Level of Effort: Low

Let's start off with the easy stuff; this includes eliminating small bank or credit card fees you may be incurring without even realizing it, cancelling ongoing services and subscriptions that you no longer use, and negotiating existing cable, internet, and phone plans. While the monetary impact of cutting these expenses will be low to medium, you can take action on them pretty quickly.

Impact: Low

A lot of the fees that banks and credit cards charge are completely avoidable. Table 5.3 highlights the strategies I recommend for decreasing or eliminating these fees.

Impact: Medium

Many companies now use an ongoing subscription model when charging for their products or services. While each subscription may only cost $10 to $15 a month, the total costs can really add up. In fact, I've been able to help some clients save hundreds of dollars a month simply by identifying and reminding them to cancel unused subscriptions. I recommend that you review your existing subscriptions at least once a year and ask yourself the following questions:

• Do I still use this service?
• Do I have other services that serve the same purpose?
• Are multiple people in my family using this service? If so, could I combine our subscriptions under a family plan that may allow all of us to save money?

Impact: Medium

Many people have found success in lowering their monthly fees for cable, internet, and phone service by calling providers and requesting a lower rate, or by saying they are considering cancelling the service and switching to a new provider. If a provider is unwilling to lower your monthly fee, you could instead try to request some type of service upgrade at no cost, such as a premium channel, faster internet speed, or a larger phone data plan. While these extras won't increase your financial runway, they could still improve the quality of your life (because being able to watch Big Little Lies is cool, but being able to watch it for free is even cooler).

I recommend you take 10 to 20 minutes to review your account statements for any bank and credit card fees you're incurring, as well as any unused subscription fees you are paying. Use the strategies we've discussed to come up with a plan for eliminating or decreasing these fees. Then, carve out another 20 to 30 minutes to call your cable, internet, and phone providers to try to score a lower monthly rate or extra perks that you may value. You might be surprised by how much additional money you'll be able to save by decreasing these costs.

Level of Effort: Medium

The strategies discussed in this section — like decreasing your shopping, travel, and food costs — might take a little more energy, but they should not be particularly controversial.

Impact: Medium

Table 5.4 highlights two ways to save on shopping, including 1) enrolling in free loyalty programs and 2) using cash-back shopping for online purchases.

Impact: Medium

Credit card points are another easy way to receive cash back, save on everyday purchases, or save on your next vacation. These days, most credit cards offer cardholders some type of reward for using their cards. However, not all credit card rewards programs are created equal — some credit cards offer the same cash-back or credit card rewards percentage no matter what you buy, while other credit card rewards programs offer increased rewards for certain spending categories, such as food and travel.

To determine the best credit card for you, set aside 30 minutes to review your spending patterns from the past year. If your spending is concentrated in a couple of categories, search for a credit card that allows you to earn more points per dollar spent in those categories. If your spending is evenly distributed across categories, it could make sense to look for a card that provides solid credit card rewards for all types of spending rather than increased rewards for certain categories.

Impact: Medium

While everyone needs to spend a certain amount on food, you might be overindexing in this category, particularly if you rely on food delivery services or go to restaurants frequently. Even when people buy groceries to try to save money and eat healthier, they may end up overspending (like when spontaneous social plans come up midweek that cause the groceries you bought last Sunday to go bad).

Take some time to review how much you spend on food overall, as well as the breakdown between restaurants and groceries. Determine your average costs when you dine in and get delivery, and then identify if there are ways to decrease those costs. For grocery spending, think back to your behavior over the last month, including:

• How often did I cook?
• Did certain barriers keep me from cooking?
• Did a lot of my groceries go bad before I could use them?
• What strategies could I use to decrease waste?

Level of Effort: High

While cutting smaller costs may be easiest, reviewing and decreasing your largest costs, such as housing, taxes, and credit card and student loan debt, could make the biggest impact on your financial runway. For example, if you decided to stop your $5-a-day latte fix, that'd only save you $1,825 a year. And think of the consequences! Without your daily dose of caffeine, you may find yourself more irritable, less productive, potentially snoozing in dirty subway cars or at your office, and eventually, living in a van down by the river. On the other hand, if you're able to lower your monthly rent from $2,500 to $2,200, you'll save $3,600 a year — nearly double the latte strategy, and probably a much less painful route.

