Money-Saving Hacks: Common Monthly Expenses List and How to Cut Back
Reducing your monthly expenses can help keep you out of debt.
Contributing Writer at Tally
November 6, 2022
Do you find yourself living paycheck to paycheck? Are you aiming to make monthly debt payments or fund a retirement account but can’t seem to figure out why your cost of living expenses are so high? If so, you may want to take a closer look at your spending habits.
One way to more closely evaluate your spending habits is by looking at a list of your monthly expenses. In this article, we’ll outline what should be on your monthly expenses list, why it's important to monitor these expenses and five ways to reduce them.
Creating a monthly expenses list
A monthly expense is one you pay on a regular monthly cadence. A housing cost, like your rent or mortgage payment, would be one such example since you owe this every month. Purchasing a new TV, however, would not typically be considered a monthly expense — unless you were consistently buying one every four weeks or you financed the purchase and owe monthly payments.
The types of purchases that may appear on your monthly expenses list include:
Insurance payments, like health insurance, car insurance, life insurance, renter’s insurance, homeowners insurance and pet insurance
Student loan payments
Credit card payments
Child care, such as daycare and babysitters
Transportation expenses, such as public transportation costs
Alimony or child support
Other routine expenditures, such as subscription services and cable
The above are examples of monthly expenses, however, your personal finances may reflect other recurring expenditures that you've built into your monthly budget. For instance, personal care, such as haircuts, manicures and pedicures, may not be a precise monthly expense, but it is something you budget for every six weeks or so.
Why monitoring your monthly expenses is important
Knowing and monitoring your monthly expenses is important because it can help you avoid overspending. If you know how much you have to spend each month, you’re less likely to buy something you can't afford.
For instance, let's say that your net monthly income after withholdings for taxes, Social Security and Medicare is $4,000 per month (otherwise known as your take-home pay). If your monthly expenses are $3,500 per month, you have $500 per month to put into a savings account or to spend on things like entertainment.
Let's take this a step further and say you put $250 into a bank account to help build an emergency fund. Now you have $250 remaining for other expenses. Your spouse's birthday is coming up, and you need to buy a gift and plan a fun night out. If you’ve been monitoring your monthly expenses, you know how much you can spend before you have to take on debt or start putting the expenses on a credit card.
By knowing your monthly expenses, you reduce the likelihood of taking on debt. In turn, you can better manage your finances and potentially put more money toward things like retirement.
5 tips to help you reduce your monthly expenses
Now that you know what your monthly expenses are and why they’re important, let's take a closer look at some things you can do to lower them.
1. Build a budget
Building a budget allows you to better understand where your money is going. You can start by calculating your monthly income and expenses, and looking at your pay stubs to determine how much you’re making per month.
Then, break down your household expenses into budget categories. For instance, you may have all your homeowner expenses in one category and your car expenses in another.
Next, figure out how much you spend on each of these categories each month. Using a budget calculator, template or worksheet can help you better track these expenses and see how much you have left over to spend.
One budgeting tip to consider is the 50-30-20 rule. This rule states that 50% of your net pay should go toward monthly expenses. If the number is higher than that, you can increase your income by possibly picking up a side hustle or focusing on reducing your monthly expenses. Building a budget can hold you accountable and help you reach your financial goals.
2. Find ways to reduce your utility usage
One area that could be draining your household budget is your utilities. Fortunately, it's possible for you to reduce the cost of your utility bill. To start, remember to shut your lights off when you leave the house. You can also raise your thermostat when using the AC and lower your thermostat when using the heat to reduce energy consumption, especially when you aren’t home.
Smart thermostats are a solid way to control your energy usage. The Nest Thermostat, for example, saves 10% on heating and 15% on cooling on average. You’ll need to pay money upfront for these units, but they could cover their own cost with savings in the long run.
Additionally, you can make efforts to conserve water. Turn off the sink when you’re brushing your teeth and avoid leaving the water running before you get in the shower. If you tend to take long showers, set a timer for yourself to keep things moving.
3. Evaluate subscriptions and memberships
Today's monthly expenses are full of subscriptions and memberships. You may have gym memberships or subscriptions to newspapers and magazines. You may also subscribe to cable television or services like Netflix and Hulu. The monthly cost of these services can add up quickly.
Take a hard look at which of these services you really need. There are alternatives to each that can help you save money. For instance, instead of paying for a gym membership, you can commit to exercising at home or outdoors. You can also pick up hiking or look for free fitness classes in your area.
It’s important to consider how much television you watch as well. Consider canceling your cable service and signing up for a streaming service instead. If you’re signed up for multiple streaming services, pick one or two that you watch frequently and cancel the rest.
Finally, check to see if there is an annual purchase option for your subscription services. It’s sometimes cheaper to pay for a year upfront than to pay month to month.
4. Plan meals and eat out less frequently
Another great tip to cut down on your monthly expenses is limiting how much you eat out. Even if you only eat out for lunch once per week, you’re still spending roughly $60 per month, assuming your lunch costs $15. This doesn’t include things like daily cups of coffee or dinners out on the weekends.
Instead of eating out, try meal prepping instead. When you go grocery shopping, buy enough food to make meals for the week. Take time at the beginning of the week to prepare or cook all of your food. By doing so, you won't find yourself opening the fridge and wondering what you're going to eat the next day.
5. Save for down payments
If you’re taking on new debt, consider putting as much money as possible toward a down payment. Doing so lowers the total amount you have to borrow. This, in turn, reduces the amount you’re required to pay in interest.
By cutting down on your interest payment, you'll end up saving more each month. You can put the money you save on interest toward a retirement account.
Answers to FAQs regarding monthly expenses
Now that you have a better understanding of how to reduce your monthly expenses list, let’s take a closer look at some other questions you may have regarding monthly expenses.
What is the average amount spent on monthly expenses?
A recent study found that the average consumer's annual expenditures was $66,928 in 2021. That’s about $5,577 per month. In addition, another study found that the average American consumer overspends by $7,400 per year.
However, keep in mind that average spending should not be considered a benchmark. Instead, the amount you spend each month should be based on your specific needs and income.
What are the 4 types of expenses?
Broadly speaking, you can split monthly expenses into four different categories: fixed, variable, intermittent and discretionary.
Fixed expenses: These remain the same each month. Mortgage payments and auto insurance premiums are examples of fixed expenses.
Variable expenses: These may change from month to month but are generally expected and within a certain range. Utility expenses and groceries are examples of variable expenses.
Intermittent expenses: These are costs that do not occur regularly and can include a surprise or emergency expense. Your car registration, a health care copay or a home repair would be examples of intermittent expenses.
Discretionary spending: These are expenses that are not essential or necessary. A night out at a restaurant would be an example of this.
How do you manage monthly expenses?
The best way to manage monthly expenses is by creating a budget. Once you have a budget in place, you can put other techniques to use to help ensure you stick to your budget. For instance, you can consider paying in cash or with a debit card to reduce overspending.
Understand your monthly expenses and work toward your financial goals
Understanding and controlling your monthly expenses can help you reach your financial goals, reduce overspending and keep you out of debt. Your monthly expenses might include your cellphone bill, mortgage, auto loan, student loan or even credit card debt payments.
If you’re trying to get ahold of your monthly credit card debt expenses, consider Tally†. Tally is a credit card payoff app designed to help you pay down debt quickly and efficiently with a lower-interest line of credit. By paying off your credit card debt, you may find that you have extra money in your monthly budget to put toward other financial goals.
†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.