal. Ask for a lower rent in exchange for a longer lease, or ask the landlord to hold the current rate. Finding a new tenant costs them money too.
- Downsize. A smaller place lowers rent, utilities and furnishing costs together. Some people take it further with a tiny home.
- Homeowners: look at the mortgage. Removing private mortgage insurance once you reach 20% equity, or refinancing when rates are clearly below yours, can lower the payment for years. Compare mortgage lenders before you apply.
Cut Your Insurance Costs
Insurance is the easiest large bill to lower because the fix is a quote, not a lifestyle change. Insurers price the same person very differently, and rates tend to creep up for customers who never shop.
Car insurance
The average car insurance bill is about $1,282 a year, according to the Insurance Information Institute. Compare quotes every time your policy renews, using the same limits and deductibles. Then ask about discounts for paying in full, a clean record and low mileage. Get a free car insurance quote from Farmers and compare it to what you pay now.
Renters or homeowners insurance
Renters insurance averages about $171 a year, per the Insurance Information Institute, and buying it from the same company as your car insurance usually discounts both policies. Get a renters insurance quote from Farmers and ask about the bundle. Own your home? Get a Farmers home insurance quote the same way. Our guide to the best renters insurance shows how the bundle math works.
Life insurance
If anyone depends on your income, life insurance is not the place to cut. Overpaying for it is. Term life covers the 10 to 30 years your family needs you most, and it typically costs far less than whole life for the same payout.
Ladder lets you apply online in minutes. Policies up to $3 million take a few health questions and no medical exam, and you can lower your coverage later if you need less. There is a 30-day money-back guarantee. Get your price from Ladder or compare more options in our guide to the best life insurance companies.
Cut Your Debt Payments
Interest is the one expense that buys you nothing. Lowering it frees up money every month without changing how you live.
- Call your card issuer. Ask for a lower rate or a hardship plan. It takes ten minutes and they say yes more often than people expect.
- Pay the highest rate first. Put every spare dollar on the card with the highest interest rate and pay minimums on the rest. Our guide on how to get out of debt lays out the plan.
- Stop adding to it. If cards are the problem, take them out of your wallet. Some people go as far as cutting up the card.
- Check your student loan plan. Federal borrowers can switch to a payment based on income. See student loan repayment plans.
If you are juggling several balances, read how to manage debt before you consolidate anything.
Cut Your Transportation Costs
- Go down to one car. A second car costs a payment, insurance, gas, registration and repairs. If one of you can commute another way, selling it is one of the largest single cuts a household can make.
- Refinance the car loan. If your credit has improved since you bought the car, check current auto loan rates against yours.
- Pay less at the pump. Prices can differ by 20 or 30 cents a gallon between stations a few blocks apart. Upside pays cash back on gas you were already going to buy, and it stacks with your credit card rewards.
- Do basic maintenance yourself. Air filters, wiper blades and tire pressure take minutes and save a shop visit.
Cut Your Food Costs
Food is the most flexible large expense you have. You control it every week.
- Plan the week before you shop. Build the list around what is on sale and what you already have, then buy only what is on it.
- Cook at home. A restaurant meal costs several times what the same meal costs to make. Cut takeout to once a week and the difference shows up in the first month.
- Buy store brands and seasonal produce. The quality gap is small and the price gap is not. Buy staples in bulk and freeze what you will not use this week.
- Use coupons where they are easy. Store apps load digital coupons in a tap. Our guide on how to start couponing covers the rest.
Then get something back on what you buy. Fetch gives you points for a photo of any receipt from any store, and the points turn into gift cards. See more options in our list of the best apps to save money on groceries and the full guide on how to save money on groceries.
Cut Your Bills and Subscriptions
- Call your internet, cable and phone providers. Ask the retention department for the current promotional rate. Rocket Money will negotiate for you and only charges if it lowers the bill.
- Drop cable. Keep one streaming service at a time and rotate when you run out of things to watch.
- Cancel what you have not used in 30 days. Free trials that rolled into paid plans are the usual culprits.
- Lower the power bill. Turn the thermostat back while you sleep or are at work, set the water heater to 120 degrees, switch to LED bulbs and unplug what you are not using.
- Stop paying bank fees. Monthly maintenance and overdraft fees are optional. Plenty of accounts charge neither.
We go through each of these step by step, including what to say on the call, in how to lower your bills.
Cut Your Everyday Spending
- Wait 48 hours on anything you did not plan to buy. Most impulse purchases do not survive the wait.
- Shop with a list. For groceries and everything else. If it is not on the list, it waits until next time.
- Buy used. Refurbished phones and laptops, secondhand furniture and clothes cost a fraction of new and work just as well.
- Use cash for the categories you overspend in. When the envelope is empty, you are done for the month.
- Run a no-spend week. Pick one week a month where you buy only essentials. It resets habits and shows you what you do not miss.
- Use the library. Books, movies, audiobooks, Wi-Fi and often museum passes, all free.
- Repair before you replace. A button, a zipper or a patch costs almost nothing next to a new coat.
- Travel off-peak. Flexible dates and booking early cut the cost of flights and hotels more than any discount code.
For dozens more small wins, see our list of 56 ways to live cheap and the best money saving apps.
Offset What You Cannot Cut
Some costs will not move. When you have cut what you can, a little extra income closes the gap faster than another round of trimming.
Testerup pays you to test new apps and games, and you get a $10 welcome bonus straight after sign-up. A single game goal can pay over $200, and payout requests are approved within hours to PayPal, a gift card or your bank. Claim your $10 Testerup bonus
If you would rather earn in the background, Nielsen rewards you for keeping its app installed on your phone or computer. For more ideas, see how to make money from your phone.
Put the Savings Somewhere Safe
A cut only counts if the money does not get spent on something else. On the day an old bill used to be due, move that amount into savings. Start with a small cushion so one car repair does not undo your progress. Our guide on how to start an emergency fund explains how much to aim for.
Keep it in an account that pays interest. CIT Bank Platinum Savings is a good place to start, and we compare more in our list of the best online savings accounts. Once the cushion is in place, work toward your first $1,000 saved.
What Not to Cut
Drastic does not mean reckless. Keep your health insurance, the insurance your lender or state requires, minimum debt payments and basic car and home maintenance. Skipping those saves a little now and costs far more later. And leave room for one or two things you enjoy. A budget you can stand is one you will keep.
Frequently Asked Questions
Go after the largest costs first: housing, insurance, debt and transportation. Getting a roommate, requoting your insurance, calling your card issuer for a lower rate and dropping a second car save far more than trimming small purchases.
Start with anything you pay for and do not use, such as subscriptions and bank fees, because those cuts cost you nothing. Then requote your insurance and call your service providers. Lifestyle cuts like eating out come after that.
Cutting spending in half almost always means changing housing or transportation, since those are the largest costs. Sharing housing, moving somewhere cheaper or going from two cars to one does more than every small cut combined.
Keep health insurance, required home and auto insurance, minimum debt payments and basic maintenance. Cutting these creates larger bills later.
Track your spending every week, move the money you save into a separate savings account right away, and keep one or two things you enjoy in the budget so it is sustainable.
The Bottom Line
You do not need all of these. Pick the largest area on your list, make one change this week and move the savings out of your checking account. Then take the next one. Three or four of the big cuts will do more than thirty small ones.
