3 Extreme Expense Reduction Strategies When Income Isn't Enough

Why Income Alone Isn't Solving Affordability

Working harder doesn’t pay off financially. According to a My Perfect Resume survey of 1,000 workers spread evenly across age groups from 18 to over 65, side hustles and overtime are necessary just to keep up. People are delaying major life decisions, such as buying a home, changing careers or saving for retirement, because of financial challenges.

Growing income to solve affordability issues has been the focus of previous columns. You can tap your expertise to start a consulting business, pivot your career to a higher paying industry or advance your career and grow your salary where you are. However, growing income is only half of the affordability equation. The other half is expenses.

Relocate To A Lower Cost Area

Yes, moving has upfront costs, and there is sweat equity to integrate into a new place. However, the savings are ongoing and can be significant (e.g., housing, food, entertainment). Health insurance and taxes may even decrease depending on where you move.

If you work remotely, a move abroad could save money across the board. If leaving the country is a step too far, relocate to new city with cheaper housing, lower tax rates and/or lower daily living expenses. Even changing neighborhoods within your same city can unlock savings – e.g., moving from Manhattan to the outer boroughs.

Downsize Large Expenses

There is only so much you can save with bringing your lunch from home or skipping the fancy coffee. To change your bottom line, you need to downsize large expenses, such as housing, transportation and insurance. Can you move down to one less bedroom? Can you trade the car for mass transit? Can you switch to a lower cost plan for your home, car, life and other insurance plans you have? Open enrollment is coming up in November, which is a good time to review your health insurance selections for cost savings.

If getting rid of your current residence and/or car is a step too far, can you share it and therefore share the expenses? Take on a roommate. Start carpooling. Check with your home insurance and car insurance first to ensure you have the right coverage.

Comparison-Shop Ongoing Expenses And Keep Working On Income

The time you spend comparison shopping for better deals is paid back in savings. Look at your utility providers – can you get a better rate for Internet, cell phone, cable? If you like your provider, call them anyway to see if there are any current deals you can take advantage of or simply to ask for a better rate. Ask for a better rate from your debt providers – e.g., student loan provider, credit cards. While interest rates generally go up when the Federal Reserve raises interest rates, your individual rate is also based on your own credit and paying history, so lenders might still be able to give you a better rate than what you have now.

A key advantage of focusing on the expense side of your bottom line is that you can make some changes quickly, sometimes even the same day. The quick wins encourage you to keep going and give you money to reinvest in bigger moves, such as relocating. The savings can also give you runway to focus on growing your income, such as changing careers or starting or growing a side business.

A key advantage of focusing on the income side is that there is unlimited upside to how much you can increase your earnings, while there is a limit to how much you can reduce your costs. Keep your resume and LinkedIn profile updated for the jobs you want. Nurture your network – keep in touch with former classmates and colleagues, stay active with professional events to meet new people, and cultivate relationships outside your immediate department so you’re visible across the company, not just where you work right now. Stay alert for opportunities – following companies and industries, telling trusted contacts what you’re interested in, and applying to jobs on an ongoing basis to keep your job search muscles strong.