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Your 6-month plan to cut expenses

December 27, 2018

By Katie Pins

No matter what your goal, reducing your expenses can be a challenge. It requires some work and creativity but ultimately, it will allow you to save more for the things that matter to you most. Since reducing your expenses takes energy, we’ve created a simple six-month plan for you on how to cut expenses one step at a time. After six months, it will feel like you reached your personal financial mountain top!

Month One: Cut the extra

Month one is about looking at your expenses under a microscope. Take a look at your credit card and checking account transactions for the last few months and write down the ones that fall in these categories:

  • Dining: Restaurants, alcohol, coffee, fast food
  • Entertainment: Arts, music, movies, newspapers, magazines
  • Shopping: Clothing, books, electronics, etc.
  • Personal care: Spa, nails, gym, hair
  • Transportation: Rideshare, fuel, public transportation
  • Travel: Hotels, tickets, rental cars, vacation expenses
  • Fees: Late fees, service fees, ATM fees

Add up the expenses for each of these categories and see what can get cut. Some expenses are easier than others, such as cutting out spa treatments or fees. Avoid late fees by setting up automatic payments. Switch to a checking account without ATM fees or service fees. No one should have to pay to use a checking account!

Other expenses, like a night out with friends, can take some creativity. Try researching some free activities in your area such as museum free nights, concerts in the park or holiday festivals. If you want a fun alternative to dining out, host a potluck with a side of board games. For your personal entertainment needs, try your local library. Now there are even apps that allow you to borrow a book or audiobook with a tap of your finger.

Look at this month as a positive experience: you’re getting creative and trying new things that happen to cost less. You’re not just cutting expenses, you're prioritizing what matters most to you.

Month Two: Create a plan to reduce high-interest debt

Your monthly expenses can add up quickly if you’re paying a lot of interest on your loans. Take a look at all of your loans and identify the ones with the highest interest, such as credit card debt. Create a plan to pay off those loans first. If you have multiple loans with high interest rates, consider consolidating your loans. For example, if you have one or more high-interest credit cards, you can transfer your balance to a credit card with a lower interest rate. You could pay off your balance quicker when you switch to a new credit card with a lower rate. Use some of the savings you earned in month one to contribute to reducing your debt.

Month Three: Negotiate recurring bills

During month three, take a look again at your credit card and your checking account transactions for the last six months. First, make a list of your reoccurring bills. Many of these bills can be negotiated, evaluated or simply reduced. Examples to look for include:

  • Insurance: Home, renters’, car
  • Television: Cable, streaming services
  • Phone: Home, mobile
  • Utilities: Gas, electric, internet

Shop around for alternatives to the companies you are currently using. Or, call up your current provider and ask if there are ways to reduce your bill. Sometimes bundling your services will help you reduce your overall expenses. When signing up for a new deal, watch out for limited-time promotions that might make your expenses higher in the long run. When it comes to cable, sometimes cutting the cord completely is your best bet.

For some bills, reducing your use can make a difference. Turn down the heat and grab a blanket during the winter months for some big savings. Turn off and unplug the laptop or other electronics when not in use. Look for energy efficient models when buying new appliances. You can be proud you’re doing your small part for the planet and your pocket.

Month Four: Refinance your loans

Are you paying your mortgage, student loans and car loans each month? It can be quite a burden paying any of these three each month. If you have not considered a refinance yet, this month is a good time to take a look at your options. You can reduce your monthly payments or the term on your loan with a refinance. Refinancing your loans is a good option if you have multiple years left on your loan, high-interest rates, a better credit score than when you took out the loan, or your monthly payments are too high.

Look for a loan that has no prepayment penalties. This type of loan will let you reduce your debt if you pay a little extra to your principal. With the savings you’ve piled up from your first three months of cutting expenses, this could definitely be a good path for you!

Pro tip: If you don’t have a mortgage and you’re renting, see if downsizing or adding a roommate might help out with your monthly expenses.

Month Five: Set up automatic savings

The ultimate goal of cutting your expenses is to save more money and reduce your debt. Set up an automatic transfer from your checking account to a high-rate savings account each month. If you don’t have emergency savings, your first goal should be to build that up. Any amount of savings is better than nothing, so start small. Eventually, you’ll need six months of expenses in a savings account.

Another priority would be to invest in your employer-sponsored retirement plan such as a 401(k). If your employer matches a percentage of every dollar you contribute, your paycheck has essentially increased and you’re on your way to a better retirement. Any amount at first is best, however, when you can, contribute the maximum amount that is matched by your employer so you don’t leave any money on the table.

If you need other ideas on how to contribute to your savings, adopt a clever way to save or take your savings skills to the next level by checking out more Money Mentor blog posts.

Month Six: Repeat month one

It’s important to evaluate your progress after six months. You’ve done a lot, but if you’ve slipped up, that’s OK. You can take a look at your expenses at any time and find ways to cut excess again. Get support from family and friends by sharing your goals, your progress, and where you have slipped. You may be surprised by how many people have similar goals and can support each other toward financial bliss.

Remember to think of this process not as a chore but as a way to create the financial life you want. Celebrate small wins throughout this time. Good luck!


Katie Pins is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.