Impact: High

Housing is by far the largest expense in most people's budgets, making up 33% of the average American's total expenses, according to the Bureau of Labor Statistics.¹ In terms of what it “should” be, financial planners recommend you limit your housing expenses to a maximum of 28% of your annual gross income (28% is an upper limit, not the target goal). If you make an annual salary of $100,000, you should be aiming to spend no more than $2,333 a month on housing, or $28,000 a year. Of course, the less money you divert to housing costs, the more you'll have available to fund other financial goals, including being able to shore up your financial runway.

If you're currently well beyond the 28% threshold, don't worry. Here are some ways you may be able to decrease your housing expenses and fuel more financial runway:

• Negotiate Your Rent: If you've been a good tenant (i.e., consistently pay rent on time, adhere to building rules, do not damage property), your landlord may be open to lowering your rent if you ask. If your landlord balks at lowering your rent, you could request other value-add amenities instead, such as free access to the fitness center or discounted or free parking.
• Refinance Your Mortgage: If you own your home, explore if refinancing your mortgage could decrease your monthly payment. Be sure to take into consideration the closing costs involved and how much longer you'll stay in the home to determine whether any monthly savings would offset the upfront costs.
• Align Your Space and Amenities with What You Value: Determine the amount of space and type of amenities you want and match those preferences to your living situation. For example, if you're living in a new high-rise building with a lot of amenities that you don't value or a big house with a chef's kitchen you don't use, you could save money by moving to a place that better matches your needs. Not only will you be able to decrease your monthly housing payment, but you may also be able to lower other housing expenses, such as utilities, cleaning fees, and furniture costs.
• Evaluate Where You Live: Housing prices will usually be higher for units that are perceived as more desirable because they're in a supposedly “better” location. If you're paying high housing prices because you live within close proximity to community amenities that you don't take advantage of — such as top-rated schools, a lively nightlife district, or public transportation — it could make sense to relocate to a less expensive area within the same city.
• Get a Roommate: Adding a roommate could help you live in a nicer area or building, while enabling you to pay less than if you lived on your own.

Your home can have a significant impact on your daily happiness and comfort, as well as the amount of money you're able to save each month. As you evaluate your housing situation, be sure you understand your preferences and priorities, and take all factors into consideration when determining whether a change makes sense for you.

Impact: High

Nobody likes paying taxes, and most people want to minimize the amount of taxes they have to pay (within the law). Luckily, there are surprisingly easy ways to cut your tax bill that could help you save a significant amount of money.

Reduce Taxes Through Employee Benefits

You may be able to save a fair amount on your tax bill just by taking full advantage of your employee benefits. Regardless of whether you're funding a retirement, health care, or commuter account, the general mechanics are the same:

• You decide to contribute some portion of your salary to an account to fund your retirement, health care expenses, and/or transportation costs.
• Those contributions decrease the amount of your income that is subject to federal taxes in the year of contribution. With a lower taxable income amount, you'll generally owe less in taxes.

For example, say that you make $100,000 a year. You decide to contribute $2,000 to your health savings account this year. Instead of your taxable income equaling $100,000, just $98,000 would be subject to taxes.

Table 5.5 outlines some employee benefits you can use to save on your current-year tax bill.

Other Tax-Saving Strategies

Table 5.6 highlights strategies outside of your employee benefits that could help you save on taxes, including by contributing to a 529 plan, making charitable donations, or deducting mortgage interest and property taxes for home ownership. Keep in mind that some of these strategies require you to itemize deductions on your federal tax return to benefit from tax savings.

What the heck does itemizing deductions actually mean? When you file your federal tax return each year, you are allowed to subtract a standard or itemized deduction from your income to arrive at the amount of your income that is subject to tax. You'll generally choose the higher amount between the standard and itemized deduction, which will minimize your taxes. The standard deduction is a fixed amount based on your filing status, age, vision status, and whether someone else can claim you as a dependent. Itemized deductions are based on eligible expenses that you incurred throughout the year, like mortgage interest; state, local, and property taxes up to $10,000; and charitable deductions. For 2019, the standard deduction for single filers was $12,200.² As a single filer, if the amount of your eligible expenses to itemize is less than $12,200, then you would take the standard deduction.

Impact: High

Decreasing the expense of your debt could take time, but it has the potential to significantly reduce your burn rate, particularly if you are able to eliminate high-cost credit card debt.

