How much did your household spend last year? According to 2019 Bureau of Labor Statistics (BLS) Expenditure Survey released on September 9, 2020, the average household spent $63,036. There is no doubt that this amount will change in pandemic-ridden 2020, but it gives us a good starting point for discussion.
Let’s begin with these questions:
How much do you think you could save of that $63,036?
Could you save 1% or 2% or $630 to $1,260?
Has COVID-19 reduced or changed your spending?
Could the savings you generate be used to help you pay off debt? Fund your emergency account? Add to savings for your later years?
Should you be thinking about where to save money?
The answer to each of these questions should be a resounding yes. The next question you might ask is where should you start looking for savings? In this post, I will give you 6 steps you should consider taking to determine what the level of spending should be planned for your household and where to look for savings.
The Six Steps
The six steps you should think through to find savings are shown below. I have phrased the questions as if you are approaching them as a household.
1. How Aware Are We of Our Spending?
Do you know what you are spending each month and why? Do you have a basic cash budget that you monitor? If you don’t have a budget, how do you know where your precious money is going. The first step in your journey to saving on your spending is to sit down and track the major categories of where your cash goes. I promise you that if you have not done this, it will be eye opening.
2. Where Should We Work?
The door is now open to question, if we have to take the job that does not allow for full or at least part-time remote work. Having this remote work flexibility reduces transportation, meal, and other work-related direct costs, along with the human wear and tear that happens when commuting into major metropolitan areas. If you can find the remote job, that comes with reasonable compensation, you can adjust your spending accordingly.
3. Where Should We Live?
The pandemic has opened the door to WFH or remote working. If remote work is now the norm for your household, you can consider moving to a lower cost area than you currently reside. I think this is a question many households will be asking themselves. We are seeing the creation of Zoom towns across the US that allow people to work in lower cost, higher quality of life areas, while still being connected to their workplaces.
4. What Lifestyle Should We Have?
As a result of the pandemic and restricted time at home, most people have had the opportunity to look at what they have been spending to live and consider making changes. They have decided to cut back or eliminate cash outflows on everything from clothing to entertainment. For example, more people have dropped their gym memberships and have decided to workout at home. You should sit down and contemplate exactly what you need to live and what is a nice to have.
5. What are Our Transportation Needs?
This is a big potential saver. If you can work remotely from home do you need that extra car? Per the BLS the average household spent $10,742 on transportation costs in 2019. If you can go with only one car in your household it can save a large amount.
6. How Does Our Spending Impact the Environment?
We all want to address improving the environment and fight the impacts of climate change. This starts with our energy consumption habits ranging from how we get to work, how much we use available public transportation, how we heat and cool our homes to the choices we make for the food we eat. These are all individual choices each household makes that can save energy and money. Turning down the thermostat winter to air drying clothing in summer all contribute to lower energy costs.
Your Spending Challenge
So there you go. Here are six steps for you to take and potentially act upon. Opportunities to reduce spending and increase saving are abundant. All it takes is for your household to become more aware of its spending habits and where savings can be generated.
If you're looking for ideas on where to find cash savings, please buy my new book, The FinancialVerse Guide to Savings – 600 Cash Savings Ideas.
The book is priced at $16.99 for print and only $3.99 for the eBook. Cash Savings provides practical suggestions for where you should look for savings as part of your day-to-day life. For most households, I believe they will find at least $600 in annual savings.