By Kathleen Nemetz, CFP, CDFA
Learn more about Kathleen on NerdWallet’s Ask an Advisor
It’s amazing to see how savings can add up. With monthly contributions of $500 earning just 1% annual interest, you would have more than $63,000 after 10 years. A variety of online calculators can help you determine how much money you need to save over a given period of time to reach your goals.
But if you’re frustrated by the slow progress you’re making toward those goals, it’s time to reset the spending habits that are holding you and your family back. And finding ways to save doesn’t have to be difficult.
Start by reviewing — and, when possible, trimming – big-ticket categories. This will give you momentum early on in the process. Here are some ideas to reduce the major expenses in your budget:
Make dinner at home rather than go out to eat. Eating out usually costs more and should therefore be considered a treat rather than a staple in terms of getting meals.
Just do the math. One takeout pizza serving four can easily cost $22 with all of the goodies, and of course you need the salad, too, adding another $4 to $6. You could instead make or buy the dough, throw on some toppings, wait the same 30 minutes for it to cook, and save at least $10 to $12.
If you don’t like pizza, think about barbecue. Throw some meat on the grill when you get home, prepare a quick salad and, voilà, dinner is served. Takeout barbecue with sides at one national chain in my area costs $35-$40 for four people; a grill-ready chicken costs less than $8. You can add the marinade.
I usually don’t advise my clients to focus on going without coffee or lattes, as these are small pleasures and may possibly help them get through an otherwise long workday. Bringing lunches now and then is a good idea, but it is a homemade dinner that gives you the biggest savings. Over the course of the month, you could shave around $300 off your total food tab.
Also consider buying in bulk. Larger families may already do this, but buying 25-pound sacks of staple items and then using them in rotation before they go bad is a smart and cost-effective way to make sure you have food around the house to cook. You can also join with friends and neighbors to buy larger quantities that you can split among yourselves.
For many households, transportation-related expenses follow housing and food as the biggest monthly outlay. Cutting in this category may require going from multiple cars to one, or substituting bicycles or public transportation for some trips.
Factors to consider in this analysis include not just the monthly payment on a car loan, but also the cost of insurance, gas, depreciation and maintenance costs such as oil changes and gas. Insurance costs alone can exceed $1,200 a year here in California for a new four-door passenger vehicle.
If you convert a vehicle from personal use to partial commercial use — hauling stuff on the weekends, for instance — you or a family member could generate hundreds in additional income. You’d also reduce the cost of owning the vehicle by getting to deduct the depreciation. In order to reach your goals, all ideas should be on the table.
And changing your transportation habits may not just be good for your wallet. Vehicle use enlarges your carbon footprint. Switching to bicycles or walking for some of your trips can reduce the amount of energy you consume overall, aiding the environment — to say nothing of your health.
Insurance costs can add up to a large monthly outlays when you add together premiums for life, homeowners, auto and health coverage. Just as with other expenses, shop carefully and compare quotes. You could save hundreds each month just in this category.
One innovation in car insurance is the ability to pay by the mile rather than as a flat monthly or annual fee. If you drive less than 12,000 miles a year, this method may work for you.
And don’t forget life insurance. If you are married and one of you is much older or has health issues, think about buying a cash value life insurance policy that covers both of your lives. That way the cost for the policy is less than if the older or less healthy partner is covered alone. Cash value life insurance can also give you a source of emergency savings to tap, in lieu of zeroing out accounts or resorting to credit cards.
But don’t go without insurance. It covers the worst-case scenarios that can otherwise wipe out any savings you may have carefully set aside.
Before spending money to replace anything, ask yourself if the item is necessary or simply “nice to have.” If it’s the latter, can you do without it? If not, look for a less expensive option.
And before deciding that you’re going to buy everything online because it’s cheaper, consider the hidden costs — such as shipping charges and the increased temptation, when using a credit card, to add extras. You might do better to shop closer to home and use more cash, and less plastic.
If you need to use credit cards for work or travel, be sure to expense what you can. And shop for the best credit card rates, if you are using personal cards for carrying balances.
To get everyone involved and working to reach your family’s goals, make spending a family discussion (or even a game) at least once a month. Set aside time to have the conversation and ask everyone in the family to identify one new way to spend less.
Finding ways to save more doesn’t necessarily mean you have to give up everything, but it does mean you’ll need to get creative. It doesn’t mean going without couch cushions, for example, but it may mean pinning fabric around the old ones to pretty them up, rather than spending $25-$35 for new ones. Or it may mean going to a ski swap rather than investing in new equipment.
Ultimately, to save more, you’ll need to examine your current needs and priorities and their relative costs. You can chuck whatever is not essential to reach your defined goals. Whether you’re hoping to take a dream vacation, send a child to college, or retire at 62 instead of 65, take stock and see where you can recalibrate some of your spending.
This article was originally published on NerdWallet.