Think outside the box

One of the trickiest aspects of budgeting and saving money is thinking outside the box. It’s one of the reasons I recommend people ask a trusted friend or family member to look over their expenses and discuss ways to trim unnecessary spending. Sometimes, when going over another person’s budget, things will appear obvious to an outsider that seemed normal to the person paying the bills.

I’d like to look at a couple of examples I’ve stumbled across over the years to highlight how easy it is to not think about certain costs simply because they fade into the background and just become part of everyday life.

For instance, once when trying to help a friend trim their budget I pointed out they were paying nearly $100/month for cable TV. For me, a person who has never had access to cable, it seemed excessive to be paying $1,200 each year for a service they were hardly ever using, given their busy schedule. But to my friend, having cable was just something people did. They’d always had it, their parents had had it. For them, cable TV packages were just things adults maintained, used or not. It wasn’t until an outsider came along and pointed out, “You could not pay for this,” that they thought about cancelling the subscription.

I had a similar conversation with someone about upgrading their cell phone every few years. Every couple of years as their contract reached its end they’d upgrade their cell phone, sign a new two or three year contract, and then upgrade again in another few years. They’d never really considered the idea of “What if I just didn’t upgrade and used the same phone for a few more years?” The difference in cost is in the range of $250 to $500 each year, depending on which phone they were purchasing. Again, to them it was just a normal part of life to always sign up for a new phone and a new contract. While to someone who usually picks up a refurbished phone every three to five years for peanuts, their approach seemed luxurious.

One final example I see occasionally is smoking cigarettes. When a person is a smoker they often become accustomed to the cost of cigarettes as part of life. After all, one smoke is fairly cheap. However, a half-a-pack-a-day smoker is spending $10 or more each day, which adds up to about $3,650 each year. A pack-a-day smoker spends about $7,300 each year. A habit, which feels like just a typical part of a person’s day, can add up in a hurry.

In essence, often times the non-necessities that cost us a lot over the years are items which we no longer think about, they’re part of the background, something no longer thought about. It takes some careful examination and outside the box thinking when looking at a budget to identify the areas where we can make improvements.

This is especially true of monthly bills which have become part of a person’s routine. I sometimes consider friends who had purchased a bundle from their phone and Internet provider that was over $300/month. When we examined the alternatives we found they could enjoy the same services from the same company (and get some upgrades) for a total of about $180/month, saving them over $1,000 each year. The trap was the $300/month bill had become normal, part of the routine, and no one had been motivated to question it.

I feel this is key: question expenses. Maybe each item line in your budget is important and necessary, but it’s quite possible you have an unnecessary expense or could be paying less for something you do need. Looking at each reoccurring cost in your life and examining whether it needs to be there or could be cut back will often result in saving money, sometimes hundreds or thousands of dollars per year.