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Key takeaways:
If you’re thinking about your personal finances more often, you’re not alone. With headlines dominated by inflation, grocery prices and tariff news, what does this mean for your budget?
One of the best ways to kick start your savings is looking at where you can cut back on your spending.
New to budgeting? First let’s dive into how you create your budget, then we’ll break down how you can cut back on your expenses to help you boost your savings.
Before you can cut expenses from your monthly bills, you first need to have an idea of how much you're actually spending — and what on. That’s where a household budget comes in.
A budget doesn't have to be complicated, but it should be complete. This means you need to track all of your income (money coming in) and expenses (money going out). Unless you can significantly increase your income, you'll need to focus on cutting your expenses.
To know where to cut back, you need to know where you’re spending money. One way to do this is to track spending over time — either manually, by entering your expenses into a spreadsheet, or automatically, using a money management tool like Scotia Smart Money by Advice+ on the Scotiabank mobile app.1 Regardless of the method you choose, make sure you account for every expense, from your biggest bills (car and rent or mortgage payments) to the smallest purchases (takeout or movie tickets).
You’ll notice that your expenses aren’t all the same. They may vary by how often you pay them or how essential they are to your life. Categorizing them will make cutting spending easier.
Fixed vs. variable expenses
All expenses are either fixed or variable.
Fixed expenses are bills that are consistent each time you pay them. Some examples include:
- Rent or mortgage
- Car payment
- Insurance premiums
- Student loans
- Utilities
- Streaming services
Variable expenses change. For example, you spend a different amount each time you go to the grocery store, eat out, shop for clothes or take a vacation.
Fixed expenses are easy to account for, but they’re often more difficult to cut back on — it can be more challenging to change your rent or mortgage payment. A better strategy is to hone in on your variable expenses when you’re looking to cut back.
Necessary vs. discretionary expenses
You can also divide expenses into your needs versus your wants.
Your needs are those necessary expenditures you can't avoid, like rent or mortgage payments, groceries and transportation costs. You need shelter and food, and likely some form of transportation to get to work to pay for those two things.
But your life doesn't depend on discretionary expenses. A gym membership is nice to have — the same goes for dining out, luxury goods or taking a vacation.
Cutting back on discretionary spending is easier and faster than, for example, moving to a cheaper neighbourhood, so it makes sense to look for ways to save in this category. That said, a budget will only work if it’s realistic, and that means allowing yourself some treats. If your financial plan is too strict, you may get frustrated and give up.
Once you dig into your expenses, you're bound to find places to trim the fat from your budget. But there are other ways to reduce your spending — even on fixed and necessary expenses.
Step 1: Reevaluate your utilities
The household utilities spending category can get bloated over time. Look at what you’re paying for services like internet, cable TV and cell phone. Where can you cut back?
For example, you could explore cable TV packages that only include your top channels or run your cell phone with fewer gigabytes of data. Bundling internet and TV services sometimes yields a better price, and telecommunications companies often run promotions. Revisit these bills annually to see if you qualify for a deal.
You can also lower your utility bills by taking shorter showers (set a timer), running the washing machine and dishwasher during non-peak hours, and turning down the heat or using a smart thermostat. Other easy changes include using energy-efficient light bulbs and unplugging appliances when they're not in use.
Step 2: Eliminate unnecessary subscriptions
Subscriptions tend to either auto-renew monthly or annually, so take an inventory of what you are paying for vs. what you are actually using. Did you get a subscription to watch your favourite show which now doesn’t have a new season for another year? Cancel subscriptions or memberships you can live without. If you find you have a lot of tv related subscriptions, you can explore limiting yourself to one subscription service at a time. You can also opt for ad-supported streaming for a discounted rate.
Look to see if there are bundles or family plans you could use to make a dent in the cost of your top subscriptions.
Step 3: Consolidate debt
Paying off your debt, especially credit card debt, is one of the most effective ways to free up money. If you have multiple loans or credit cards, debt consolidation can be a helpful solution. Combining your debt into a single loan means you only have to pay one monthly bill, ideally at a more favourable interest rate, which can help you pay it off faster.
Step 4: Eat well on a budget
If you’re dining out or ordering in, you’re paying for a big food markup. Now's a good time to dive into learning to cook or taking your culinary skills to the next level. Meal planning can help you build nutritious and cost-effective dishes based on what's on sale or in season.