The first step in cutting down your debt is to list out all of the debt that you have. Use Table 5.7 (also available at www.workyourmoneybook.com) or your own template to create an inventory of your outstanding debt, including:

• Lender
• Type of debt
• Outstanding balance
• Interest rate

You may have already compiled some of this information in Chapter 4 when you came up with your net worth and burn rate, so be sure to reference that work before duplicating efforts.

For student loans, specify under type of debt whether the loan is a federal or private student loan. You can figure this out by looking at the latest statement from your student loan provider, or in the case of federal student loans, verifying your outstanding loans through the National Student Loan Data System (nslds.ed.gov).

Determine Options to Decrease Debt Cost

There are three main ways to decrease your debt cost or simplify your debt repayment for credit cards and student loans:

1. Request an Interest Rate Reduction (Credit Cards Only): Receive a lower interest rate on your existing debt.
2. Consolidate (Federal Student Loans Only): Combine multiple federal student loans together into one loan; does not decrease the weighted average interest rate on your debt.
3. Refinance (Credit Cards and Student Loans): Could be used to combine multiple loans together into one loan, potentially decrease the interest rates on your debt, and/or give you better terms on your new loan.

Request an Interest Rate Reduction (Credit Cards Only)

While student loan providers typically don't negotiate interest rates, your credit card issuer may be open to exploring this option.

Before making a call to request a rate reduction, be sure to arm yourself with some relevant information, including your current interest rate, the interest rate on comparable credit cards, and your credit history and credit score (which you should have from Chapter 4).

Once on the call, if the initial customer service representative you talk to lacks the authority to make such a decision, ask to speak to their supervisor. Regardless of who you speak to, try to remain calm, collected, and patient during your discussion — after all, the biggest (and only) downside is that you'll end up with the same interest rate that you have currently. That being said, CreditCards.com research found that three out of four cardholders who ask for a lower interest rate get it!³ (How's that for motivation?)

Consolidate (Federal Student Loans Only)

Debt consolidation offers you the opportunity to combine your outstanding federal student loans into one loan. (Private student loans aren't eligible to be consolidated under the Federal Direct Loan Program.) Consolidation could be a great way to help you more easily track and pay your loans; however, it will not lower your interest rates. The interest rate of your new consolidated loan will simply be the weighted average of the interest rates of your outstanding federal student loans.

Nonetheless, consolidation could decrease your monthly loan payment, because combining several small balance loans may qualify you to extend the length of your new loan from the standard 10-year term to as long as a 30-year repayment period.⁴ Be aware that while your monthly loan payment might decrease in such cases, the total amount of interest paid for the life of the loan would increase because you'd be paying the loan over a longer period of time, unless you decide to prepay your loan.

Refinance (Credit Cards and Student Loans)

Refinancing involves replacing your existing loan(s) or credit card balances with a new loan or credit card that (hopefully) provides better terms. The main ways to refinance credit card debt are through balance transfers or a personal loan. For student loans, you could refinance federal and private student loans through a new private student loan.

Credit Cards

• Balance Transfers: Transferring your existing credit card balances to a new card that offers an introductory 0% interest rate for 6 to 18 months could provide you with some temporary relief from interest accruing. Your goal would be to create a plan to pay off the new credit card balance entirely before the introductory 0% interest rate period ends. When deciding whether to open a balance transfer card, be sure to evaluate the introductory interest rate offered (hopefully 0%), how long the introductory rate will be applicable, the balance transfer fees, and how much can be transferred to the new card. A balance transfer card could be an attractive move if the interest savings outweigh any fees, and if the introductory 0% interest rate period gives you enough time to pay off your credit card debt in full.
• Personal Loans: Refinancing through personal loans is an alternative strategy for reducing credit card debt. Personal loans often have upfront fees associated with them, so you'll need to consider the all-in-fees you'll be paying to see if refinancing your existing credit card debt would be financially beneficial.

Student Loans

• Private Student Loan Refinancing: Refinancing through a private student loan lender allows you to combine all of your various student loans (federal and private) into one loan payment. Unlike a federal consolidation loan, for which the interest rate is simply the weighted average interest rate of your existing loans, the interest rate for your new refinanced student loan will be based on your particular financial profile, including your credit score, current asset and liability profile, and debt-to-income ratio or free cash flow (typically, your net income less any debt and housing payments). If you have a strong financial position, you may be able to score a lower interest rate by refinancing. In addition, most lenders do not charge a fee to refinance your student loans.