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.

The article may contain affiliate links from one or more partners. Learn how we make money to continue our financial wellness mission.

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. Therefore, you’ll need a smaller amount of savings to cover your monthly expenses in the event of a crisis.

Lowering your expenses does two things:

  1. It lowers the amount of money needed to cover monthly expenses.
  2. Frees up 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?

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 bills, debt and cause a great deal of stress.

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

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.

Now, I believe it’s important to break these categories into expense types. There are three distinct expense types.

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’ll work on improving my habits with discretionary spending as my final step.

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 with your credit balances or debts. Consider refinancing your mortgage, student loans, credit cards into lower rate options before a crisis. It can improve the chance of approval. The result of refinancing lessens the amount you’ll pay each month, but it can lessen the total cost of borrowing in the long term.

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 can lead to financial security.


Call your financial institutions, lenders, and credit card companies about lowering your current interest rates. Many have programs that help good customers with loyalty rate reductions and others have options for those who’ve fallen behind.

Call your service providers and negotiate your service contracts. Ask about cheaper options for the service you already have with them. Think about your utilities, home and auto insurance, cell phone packages, subscriptions, etc. Ask about a group or affiliate discount.

If you find your creditor or service provider is unwilling or unable to help, then take your business elsewhere. Shop around for better rates for your financing needs, debt obligations, utilities and subscription services, insurance plans and more.


Just cancel those unnecessary plans altogether. You might be paying for multiple streaming services and often only use one service. Also, consider removing extra perks or options from existing subscription plans that can reduce your monthly payments.

Go through your banking statements or 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.


Make life simpler by consolidating credit cards, student loans, and other debts. Not only can you save with lower interest rates, better terms, and a lower monthly payment, you benefit by simplifying your debt repayments. Consider consolidating your multiple credit cards into a debt consolidation loan or a zero-interest balance transfer offer. 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 experiencing some financial upheaval, 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.

Shop the Financial Marketplace Discover the Best Money Apps
Show More

Jason Vitug

Jason is the founder of phroogal, creator of the award winning project Road to Financial Wellness, and author of the bestseller and New York Times reviewed book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.