How to slash your bills

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Even if you’re still living with your parents or have them as a financial backup, there might be times when you or your family must drastically cut your spending. It might be during your time in college as you deal with tuition, room and board and student loans.

It might be because one or both of your parents has lost their jobs. Knowing how you can slash your spending will help you ride out tough times, or avoid running up lots of credit card debt when you’re not in trouble.

Small weekly spending cuts can add up to huge annual savings.

Create a personal budget, or a household budget if you’re helping your family cut back. Gather last year’s credit card and bank statements to determine what you spent on various expenses and what you might expect to pay this year. List your expenses by category, such as utilities, rent, food, car payments, entertainment, tuition, clothes and phone bills.

The Better Business Bureau provides a helpful list of household and personal expenses at its website. Look for the article titled, “Tips on How to Develop a Working Budget.”

Download and use our personal budget spreadsheet.

List your expense in necessary and discretionary expense categories. Necessary expenses are those you can’t easily cut, such as food and rent. Discretionary expenses include fast food, movies or video games.

Use last year’s records to determine your average monthly spending on each. Include savings for college tuition or an emergency fund as discretionary expenses. List your monthly income sources, which can come from an allowance, job, holiday gift money or other sources of income your parents have if you are creating a family budget.

Subtract your estimated monthly expenses from your estimated monthly income to see if you will have enough money to pay your bills. Reduce your discretionary spending numbers until you can pay your bills and meet your savings goals.

Look for ways to cut small, regular purchases you make. Cutting two cups of $5 coffee per week adds up to $520 per year, plus interest if you put those purchases on a credit card. If you’re on a college dorm meal plan, cutting two extra $20 pizzas per week saves you close to $100 per month.

Staying home to watch movies twice more each month and saving the $40 you’d spend at the theatre saves you another $500 or more per year if you put those trips on a card. Cancel a $30 monthly gym membership and buy some resistance bands, an exercise ball, bike trainer stand or other low-cost equipment, and/or work out in front of the TV following along with free exercise programs.

Decide if you really need the cellphone and plan you have. If you’re in an emergency situation, you might need to give up the extra coverage, apps and speed and get by with a basic phone and plan. Some companies offer free phones and $15 monthly plans that include basic calling and texting.

Cut grocery and household items costs using coupons, finding store specials and buying in bulk. Visit supermarkets on a non-shopping trip to compare prices at different local stores, check out generic prices compared to name brands, and to learn what each store’s coupon policy is.

Some stores will honor competitors’ coupons and deals, while some will double manufacturer coupons. Sign up for customer loyalty cards and register at grocery store websites to download coupons to your card, earn gas points or receive other discounts. Saving $150 per month on family shopping can add up to more than $2,000 per year when you include credit card interest.

Cut your interest expense payments if you have a credit card with a high balance. Do a balance transfer at 0 percent interest or for a much lower interest rate than you currently have if you can do so.

Eliminating a 25 percent interest rate to 0 percent on a card with a $5,000 balance saves $1,250 per year. Ask your parents if they will lend you money to pay off a credit card, agreeing to pay them back with or without interest, depending on what they will do. They might be willing to lend you $5,000 if they know you can pay the money back. They might be happy to take 10 percent on their interest, saving you from paying 25 percent interest on your card balance.

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