March 31, 2020 - 5:00 am
Many people are experiencing job loss and reduced hours as businesses close their doors in compliance with measures to prevent COVID-19 from spreading.
St. Louis Federal Reserve President James Bullard estimates that unemployment could reach 30% — higher than in the Great Depression and three times more than the 2007-09 recession, Reuters reported. With so many people making less money and thousands more on the verge of being laid off, it’s important now more than ever to focus on saving and reduce spending.
GOBankingRates spoke to financial and consumer experts to find out what expenses you should be cutting out in the midst of the coronavirus crisis.
You’re probably using your Netflix, Hulu and Disney+ subscriptions a lot now, but check your bank statements to see if there are other subscriptions you’re being automatically billed for that you are not using.
“Take inventory of any subscription services such as streaming music, subscribe and save items on Amazon or other monthly subscription boxes,” said Regina Conway, consumer expert at Slickdeals.net. “Right now is not the time to have a ‘set it and forget it’ mentality.”
“Assess your account fees immediately,” Conway said. “In better times, we often put off evaluating where we might be incurring hidden costs. Switch your banking to free accounts.”
Many gyms are closed, and if yours is not, it’s still best practice to avoid going. While you’re home, there are numerous online workouts you can access for free.
“Even if you plan to hold onto your membership for the longer term, put a vacation hold on your membership if you haven’t already done so,” Conway said.
Services you can DIY
“Don’t spend money on any services you can do yourself — like yard work or maintenance,” said Howard Dvorkin, CPA, chairman at Debt.com.
Cable packages you don’t need
“Cancel extra cable packages,” Dvorkin said. “I know this seems counterintuitive during isolation, but cutting costs is key until this crisis is over.”
This is especially true if you’re paying extra for sports channels, with most professional sports now on hold. If the main reason you have cable is to watch sports, consider cutting the cord altogether and relying on streaming services for the time being instead.
Nonessential food spending
Cooking at home can be time-consuming, but it’s a big money saver.
“Having food delivered and going to the drive-thru can get you out of the house, but the cost of feeding your family can quickly add up,” said Leslie Tayne, founder and head attorney at the debt solutions law firm Tayne Law Group. “If you frequently order takeout, a family of four can spend at least $75 each time they order in. If you cook instead, an average meal costs around $30 to prepare. Even if you get takeout once per week, you’ll save almost $200 just by cooking at home.”
“Renting on-demand movies can seem like a good idea until your cable bill arrives, so check out the free selection of movies instead,” Tayne said.
Shopping is one of the few activities you can do from the comfort of your home, but it’s not a smart use of your funds.
“Retailers are trying to minimize their losses by having frequent online sales, so ask yourself if you really need the item in your cart before checking out,” Tayne said. “If you find yourself browsing sales and purchasing items because they’re a ‘good deal,’ consider unsubscribing from the retailer’s list and minimize your time browsing due to boredom.”
Many people are saving gas money by not having to commute. Put that money into your savings instead of burning through gas unnecessarily.
“Driving around aimlessly to get out of the house can cost a lot in fuel costs,” Tayne said. “If the weather is nice enough outside, walk around your neighborhood instead, and save money while exercising and keeping your mind occupied.”
“Determine whether you need the premium version of some apps,” said Bobbi Rebell, CFP, personal finance expert with Tally. “You may want to temporarily downgrade some of the apps you use before the next billing cycle.”
Vacation fund contributions
If you’ve been contributing regularly to a fund for your next trip or vacation, put those contributions on pause and save the money instead.
“Be proactive and stop your auto-billing for things you aren’t able to use for now, [such as] upcoming trips or vacations,” Rebell said.
“Review your credit card statements from the last three months and identify any recurring expenses you have that you no longer need,” Rebell said. “Do you have season tickets to events, such as sporting events or theater performances? Don’t assume the auto-billing will stop just because there’s been an event cancellation. Some expenses may be billed quarterly, which is why reviewing three months’ worth of credit card statements is a good idea.”
During hard times: 14 cheap ways to invest in your health
Many celebratory events have been canceled or are on hold, so you’re better off putting the funds you would have spent on gifts for friends and family toward necessities or savings.
“[There are] no bridal showers or birthday parties to attend to for now — you can bring gifts later to rescheduled events,” Rebell said.
The average American spends roughly $17.50 a month on bottled water, a 2019 survey by Ladder found. While that doesn’t seem like much, it can add up over time. Buy a refillable pitcher to eliminate this unnecessary expense.
Why it’s so important to cut out these expenses
You might feel like since you’re spending less money by not going out as much, you don’t need to watch what you do spend on. However, tracking how much you spend and cutting out expenses that you don’t need — like the 14 listed above — is critical.
“We’re living a time of financial uncertainty, where jobs are at risk and businesses are unsure of their future,” Tayne said. “By reducing expenses of non-essential goods and services, you can increase the amount you save to ensure that you’re still able to pay your bills or have some money in savings if you or a loved one loses their job. Interest rates quickly add up, and the last thing you want to do in a financial situation like this is put yourself further into debt.”
What you should be spending money on
Prioritize keeping up with your fixed expenses, said Cal Brown, a financial advisor with Savant Capital Management in McLean, Virginia.
“The best way to understand fixed expenses is to think, if you don’t pay them, something bad is going to happen,” he said. “For example, rent or mortgage payments, car payments, utilities and other loan payments.”
In addition to these expenses, Jeffrey Benowitz, CLU, ChFC, a registered representative with Certified Financial Services and Guardian Life in Paramus, New Jersey, said to continue to keep any insurance coverage you have.
“During these times people have a knee-jerk reaction to look at their insurance premiums as a way to cut costs,” he said. “Be very careful in this department. You do not want to change an existing policy to save money and have adverse effects if a claim is ever made.”
Keep contributing to emergency savings
Use any savings you get from cutting out unnecessary spending and contribute them to an emergency fund.
“About 40% of Americans can’t handle an emergency costing more than $400, according to a Federal Reserve study, so now is the time to cut down expenses and put that extra money in savings,” said Lindsay Sacknoff, head of consumer deposit and payment products at TD Bank. “Saving is about tradeoffs. Find the things that bring you less value or are added luxuries. Trade those in for savings and more security to plan for what the future may hold.”
This article originally appeared on GOBankingRates.com: Things to cut out right now to save money during the health crisis
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