How to cut costs? Review your expenses

In the current scenario, with widespread price increases due to inflation, the energy crisis, and rising interest rates, it is important to review your monthly family budget and see if it is possible to cut costs. This is because the current economic context, aggravated by the Russian invasion of Ukraine, has had and will increasingly have a major impact on families.

Therefore, in this article, we have put together solutions that will help you reduce your monthly expenses, whether in mortgage, insurance, telecommunications, energy, gas, or leisure costs.


Plan your family budget 

The first step you should take to cut costs is to get your finances in order. To do this, you should draw up a monthly family budget. 

Make a strict financial plan, describing all your expenses in detail (even leisure expenses, such as coffee breaks). In this budget, take into account what has gone wrong so far, so that you can identify what you can change and where you need to cut back. Write down the habits you have acquired that are causing you to spend more money. 

From there, start by listing all your fixed monthly expenses. Then, for variable expenses, set an amount for each area: for example, $100 to spend on clothing, $150 to spend on leisure, $200 to spend on gas, and so on. Remember to also account for one-off expenses, such as tax payments. 

Next, include your income in the budget. This will help you understand whether it is sufficient to cover your expenses and whether you have any leeway. Calculating your debt-to-income ratio can help. 
This will allow you to analyze where you are spending your money and which expenses you can cut in order to achieve savings. 

This is a document that should be reviewed and adjusted monthly. To stay within your budget, you can use mobile phone apps so that, wherever you are, you can keep track of your daily expenses and control what you can and cannot spend, taking into account the amounts you have set. 

 
Mortgage: how to save on your monthly payments

You can request a review of the terms and conditions 

Given the current rise in interest rates, mortgage payments are one of the biggest monthly expenses in the family budget.  

Therefore, you should look for ways to save on this expense. Do you know what your spread is? Do you have a variable rate? Now is a good time to review the terms and conditions of your loan. 

Talk to your bank to find a way to reduce your monthly payment. Renegotiate conditions, for example: add products to your loan, such as a credit card with a monthly spending limit, and in return, reduce the spread. 

Changing from a variable rate to a fixed rate can also pay off at this stage. This is because a fixed rate means paying the same amount for the rest of the contract, while the variable rate is indexed to Euribor. In other words, depending on the term you have chosen, the variable rate changes each time it is reviewed.  

As interest rates have been rising steadily, whenever there is a review, your interest rate increases. But if you switch to a fixed rate, you may benefit in the long run because it may be lower than current interest rates. 

You also have the option of a mixed rate: initially, you pay a fixed rate, but after a certain agreed period, your credit becomes indexed to Euribor. 


These last two options offer more stability in the current climate, so you should consider this change if you want to cut costs on your loan.
 

Have you thought about transferring your loan?

If you are not satisfied with the new conditions proposed by your bank, you can always request to transfer your loan to another institution. 

The biggest advantage is that you can get a lower monthly payment. This is because it is possible to reevaluate the products purchased with the initial credit, as well as the interest rates, from scratch. These are conditions that may have made sense when you took out the credit, but which may now be preventing you from saving significantly. 

However, there are also costs associated with this option. Depending on the bank, you may incur expenses when transferring, such as an early repayment fee (between 0.5% and 2% of the outstanding amount, depending on whether the loans are variable or fixed rate). 

However, the money you will save in the long term, on a monthly basis, may offset the transfer costs. Therefore, you should not make decisions without understanding what is involved. 

To do this, look for several offers and compare the proposals. You can use a credit intermediary for this purpose, such as Doutor Finanças, to help you understand the best solution for your case. 


To do this, look for several offers and compare the proposals. You can use a credit intermediary for this purpose, such as Doutor Finanças, to help you understand the best solution for your case.
 

Reduce your insurance premiums

Do you have health insurance? Life insurance and multi-risk mortgage insurance? Then consider reviewing your insurance policy or changing your insurer to reduce your premiums.

To do this, you need to be familiar with your insurance portfolio and what each policy covers. It is very common for there to be duplicate coverage between different insurance policies, and if you identify and exclude them, you can save a lot of money. 

When you take out a mortgage, banks ask you to take out life and multi-risk insurance with their own insurance companies. But be aware that this is not mandatory. So, if you have insurance with the bank's insurance company, you can now transfer it to another and significantly reduce your monthly payments, as well as get better conditions. 

So, analyze the conditions of the various insurance policies you have and, if you are not satisfied, change your insurance company. Ask other companies for quotes and compare them so that you can make the best financial decision and reduce what you pay for your insurance. 


Combine your loans into one 

Consolidated loan 

If you have taken out several loans, such as a loan to buy a computer, an appliance, credit cards, a car loan, a mortgage... All these payments can have a big impact on your family budget. But did you know that it is possible to combine all your loans into one? 

