Budget hacking is a buzz phrase that’s been circulating the personal finance realm within the last few years. So what is it? Essentially, it’s the process of reviewing your monthly expenses to determine if there are ways to eliminate or reduce them without sacrificing quality of life.
We often lose track of our monthly expenses due to the busyness of life. Even more of a reason to use a budgeting and money tracking tool. And if we lose track of our monthly expenses we lose the ability to recognize if there are ways to save money.
The more you can minimize your monthly expenses the more discretionary income you can have on hand to utilize for what’s most important. Look at your monthly expenses through a lens of need first. This often puts perspective on waste and wants that may not be life-giving or productive towards your goals.
I often evaluate our expenses and if they are even necessary. There’s never been a time in history where more things have been freely available (thanks technology!). If they are necessary, I evaluate if there’s a way to reduce them via a cheaper solution that provides the same value. If they aren’t necessary, they don’t stick around very often.
Here are some useful and very real applications of budget hacking.
One example is that I’ve moved to using a cellular provider called Republic Wireless. Republic Wireless is an MVNO (Mobile Virtual Network Operator) that purchases network services via wholesale rates from Sprint. This coupled with their ideology of WiFi based usage (using WiFi whenever it’s available) helps provide discounted prices for their services. Republic Wireless is a prepaid, no-contract provider. Users pay $10 for unlimited call and text. They can also pay $10 per GB of data and be reimbursed for data they don’t use. I’ve regularly kept my cell phone bill under $20 per month, typically around $15 per month. If your phone bill is on average of $50 per month you can see how you’d be able to save hundreds of dollars over a course of a year! Google is another provider that’s stepped up to the plate with Project Fi.
Another example is evaluating if you can purchase generic brand items instead. Consumers often can’t even tell the difference between name brands and generic brands. I often look to see if an off brand has the same “active ingredient” as the name brand and if the quality is similar. Let’s take groceries for example. Lifehacker featured a study by personal finance site that decided to purchase generic groceries for a month and saved approximately 25%. Granted, this will vary by preference and shopping habits. The point is, if you can find the generic items that you’re willing to endure then you have a hackable opportunity.
Prepay for things. If you have to pay for something pay for it all up front. By doing this, you can often negotiate or receive a discount due to the convenience for the provider. For example, I was talking to a friend whose car insurance provider charges her a convenience fee, an extra approximately $3, for paying her premiums on a monthly basis instead of all at once. You can often save 5-10% by prepaying auto premiums. The kicker is that you have to be diligent about saving 6 months before the semi-annual premium is due.
Trust your neighbors? Share WiFi, trash, or other services with them. You both would be paying full price otherwise but can potentially share the cost. It may not seem like significant savings over the short term but it can add up fast.
Honestly, the truth is that we have more control over our expenses than we think. Utilities, an expense we often chalk up as out of our control, even have a portion tied to usage which I’m sure we can all be more efficient when using utilities.
I’ve learned over the years to quit taking some expenses at face value. What I mean is to do your research before you jump at the first opportunity, I try to find three alternatives before I make a decision.
Or I’ve learned that some expenses can be negotiated, but few people tread these waters out of dignity or fear that it’s “beneath them”. Providers are banking that you fall in line and don’t ask questions. I once negotiated my internet bill down when I saw it increase more than $10 in one pay period. Now negotiating won’t work every time. The worst thing they say is “no.”
Enough budget hacking can equivalate to freeing up enough resources to pay off debt, give more, or invest in your future and do it quicker in that regard. Truthfully, this concept is just moving money from inefficient areas of our lives to places we value and hold important. If you don’t come to terms with that idea and desire to embrace it then there isn’t a real need to review your expenses in order to hack them.
So hack away! You have the power of the internet at your fingertips to see what other people are doing and what’s working for them. Don’t let it go to waste!