Remember: Your budget should be realistic so you’re not cutting out restaurants altogether. You can still dine out as a treat — just not because you forgot to take something out of the freezer, aren't sure what to make or haven't been to the grocery store.
Step 5: Grocery shop like a pro
More home cooking means more grocery shopping, which is good news for your wallet. There are so many ways to save money at the till:
- “Clip” coupons: Many grocery stores post weekly flyers on their websites, which you can scan for deals and digital coupons. Better yet, use an app that helps you compare prices across stores and clip deals to your lists, which you can then show at stores that price match.
- Buy in bulk: When you shop at bulk stores, you pay only for the product, not the packaging. This means you can get more for your money while avoiding single use containers.
- Think generic: Most people have favourite foods from certain brands but for others, a generic product may be just as good. Treat yourself to the things that really matter to you, but keep your grocery bills low by buying generic when using a known brand doesn't make a difference.
- Use food-saving apps: There are apps that connect shoppers with grocery stores to buy items nearing their expiry date for deep discounts — sometimes as much as 50% off.
- Shop for groceries with a credit card: You know you’re going to spend money on groceries, so you might as well get something extra for those purchases. Some credit cards offer cash back or points on your food shopping. For example, with the Scotia Momentum® Visa Infinite* Card, you can earn 4% cash back on grocery purchases.2
Step 6: Discover thrifting
Cutting back on spending doesn’t mean saying goodbye to the fun of shopping completely, that’s where thrift shops come in. Thrift shops carry everything from housewares to clothes to sporting equipment to furniture, and the prices are a fraction of what you’d pay retail. Unlike at retail stores, you never know what will be in stock, so the experience can feel more entertaining as you discover the perfect new look.
Step 7: Tackle impulse buys
Impulse shopping is an understandable — and potentially expensive — habit for many people. Unfortunately, rewarding yourself with a little treat or turning to retail therapy to improve your mood is rarely a good money choice and often leads to overspending. You can avoid spending impulsively through practice and these strategies:
- Set up a wait period on discretionary spending so you get used to making your purchases with purpose. If you still want that item after a week, it might be worth it.
- Unsubscribe from promotional emails that attempt to lure you with time-sensitive deals.
- Avoid browsing online stores when you're bored.
- Splurge occasionally. Sometimes it’s time for the trip, concert or new outfit. Just do it with your budget in mind, what can you afford to do without throwing your financial plan out the window?
Making small changes can make a big impact on helping you cut back on your monthly expenses. With a little bit of creativity and effort, you can put money back in your pockets and meet your financial goals.
This article is provided for information purposes only. It is not to be relied upon as investment advice or guarantees about the future, nor should it be considered a recommendation to buy or sell. Information contained in this article, including information relating to interest rates, market conditions, tax rules, and other investment factors are subject to change without notice and The Bank of Nova Scotia is not responsible to update this information. References to any third party product or service, opinion or statement, or the use of any trade, firm or corporation name does not constitute endorsement, recommendation, or approval by The Bank of Nova Scotia of any of the products, services or opinions of the third party. All third party sources are believed to be accurate and reliable as of the date of publication and The Bank of Nova Scotia does not guarantee its accuracy or reliability. Readers should consult their own professional advisor for specific investment and/or tax advice tailored to their needs to ensure that individual circumstances are considered properly and action is taken based on the latest available information.
1. To access Scotia Smart Money by Advice+, you must have an active personal banking retail product, have transacted at least once on your account within the preceding 6 months and have logged into the Scotia Mobile Banking App. If you have any questions about whether any recommended action, insight, or product is right for you, please contact us.
2. You will earn 4% Cash Back on the first $25,000 you spend annually on purchases on the Account at merchants classified in the Visa Inc. (Visa) network as Grocery Stores & Supermarkets (Merchant Code 5411) and Recurring Bill Payments. Recurring Bill Payments are defined as payments made on a monthly or regular basis automatically billed by the merchant to your Scotia Momentum® Visa Infinite* Card. Not all merchants offer recurring bill payments. (Please check with your merchant to see if they offer recurring bill payments on Visa cards.).
® Registered Trademark of The Bank of Nova Scotia
* Visa Int. / Licensed User
