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It all starts with a budget

The first step in determining how you might be able to save an extra $1,000 a month is to examine your spending and then make a budget. By itemizing all your expenses, you can get a better idea of where you might be able to comfortably cut back. Setting up a sustainable budget can keep you on track and help reduce unnecessary and impulse purchases.

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Take a bite out of your food expenses

Food is the third-largest expense for U.S. households (after housing and transportation), according to the latest consumer expenditure data from the Bureau of Labor Statistics. It’s also an area where you may be able to reap some big savings.

The average amount American households spend on “food away from home" is more than $3,500 a year. Most of us know the cost of that morning coffee we grab on the way to work adds up, but it’s also likely a small luxury we’d like to keep. One way to save is to grab a coffee, but skip the pastry you’re grabbing with it ― and try to pack a lunch for work.

Plan and prep your meals for the week if you can. Make it a habit to go grocery shopping ahead of time so you’re less tempted to grab takeout on the way home. Don’t neglect to check flyers for your local grocery store to take advantage of what’s on sale, and consider adhering to the old-fashioned — but effective — practice of using coupons whenever you can.

Put the brakes on your transportation expenses

While food is a major cost, transportation takes second place as the largest expense for American households. Some people might be paying too much for a vehicle — or paying for a fancier vehicle than they really need.

While it may not be realistic to get rid of your car at this point, you can cut back on costs by walking more, taking public transportation when possible or even carpooling to work more often. This can save on gas and parking, and may help to reduce wear and tear expenses for your vehicle.

It may even reduce your insurance costs, as they’re often affected by the number of miles you drive. It's also a smart idea to shop around for car insurance.

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Take a hard look at your memberships and subscriptions, since they’ve probably piled up over the years. In a survey by C+R Research, almost one-third (30%) of respondents underestimated their average monthly spend on subscription services by $100 to $199.

If you’re still paying for cable, consider switching to a streaming service. If you’re paying for multiple streaming services, consider cutting that down to one. Plus, it’s not difficult to stop one service and start another to get the programs you want.

Can you reduce your phone bill? Are you paying for online magazines that automatically renew but you never read them? What about apps that auto-renew? Are you still getting enough use out of them? Is it possible to work out at home and cut the gym membership? Or move to a cheaper gym? Look at all your renewable contracts and decide if they can be cut, renegotiated or reduced.

Get big gains by cutting small expenses

When you look at your expenses, look for small things that add up. If you’re spending a lot on books, consider getting a library card. If you buy a lot of bottled water, start using a refillable water bottle instead. Can you get by with fewer manicures? Cutting back on regular small expenses that won’t change your quality of life much can really add up.

How saving $1,000 extra a month can change your life

If you’re able to start saving an extra $1,000 a month, you could start making big changes in your life. For starters, you’re likely to have more peace of mind. Having more savings means you’re more likely to be able to pay for unexpected emergencies without incurring more debt.

You’ll also go a long way toward building your retirement nest egg by taking advantage of compound interest. If you start by contributing $1,000 a month to a retirement account at age 30 or younger, your savings could be worth more than $1 million by the time you retire.

If you save $1,000 at the end of every month and put it in a high-yield savings account that pays 5% interest (compounded daily), you’ll have nearly $70,000 in savings in five years. Do this for 10 years and you’ll have over $157,000.

Finding an extra $1,000 a month might also mean you can worry less about your prescriptions or medical expenses, treat yourself to a vacation every few years, or cut out that second job that’s taking you away from spending time with your family. Perhaps those small expenses aren’t as important to your happiness after all.

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Vawn Himmelsbach Freelance Contributor

Vawn Himmelsbach is a journalist who has been covering tech, business and travel for more than two decades. Her work has been published in a variety of publications, including The Globe and Mail, Toronto Star, National Post, CBC News, ITbusiness, CAA Magazine, Zoomer, BOLD Magazine and Travelweek, among others.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.