How to Optimize Your Spending (the 5 Step Process)

Today I’ll share with you how to spend your money a bit wiser so that you’re able to meet more of your other goals (e.g. savings, debt reduction, security).

Just like in my previous post, Know Your Money, there’s no budget involved and there are only two main concepts you need to focus on: optimizing your expenses and consciously spending the rest. Let’s take a closer look into both of these.

Optimize Your Fixed Expenses

Remember the monthly fixed expense tracker I showed you last week? Break that out again. Now I want you to spend the next week doing the following:

Only Pay for Things You are Actually Using

Take a look at the list of your expenses and find any expenses for items that you aren’t using, or that you wouldn’t mind doing without. Cancel any unused or unwanted items. For instance, if you don’t use your cable TV service that much anymore because you’re spending your nights using Facebook (become a Fan), then consider dropping your cable and watching TV using the over-the-air channels available. You could also consider watching TV using the Internet.

Resource: use a free service like Trim to automatically find and cancel your unwanted subscriptions.

Another expense that people sat they can actually do without is home landline service. If you have a cell phone, consider making that your only phone.

Those items are just suggestions. Only you know the expenses you could do without and still have the life you want. Don’t worry if you can’t find any items to cut. Check out my next point…

Pay the Lowest Price You Can Get for the Things You Do Want

Now take a look at the remaining items on your monthly expense list. Are you paying the best price available? For things like mortgage, car payment, you may not have a choice. But for monthly service items like Internet and cell phone, odds are you can negotiate a lower monthly rate.

Over the next couple of days, call each of these companies up and ask politely for a better monthly rate. Tell them you love their service, but to continue you’d need to pay less each month. If only a couple of these companies bite, you’re going to save some money each month. If they don’t go down on their price, look to a competitor for a quote. They will likely do what it takes to get your business. Trust me, this works. Read this example of when I lowered my TV bill.

Lower you cell phone bill, potentially to nothing. Check out our FreedomPop review.

Don’t want to do your own negotiating? Let a company like BillFixers do it for you. I tried them and saved several hundred dollars a year on my Internet service.

Another service to consider is Truebill. Not only can they track your expenses, but they can suggest ways to reduce them and even negotiate with the companies for you.

The bottom line is to only have fixed expenses for the things you really want. And then pay the best price you can find for those things.

Consciously Spend the Rest

Now that you’ve optimized your fixed expenses, let’s discuss the remainder of your spending: variable expenses. These are items like dining out, morning coffee, clothes, entertainment, household items, gifts, etc. These are the items that aren’t necessarily needed, and you spend varying amounts on them from month-to-month. What I want you to do is:

Focus Your Spending on Things That Bring You the Greatest Joy

I’m not here to tell you what you should and should not spend your hard-earned money on. But what I will do is urge you to only spend your money on those things that are truly bringing you joy.

For instance, let’s say you’d love to travel more, but you find yourself blowing all your money on clothes you never wear that much or trips to fast food joints that don’t satisfy. Why not wait to spend for the life you really want?

Be conscious enough to skip the shopping spree (buy classic styles that last longer) and eat just 50% more at home where you don’t have to spend as much. Now you have more room in your budget to do some traveling with.

Again, my point isn’t to tell you what to spend on. Heck, you may get the biggest thrill out of new clothes and burger joints, while hating to travel. That’s okay. Just make sure you’re spending your money intentionally.

Take Just a Moment to Find the Best Price

The second part of conscious spending is taking a few moments to find the best price. This doesn’t have to be a long, drawn-out thing (although my wife says that I sometimes make it so). You just need to take a brief moment once you decide you’re going to purchase something to think about the best place to buy the thing.

Do you have a coupon? Can you find one? Is it better to buy online? Would a used version be just as nice? If you’re not asking these questions, you’re spending unconsciously, and over time you’re wasting money.

There are a couple of great online services that give you cash back when shopping online: Upromise and Ebates. Check out my review of Upromise and Ebates and consider their service next time you’re looking to optimize your online spending.

Know When to Go High Dollar

Lastly, I’ll add in a quick word about quality. I’m not an advocate of always buying the cheapest item. Sometimes it makes sense to spend more money on a higher-quality, longer-lasting version of the product or service. To be a conscious spender, you sometimes need to pay more.

My Latest Splurge

I’ve had a real urge to splurge here lately. I’ve got my sights set on a classic motorcycle. It’s a 70’s Honda CB550. When it’s all said and done, after riding classes, my license, gear, and the bike, I’m looking at shelling out $3,000. I’ve never really been a motorcycle guy, but strangely the desire for this one is strong.

Honda CB550 Motorcycle
The classic stylings of the Honda CB550. Should I buy it?

As you guys know, splurging isn’t inherently bad from a financial standpoint. In fact, it can be quite the efficient use of your money if the splurge brings high value to you. But it’s still fun to talk about them like they were a little diversion from your normal tight-fisted, frugal ways. So here we go, let loose in the comments about your big splurge.

Three questions for you to answer:

  1. What did you splurge on?
  2. What did you give up to be able to splurge?
  3. Was the splurge worth it?

Final Thoughts

I hope you enjoyed this second part of the series. Hopefully, you’re able to trim your budget down to only those fixed items that you really want, and then spend consciously on the rest. My challenge to you is to take control; find a way to design your spending around the life you truly want.

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  1. Avatar Doris Ovwurie says:

    I am very thrilled about your spending tips .I will definitely put these to use.Thank you !

  2. Avatar Godfrey Sserwanja says:

    Thank you for your spending tips! They are a very useful guide to saving money
    and leading a person to financial independance.

  3. Thanks, Manny and Jedrzej, for your comments.

  4. Great, common-sense advice, thanks! Those things might seem obvious, yet it’s very important to keep reminding ourselves of those optimal practices as we often tend to fall into some bad spending habits.

    Personally I try to keep my fixed costs to the absolute minimum (no landline, no TV, no long-term subscriptions of any kind). There is much more hassle with spending on the things I don’t really need, but they bring me joy. I guess it’s important to figure out what’s brings us the most value and then focus our spending on those things.

  5. I enjoyed reading this short series of yours on optimizing spending. Thanks for all the great tips and words of wisdom.

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