10 Ways to Make More Room in Your Budget

Published on: Nov 10, 2021fb-roundtwitter-roundemail-round
make room in your budgetDesign: theSkimm | Photo: iStock
The Story

If there was a "money word of the year" for 2021, it would be inflation. In October, the Consumer Price Index (which tracks the average cost of things like food, housing, and transportation costs) increased 6.2% year over year.

Can we leave inflation in 2021?

Magic 8-Ball says 'ask again later.' While no one knows for sure, many experts predict inflation will keep going strong through at least the first half of 2022. That's thanks to the likelihood that supply-chain disruptions and product and worker shortages continue, and push prices upward. (Reminder: low supply + high demand = rising prices.)

Sounds rough on my wallet.                         

Yeah, not great. If your budget is based on old price tags and habits, hit refresh. Make a new spending plan according to your current priorities and needs, plus some cushion for higher prices. Don't forget to add in short-term savings and long-term goals, like retirement. If there's not enough money to go around – or you want more to spend on your goals or fun stuff – it's time to create more wiggle room.

How do I make more room in my budget?

Some ideas to get you started:

  • Comparison shop. You aren't generic, but many cheaper items are. Swapping the name brand for a store brand could save you an average of 25%. Check out tools like Basket and MyGroceryDeals.com to look up in-store and online prices before you start shopping.

  • Check out smarter. How you pay matters. If you spend a lot on certain categories like gas, restaurants or groceries, consider opening a rewards card that gives you points or cash back. Some offer as much as 5% back in certain spending categories. Be sure to stick to your budget so you can pay your entire balance each month and avoid accruing more money in interest than you got from card benefits. For other spending, using cash could save you. Studies show that handing over cash stings more than swiping plastic, so you're less likely to overspend.

  • Reduce and reuse. Think of ways to pare down your regular spending. Think: using what's in your freezer or pantry before going back to the store. Or instituting a ‘one-in, one-out’ rule. You can also repurpose what you already have. Try repainting old furniture to match your current style and having old clothes mended or altered vs. buying new. If you have items you definitely can't use anymore, sell them on secondhand marketplaces like eBay or Poshmark.

  • Bulk up. Buying more upfront could cut your bill by up to 25% on certain items. Non-perishables like paper towels, freezer bags, batteries, and peanut butter can all offer big savings without the risk of spoiling. Pro tip: check the per-unit price vs. the sticker price to see whether a bulk deal is really worth it.

  • Cut a subscription (or two). There’s probably at least one subscription you signed up for and forgot about. Whether that's a premium cable channel, shipping service or phone app, go ahead and cancel. You weren't using it anyway. Tools like Truebill or Trim could do the heavy lift of canceling for you.

  • Negotiate your bills. What you pay for your phone bill, cable, and Internet are all up for discussion. Check out competitor deals, then call your service provider and ask if they can match (or beat) it. Don’t be afraid to push back or ask for a supervisor if the first person you talk to can’t help, but remain calm and polite. If you have a big medical bill, talk to the hospital or your doctor's office about an interest-free payment plan and/or discounts for a lump-sum payment.

  • Mind your utilities. Rising energy costs are set to crank up your utility bills. Try turning down your thermostat during off-peak hours. You can trim about 1% off your annual electric bill for every one degree you lower the temp over an eight-hour period (like the time you're sleeping). Setting your fridge to 38 degrees and your freezer between 0–5 degrees will also help keep food fresh while keeping your energy bill in check. Keeping your water heater to 120 degrees can save up to $61 per year.

  • Save at the pump. Gas prices recently hit a seven-year high. And not everyone can afford to go hybrid. An app like GasBuddy can help you find the cheapest gas around. Keeping your tires properly inflated and driving at a steady speed can also help you burn through less fuel.

  • Pay less for your insurance policy. While you can’t control every factor that impacts rates (like age, gender, and past claims), there are ways to lower your insurance premiums. Like shopping around, even if you’re generally happy with your current insurer, and asking about bundling deals. Like a policy that combines home and auto coverage. Paying more upfront – like annually vs. monthly – might get you a discount.

You haven’t mentioned housing...

True. And this is probably your biggest monthly expense. Good news: rent is also negotiable. Talk to your landlord about why you should pay less, based on what similar properties in your area cost. You could offer to sign a longer lease or pay a few months' worth of rent upfront to make it a win-win. If they won’t budge, you might be able to get another concession, like a smaller security deposit, free parking, or upgraded appliances.

If you own, look into whether refinancing your mortgage is a smart move. Especially if your credit score has improved since you took out your original mortgage. The higher your score, the better interest rate you'll likely qualify for.

Other options to cut housing costs: downsizing and getting a roommate. Not so easy to do. But if you want to save a lot, they’re worth considering.

theSkimm

Prices have been going up, up, up. And experts think the trend will spill over into 2022. That might mean your budget needs an overhaul. Cutting unnecessary expenses, negotiating regular bills, and being mindful about energy usage at home could add up to a lot more savings.

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Skimm'd by Liz Knueven, Casey Bond, Stacy Rapacon, and Elyse Steinhaus