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- Recent figures from Pew Social Trends show that about 25% of adults have had trouble keeping up with bills since COVID-19 appeared, and one in six adults have received help from a food bank.
- If you're worried about making ends meet as the pandemic continues, cutting major expenses is a step you may be able to take right away.
- Depending on your situation, there may be some "low-hanging fruit" you can cut from your budget without impacting your life too much.
- For example, you may be able to save money if you shop around for homeowners insurance or car insurance, or if you switch from whole life insurance to a less expensive term policy.
- Find out what a financial planner can do for you with Personal Finance Insider's free e-book »
If you're struggling financially right now, you are certainly not alone. In fact, new data from Pew Social Trends shows that one in four adults have had trouble keeping up with their bills since the pandemic started, and about one in six adults have visited a food pantry. Approximately one third of adults have also had to use savings or retirement money to make ends meet during this challenging time, which can be frustrating for those who have worked hard to build wealth.
If you need extra cash in your pocket, there are plenty of ways you can cut your spending as the pandemic runs its course. But where to cut first?
As a financial advisor, here are the major expenses I would consider cutting for the biggest impact.
When the pandemic first took hold, my wife and I were initially pretty unenthusiastic about making dinner after being with kids all day. After all, their school had been cancelled and we were all unwillingly plunged into e-learning like everyone else. There was a point where, with four kids and two dogs, we found ourselves giving in to delivery services like DoorDash and Grubhub way more often than we should have.
Eventually, it almost became too convenient to order food delivery a few times per week. We have since cut back and only dine out once per week now, and we have found we're easily saving $400 per month or more by making most of our meals at home.
If you're struggling to make ends meet right now, food spending is one area where you really do have a lot of control. If you're dining out or relying on food delivery a little too often, cut back and see how much you can save. Also, look for ways to spend less at the grocery store, whether that means making bulk meals and eating leftovers, cutting down on meat or pricey specialty foods, or creating a meal list every week. Even a few small changes can add up fast.
If you have homeowners insurance, auto insurance, life insurance, or any other type of insurance, now is a great time to shop around and compare quotes. Switching carriers can be the best way to find significant savings.
In addition to shopping around for homeowners and car insurance coverage to compare rates, also consider the type of coverage you have and if it's enough or too much. If you have a whole life insurance policy and you're on the fence about needing permanent coverage, for example, you could save hundreds of dollars each month by dropping your whole life policy and switching to a term life insurance policy instead.
Now is also an excellent time to take a close look at your subscription services to see if you can make any cuts. Sure, your kids probably make sure you get your money's worth out of Disney+, and most people can get value from Hulu, Netflix, and other streaming services, but you may not need all of them. Also, look at other subscriptions you have, whether that includes Audible, Spotify, Apple Music, or satellite radio for your car.
You may find that at least some of your subscriptions are well worth the cost, but it's possible you could cancel some of your lesser-used subscriptions for some monthly savings right away. And if you feel overwhelmed at the mere thought of diving into which subscriptions you have, consider using a service like Trim. This company claims to save users an average of $645 per year by cancelling unwanted subscriptions, negotiating your bills, and more.
Your mortgage payment
Finally, consider refinancing any large debts you have if your income is still sufficient, your credit score is in good shape, and you have considerable equity in your home. Keep in mind that today's best mortgage and refinance rates are still incredibly low.
How much could you save by refinancing your mortgage? Imagine you currently owe $300,000 on a 30-year home loan with a fixed rate of 4%. In that case, you would owe $1,432 per month in principal and interest on your loan, and your total loan costs would add up to $515,609, including principal and interest, by the time you paid your home off.
But if you refinanced into a new 30-year loan at 3%, your monthly principal and interest payment goes down to $1,265 per month and your total loan cost goes down to $455,332. That's a savings of more than $60,000 for a little time spent comparing mortgage rates and filling out paperwork. And, in the short term, refinancing can help you ease into a new housing payment you can more easily afford.
Jeff Rose is an entrepreneur disguised as a certified financial planner, author and blogger.
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