If you want to save money, what’s the first thing you do? Like many people, you probably pull out your trusty budget to find expenses you can slash from the list. This time-honored, frugal hack can help you free up cash, but it’s only one part of the money-saving equation.
A well-rounded approach goes above and beyond the expenses, you can avoid. It also includes reducing how much you spend on essential expenses.
In business, this is what distinguishes cost savings from cost avoidance. Using these theories in tandem when tweaking your budget can help you save as much money as possible.
What is Cost Avoidance?
Cost avoidance is what it advertises; you avoid costs.
In practical terms, it means two things:
- Limiting how much money you spend in a month by removing unnecessary expenses.
- Taking specific measures that lower the potential for greater costs in the future.
Like many novice budgeters, you’re probably most familiar with the first one. It describes any tightening of your budget, like the popular strategies below:
- Unsubscribing from surplus streaming accounts.
- Eating home-cooked meals instead of takeout.
- Cancelling a gym membership.
However, there’s a good chance you’re already following the second point if you have insurance or save money in an emergency fund. They may incur extra monthly costs in the form of premiums and savings contributions, but they help you handle greater expenses down the line.
Let’s say you crack a tooth on a piece of hard candy. No matter how you deal with it, this tooth is going to cost a lot of money. According to Forbes Health, it can range from $220–$420 to repair a chip and $500–$3,000 to get a dental crown.
Without dental insurance or a health emergency fund, these out-of-pocket expenses fall on your shoulders alone. Could you afford an unexpected $3,000 emergency dental bill?
If you can’t cover an unexpected expense on your own, you can look into cash loans online for help. You can find out more about what you need to qualify for cash loans online from a website like MoneyKey with a simple click of your mouse.
While it’s easy to apply for cash loans online, these borrowing options add interest and finance charges to what you owe. Dental insurance and a healthy emergency fund, on the other hand, can help you avoid this out-of-pocket repair without paying extra.
What is Cost Savings?
Some spending is non-avoidable. In other words, most people can’t steer clear of rent, utilities, or groceries if they expect to live a healthy and safe life.
Cost avoidance can’t help with these essential expenses, but the cost savings trick can. This strategy helps you find ways to limit how much you spend on essential expenses.
Here are some ideas on how to find cost savings in the most common spending categories:
- Housing Costs: Moving and downsizing can help you reduce what you pay in rent or mortgage payments.
- Utilities: You’ll always pay for electricity, gas, and water, but by reducing your consumption with these energy tips, you can reduce these regular bills.
- Groceries: You can spend less to fill your fridge by meal planning around cheap recipes, weekly flyers, and coupons.
Strike a Balance Between Cost Avoidance and Savings
You can save a lot of money by avoiding costs, but you’ll save even more when you commit to finding cost savings in your everyday. These money-saving strategies work best when used together.