To say that we could all use a little more money is likely the understatement of the year. Whether you need to accommodate a new expense or are hoping to save up for a family vacation, setting aside money often requires some level of personal sacrifice.
But what if you could easily reduce expenditures on your monthly bills to free up room for a new need or want? Enter “budget hacking.”
While not an official term, “budget hacking” means finding money within your fixed expenses, and not simply through reduced latte runs and cancelled social outings. Users of this strategy review their recurring expenses and call on those companies to reduce their bills.
In her recent post on applying budget hacking to a health insurance payment, Lauren Bowling of the personal finance blog lbeeandthemoneytree.com writes that she needed to find extra cash in her budget to accommodate a new health care policy. Bowling recently left her full-time position to work for herself, and says that she was struggling to afford her health care premium payment. Her new health care expense totals $297 per month, including a dental policy she’s covering through COBRA from her previous employer.
All in all, Bowling was able to reduce her fixed expenses by $141 per month by calling up the companies and requesting better rates. “When I left my full-time job in April, I started taking every Tuesday morning for a month to call up these companies and talk to them about lowering my bills,” Bowling says. She was able to reduce her monthly expenditures on her mortgage, cable, security system and car insurance.
The remaining funds she “found” were from expenses she no longer incurs as a solopreneur. These include fuel, lunches out, dry cleaning and car maintenance. Together with the money she was able to hack from her fixed expenses, Bowling freed up a total of $239 to put toward her health care expense.
As for the remaining $58? Bowling says she’s taking that out of her “fun fund,” a sacrifice she’s willing to make since “taking out $58 instead of nearly $300 is much nicer.”
So where can a novice budget hacker start to free up some funds for a need or want? Bowling suggests a comprehensive review of your spending. “Take a look at all the items you spend money on in one month, including utilities,” she says. “If you haven’t reached out in six months to a year, give them a call.”
Kate Dore, blogger at CashvilleSkyline.com, agrees. “Begin by all tracking expenses down to the penny,” she advises. “Some prefer budgeting software but I use a trusty Excel spreadsheet.” Dore conducts an expense audit every six months and identifies areas for savings. “If a line item looks wrong,” she says, “I call and ask about it.” Recently, Dore was able to reduce her exercise expenses by applying a health insurance discount to her YWCA membership. She also reduced her mobile phone costs by sharing a plan with her boyfriend, saving up to $15 per month. “If you’re single, look at the previous month’s usage,” Dore suggests. “See if you can easily drop down a tier. Replace minutes with Google Hangout, Skype or Facetime, and use wireless Internet wherever possible to conserve data.”
Budget hacking alone may not get you 100 percent of the funds you need. That’s where traditional methods for cutting back come in, but you don’t have to entirely give up new clothing and dinners out to make room in your budget. Blogger Ali Butler doesn’t have specific budget categories for her discretionary spending in order to better accommodate revolving wants and needs. “Instead, I designate an ‘other’ category that all my ‘fun’ spending falls under,” she says. “This allows my budget to be more flexible, letting me splurge on clothing one month as long as I spend reasonably in another area to balance it out.” She says this strategy provides more freedom without the risk of overspending.
Butler also acknowledges the challenges associated with budget hacking. “I honestly haven’t had a ton of luck getting companies to reduce my bills,” she admits. To combat this, Butler finds other ways to save money on fixed expenses. For example, she owns the modem and router that supports her cable TV subscription to avoid a $10 monthly rental fee. Butler also avoids recurring payments whenever possible, favoring “pay-in-full” options like those offered by auto insurance companies, where you can pay six months’ worth of premiums at a discount.
Still, haggling for better rates is something everyone should try in order to avoid paying more than they need to. To help with this strategy, Bowling suggests putting time aside to call on companies. “Making a date for yourself will help you tackle the task easier and avoid feeling rushed or distracted,” she says. It also helps when you’re prepared to cut ties with the company if they can’t meet your demands. “Companies are counting on you to value less hassle over a monthly discount,” Bowling adds, but those discounts can add up to significant savings.
Indeed, the long-term benefits of budget hacking outweigh the time and effort required. After all, who doesn’t want a bit more money?
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Hidden Spots to Find Money in Your Budget originally appeared on usnews.com
