When you start a business, it’s all about profits. Your income minus your expenses. To stay in business, you need to make money, spend less, and book some profits. If you have no profit, you have no business.
When you think about it, you’re not that much different on that score. You have income, you have expenses, and the difference is your savings. Your savings are you future. They are your future retirement, your future vacations, your future house, your future car, your future family… your savings are your future. Without savings, you’ll work until the day you die.
Entrepreneurs are trained to focus on both. Increase top line revenues while decreasing expenses, to increase the bottom line. You have to be the same. While it’s much harder to increase top line income, you can have an appreciable impact on your bottom line by cutting your expenses.
How do you cut your expenses like an entrepreneur?
Negotiate like it’s your job.
Entrepreneurs negotiate everything because the business depends on it. When you need work done, like renovating an office space, entrepreneurs get multiple quotes, bid them against one another, and then ask for more concessions. We all know that we have to do this whenever we’re getting a contractor to do a big job, but this applies to everything. Whenever you spend money, ask if there’s a discount available. Just the other day we were in Bed Bath & Beyond, home of the ubiquitous 20% off coupon, and we forgot one of the hundreds of coupons we had at home. My wife asked if there was a coupon available and the cashier said yet, opened up a book of bar codes, scanned the code, and we got a discount. Just for asking nicely!
Go over fixed expenses with a critical eye.
How many fixed expenses do you have each month and when was the last time you went over them? When was the last time you negotiated the rates? If you aren’t under contract, you need to call up that company and get concessions. People do this every single day with cable companies with tremendous success. I recently changed cable companies and was rewarded with a $300 gift card, $50 off my bill for the same service for the next two years, and credits towards renting two cable boxes. My only cost was that I signed a two year contract.
Cancel services you no longer need.
How many magazine subscriptions do you have? How many do you read? How about that Netflix subscription? Or that gym membership? If you haven’t used it in a while, consider canceling it or paying for it a la carte. If you aren’t sure how often you use it, keep a log and create a rule for yourself. If I don’t go to the gym at least once a week, then I cancel it after a month.
Downgrade services and find a middle ground.
Do you need the fastest internet? Do you need thousands of cell phone minutes or would a prepaid cell phone plan work? Instead of picking between all or nothing, find a middle ground by downgrading services so you fit the service to your needs. For us, the prime example was the Netflix subscription. We were watching everything via instant streaming and didn’t even the discs. Netflix introduced the streaming only subscription option but we never changed because of inertia. By going to streaming only, we were saving $8 a month. I’d rather eat lunch once a month than send it to Netflix for no reason.
Before there was money, there was bartering. Just as friends do favors for one another, business can do the same and trade services instead of cash. Seek out a bartering group in your area and you just might find a way to trade your skills for someone else’s.
These are just three of the ways entrepreneurs trim expenses that can be used in your life too.
One word of warning, which is something Ramit Sethi preaches from the highest mountain tops, don’t get so focused on reducing your expenses that you forget your income. You can only cut your expenses so much. There’s a mathematical limit on expenses that doesn’t exist, in theory, on your income.
So be sure to do both!
Additional Financial Resources
- 401k vs Roth 401k: Calming the Confusing Chaos
- Credit Cards Aren’t Evil: You are!
- Benefits of Saving Early for Retirement
- How to Not Get Hustled by Your Student Loans
- Savings – Ways to Stop Procrastination
- Essential Tax Resources for Everyone
- Four Ways to Save Your Tax Refund Safely
- Making Tax Season Easy