Most of the time, you may not think about cutting down on expenses until you are short of cash or are in debt. Then, you realise that you can actually survive on little cash without feeling uncomfortable. However, the moment your paycheck drops again, you start spending lavishly, and the cycle continues like that. Let’s look at a case study.

Alcy receives her $2000 paycheck by the end of the month, and in the first two weeks she spends $1500 on all her expenses, but by the end of the last two weeks, she survives on $500 without having to borrow. She has to manage whatever she has left till she receives her next paycheck. It’s safe to say that Alcy can probably survive on $1000 if she manages her money well by cutting back. In other words, we sometimes spend based on what we have or want and not what we truly need. In this blog, we will look at why it’s important to cut back on your spending so you can become more financially fit.

Why Should I Cut Back on Expenses?

Looking at Alcy’s case, there are several things she will benefit from if she decides to start cutting back. Cutting back on your expenses sounds nice, and everyone knows it’s the best thing to do, but humans are not specifically wired that way until situations or circumstances warrant it. This is why you don’t need to have mounting debt before you learn to manage. Discipline is an important virtue, and it will take you far in life and your finances. Cutting back isn’t actually an automatic response, you have to make yourself do it. Let’s look at the benefits that await you when you start to cut down on your spending.

1. It will increase your savings 

If Alcy stops spending $1500 the first two weeks and reduces it to $700 instead, or makes her total monthly expenses $1500, then it means she will have $500 savings every month. In a year, she won’t have a single debt while $6000 savings is sitting pretty in her account. If she decides to upgrade her skills or add a second job that pays her an additional $1000 monthly, her savings will grow tremendously. 

Savings are meant to save you in times of need. It’s not every time you should resort to credit cards or borrowing from lenders. You will end up paying high interest and your money won’t be enough to cover your expenses in the long run. But if you have savings, any emergency that comes can be tackled without sweating, then you will replace the money later. Savings are not a necessity, it is a must if you love a financially-free lifestyle.

2. It reduces financial stress and anxiety

Sometimes, people are not stressed because they have debt, but they are stressed because they know they are one emergency away from debt. When you start to cut back on your spending, you’re planting seeds. When you plant a seed, you’re expecting a plant with fruits and more seeds. Cutting back in this regard means you’re planning for tomorrow. When you already know tomorrow is settled, you won’t be anxious or stressed.

For example, if Alcy has $6000 in her savings account, and she needs to pay $500 for an expense, she doesn’t need to borrow money from a third party, she can easily take out the money from her savings and return it later. But if she doesn’t have any hope anywhere, she may start getting worried and her stress level may increase. Meanwhile, the savings wouldn’t have been a possibility if she had not cut back on her expenses.

3. You can achieve your goals faster 

Alcy’s emergency fund is a good financial goal but she may have other goals too. She may want to travel on a vacation or upgrade her skills. Money won’t fall from heaven, but if she cuts back on some things, she can start saving towards other important things that mean so much to her. This will mean she will become happier and more fulfilled when such goals are achieved.

Achieving your goals is one of the best things you can do for yourself. There are times you see clothes or gadgets that you love. You don’t necessarily have to use your credit card to buy these things, you can save towards them in a few months. Saving for your goals means you’re disciplined and can’t be pressured by what your eyes see.

4. It encourages intentional spending 

It takes lots of intentionality to cut back. This means, when Alcy goes to the grocery shop, she only buys exactly what she needs. She doesn’t just pick things because they are fancy, nor would she buy things impulsively. When you’re intentional about your spending, you will be able to put your finances in check, manage debt wisely, and you will become more financially-secured.

Conclusion

As we already said, cutting back on your spending isn’t as easy as it sounds. It means you have been spending more before, now you want to reduce it, it won’t be easy at first. However, the benefit outweighs the discomfort. 

Having lots of high-interest debt can take a toll on your mental health. When you’re anxious and worried all the time, it can also affect your productivity at work. How about you speak with one of our debt experts at EmpireOne Credit? Your debt can be reduced by up to 80%, and interest will stop immediately. Call us at (416) 900 2324 to schedule a free consultation with us. Being debt-free feels good!