Good Ways to Get Started Cutting Back

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It’s always smart to control your spending. But if you or others in your family are facing difficult times financially, perhaps from a job loss or wage cuts, it is especially important to spend less so you can have more money to pay essential bills or to add to a savings account you can tap in an emergency. Here are some strategies.

Managing Your Money in Good Times and Bad

Take a serious look at your spending. As a first step, think about creating a spending plan, commonly known as a budget. Make a list of your monthly expenses divided into two groups — your “needs” and your “wants.” The needs are expenses that are absolutely necessary, such as your housing, utilities, clothes, food and transportation. The wants are optional purchases.

“After you differentiate between spending for needs and splurging on wants, cut back on the second category, especially if you’re already suffering an income loss or other financial hardship,” said Luke W. Reynolds, Chief of the FDIC’s Community Affairs Outreach Section. He said possible places to cut back on unnecessary spending include restaurant meals, monthly subscriptions and premium TV channels.

But also consider opportunities to save on your necessities. Examples from experts and consumers alike: Try carpooling or taking public transportation to work instead of driving by yourself. If you have multiple cars, see if you can live without one of them. Ask yourself if you really need those $200 sneakers or if a less expensive pair will do just fine. Buy used instead of new. Take better care of what you buy so it will last longer. And, make your own coffee at home and bring your lunch to work instead of eating out.

Finally, don’t use your credit cards or other loan products to buy things you really can’t afford. For more tips about borrowing money, read “You Can Get a Good Loan” and “Your Credit Score” articles.

Keep banking costs down. “Look at the most costly fees and recurring charges on your bank and credit card statements and consider how you can reduce or eliminate them,” Reynolds said. Among the possibilities: If you routinely pay bank fees, shop for a different account that meets your needs at a lower cost. Also review your banking habits to cut unnecessary fees. For example, use your own bank’s ATMs for cash withdrawals instead of going elsewhere and paying a surcharge, and keep close tabs on your checking account balance to avoid bounced checks, which can be costly.

Likewise, ask your credit card lender to consider lowering your interest rate, particularly if you have a relatively good payment history and could qualify for a lower rate elsewhere. Also pay as much as you can as soon as you can. It will mean you’ll pay less interest and avoid late fees.

And if you have a mortgage and you expect to continue to own your home for the foreseeable future, see if you can save money by refinancing to get a lower interest rate and a lower monthly payment after also weighing the up-front costs of refinancing. “Refinancing your mortgage or auto loan can save you money over the coming years that you can put to better use in a savings account or paying off other debt,” said Mary Bass, FDIC Senior Community Affairs Specialist.

Be careful before cutting insurance coverage. It’s important to have adequate insurance, especially for life, health, disability, personal liability, and coverage of property. “While it’s a good idea to review your insurance coverage every year or so and not carry more coverage than necessary, think twice before trying to save money by dropping insurance coverage,” added Bass. “All it takes is one illness or auto accident to realize the importance of having adequate insurance.”

The bottom line: Cutting back on an already tight budget may seem daunting, but you can find ways to spend less without sacrificing your quality of life. For suggestions on how to put your savings to good use, including in an emergency savings account, see “7 Tips on Putting Your Dollars to Work…for You!” article. For more ideas on ways to cut spending, see articles in back issues of FDIC Consumer News online at, as well as tips from “66 Ways to Save” at