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How to Lower Expenses Before a Personal Financial Crisis

Mitigate future stress and do better during a financial emergency by reducing, negotiating, consolidating, and eliminating expenses today.

How to Lower Expenses Before a Personal Financial CrisisYou might be okay now, but things can change quickly. By planning ahead and being prepared you can mitigate the impact of any personal financial crisis you may encounter.

A strategy used by many to achieve financial security is to have fewer monthly expenses. Resulting in a smaller amount of savings needed to cover monthly expenses in the event of a crisis.

There are two benefits to lowering your expenses:

  1. It lowers the amount of money needed to cover monthly expenses.
  2. Improves cash flow and frees income to achieve financial goals.

Coronavirus Alert: Many financial institutions are offering programs to help during the pandemic. Learn more about these coronavirus specific plans here.

Your cash flow situation

What’s your cash flow? Are you able to cover your expenses with your income?

To calculate your cash flow, subtract your monthly expenses to your monthly net income.

Total Net Monthly Income – Total Monthly Expenses = Net Monthly Cash Flow

Your cash flow number shows how your money flows in and out of your life. Positive cash flow means having money left over to save for emergencies, debt payoff, and of course some discretionary spending.

On the other hand, negative cash flow means you’re living way above your means and a financial crisis can leave you unable to pay expenses and cause a great deal of stress.

Different types of expenses

Let’s start with the two main categories of expenses: fixed and variable.

Fixed expenses are the same each month like mortgage, rent, car payment, subscriptions, and installment loans or insurance premiums.

Variable expenses change each month like gas, utilities, car or home maintenance, food, and entertainment. Basically, the amount billed or expense fluctuates based on usage.

It’s important to break these categories into expense types. It’s a much easier concept to grasp than trying to think based on fixed and variable. The three distinct expense types are:

Bills – are expenses that are necessary, needed or essential to living. Bills include your monthly mortgage or rent, insurance premiums, utilities, transportation, food, subscriptions, and credit card payments.

Debt – are expenses that are fixed obligations such as student loans, car loans, unsecured loans, etc.

Discretionary – are expenses that aren’t necessary or an obligation. They are entirely at your discretion and include clothing, dining, entertainment, trips, and subscriptions.

It’s important to know these distinctions when strategizing on how to lower your expenses.

For instance, we often think fixed expenses are set and unchangeable. However, when we group expenses based on types we find opportunities to lower fixed expenses. This can be done by reducing, refinancing, consolidating, or eliminating.

Personally, I like to focus my efforts first on larger expenses that have a bigger impact on my cash flow. Then, I’ll tackle the smaller expenses next. After doing so, I work on curtailing discretionary expenses by increasing my spending awareness and shifting my habits.

4 Ways to Lower Expenses

Prepare yourself to do better during a personal financial crisis by reducing, negotiating, eliminating, and consolidating your expenses today.


Find ways to reduce the interest you’re paying on your credit balances or debts. Consider refinancing your mortgage, student loans, credit cards into lower rate options. The result of refinancing lessens the amount you’ll pay each month but might increase the total cost of borrowing in the long term. Applying before you’re in crisis can improve the chance of approval.

Reduce your discretionary shopping too. Create a budget for variable expenses like groceries, dining, entertainment, clothing, and trips. You probably don’t need to eliminate items that support a healthy lifestyle but reducing the amount spent on them can support financial security.

Remove extras from existing service plans. Doing so can result in lower monthly payments. For example, removing smartphone insurance.


Call your financial institutions, lenders, and credit card companies. Ask about lowering your current interest rates. Many offer loyalty rate reductions for good customers and may also offer assistance to borrowers who’ve fallen behind.

Negotiate with your service providers. Inquire about cheaper options for existing service and about an available group or affiliate discount. Create your list of services such including home and auto insurance, utilities, cell phone packages, subscriptions, and pretty much anything you pay for monthly.

If you find a creditor or service provider is unwilling or unable to help, then take your business elsewhere. Shop around for better rates and services. While you’re shopping, ask about special promotions and discounts.


Just cancel unnecessary service plans altogether. You might be paying for multiple streaming accounts and prefer one service. Go through your banking and credit card statements to find automatic payments to services you don’t use and eliminate them.

Stop spending on discretionary items that add no value. Track your spending using third-party apps like Mint or tools offered by your financial institution. Apps that categorize spending can help you decide on what expense to eliminate.


Consolidate credit card balances, student loans, and other debts. Save money with lower interest rates, better terms, and benefit from fewer and lower monthly payments.

For example, use a debt consolidation loan for multiple credit cards or transfer into a credit card with a zero-interest balance transfer offer. And determine if consolidating student loans through refinancing makes sense too.

Think outside the box on what expenses you can consolidate. Can you join someone’s cell phone plan? Could you share streaming service plans with a roommate? Does an umbrella insurance policy reduce your premiums? Is it possible to consolidate your stuff into one room and rent space in your home? Get creative.


It’s best to prepare for an emergency when things are going well. So if you’re in a good position, consider these steps to help you prepare for a personal financial crisis. And if you’re currently experiencing a financial crisis, these steps can help too.

In closing, there are services that can help you negotiate and eliminate some of your monthly expenses using artificially intelligent apps. They monitor and track your spending and suggests ways to reduce expenses. They can also negotiate on your behalf, cancel subscriptions, request refunds, and offer financing alternatives. Learn more about personal financial digital assistants.

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