Through consolidated credit, you can pay a single, lower installment for your various loans. This is because, as a rule, the interest rate on consolidated credit is lower than the average interest rate on all the loans you have. Therefore, consolidating your loans will help you have some breathing room in your monthly budget. 

The amount you save varies depending on your situation, the number of loans you consolidate, and the type of loans. But in some cases, the savings can exceed 60%. 
 

Cut leisure costs 

Review your TV channels

Cutting leisure expenses can also help you save money. Depending on what you are willing to give up, you can improve your financial life. 

For example, regarding the channels you have subscribed to on your television service, do you still watch them all at this point? Your monthly bill may be higher than necessary. 

Go through the various channels and analyze them so that you can request a review of your contract. However, pay attention to loyalty periods. This is because, if you are within this period, you may not be able to make changes. It is a matter of contacting the operator. 
 
 
Streaming services can be shared

Streaming services are becoming increasingly common these days because they are easy to purchase. Simply subscribe using a debit or credit card and the fee is deducted monthly from your account, giving you access to a recurring service. 

As the monthly fees are usually low, we are led to believe that it is an amount that will not weigh heavily on our monthly budget. However, when we calculate the annual cost, it can be a significant expense. For example, a service that costs $10.99 per month amounts to $131.88 per year.  

And if you have multiple service subscriptions, the cost is even higher. In other words, if you have subscribed to streaming services, assess whether you use them all and whether you are incurring unnecessary monthly costs. 

But this does not mean that you have to cancel all streaming services and have no leisure expenses in your budget. It is possible to find ways to save on these services. 

For example, most subscription services give access to more than one user. So, consider sharing the packages with other people to reduce this expense. Everyone has access and pays less.


Cut down on superficial expenses 

There are small everyday expenses that can cost us a lot of money in the long run. But some habits can be changed so that you can start saving. For example, commuting to work, eating out, coffee breaks, and buying clothes are all things we can change.  

If you usually drive to work, consider using public transportation. In the Lisbon metropolitan area, a pass for all forms of transport costs €40. This means that the cost is probably much lower than the fuel you spend each month on commuting by car. 

As for eating out, consider taking food from home. Organize your meals so that you always have leftovers to take for lunch the next day. This way, you avoid spending money on eating out so often.  
If you buy clothes frequently, without needing to, consider reducing these expenses now. Remember that you should cut expenses that are not fixed and essential. 
Review your energy and telecommunications packages  

Do you know how long you have had your telecommunications contract? The packages and monthly fees for these services change regularly, and companies constantly offer promotions.  


In addition, there are packages that include several services in a single contract, which can mean significant savings. For example, in telecommunications, you can sign up for television, landline, mobile phones, and internet all at once. With mobile phones, you can have the rates for the whole family combined, which can be more affordable because it is the same bill. 

However, if you already have one of these packages, you should reassess whether you use all the services. You may have signed up to use them at the time, but now you no longer use them.  
So, once again, review this contract as well as your energy contract. The conditions may no longer suit your needs. 

For example, if you have 1G of monthly internet on your cell phone, assess whether you are using that amount or if 500Mbps would be enough.  

The same goes for your electricity contract: do you need the current package you have, where the power allows you to have four devices connected, or can you downgrade to the lower tariff, where you can have two devices connected? By making a few changes to your household tasks, these are adjustments that are not difficult to make and can mean considerable savings.

So, evaluate your current contracts and, if after reviewing these financial charges, you are not happy, look for other options on the market.


Saving on gas: regulated market or liberalized market?

EDP and Galp have revealed that natural gas prices will increase again starting this October. As a result, the government has changed the law, allowing consumers to return to the regulated market.  
To help you understand how to save on gas, we will explain the differences between the two markets. The regulated natural gas market was the first to exist in Portugal, and gas is supplied by last resort suppliers (CUR), with prices set by the Energy Services Regulatory Authority (ERSE): regulated tariff. 

Prices are set for the “gas year” that begins on October 1 and ends on September 30 of the following year. However, depending on changes in the cost of acquisition, prices may be revised on a quarterly basis. In the Portuguese regulated market, there are 12 gas suppliers, fewer than in the liberalized market. 

The liberalized market has been in place since 2007, and prices are set by companies rather than the regulator. In this case, suppliers freely set tariffs and commercial conditions with customers. It is a market governed by competition rules, the law, and the Commercial Relations Regulation. 

However, this is a more competitive market due to the variety of supply options. According to ERSE, for domestic consumers, there are 17 suppliers offering deals on the free market.
With the regulated tariff, it is possible to obtain a reduction in your natural gas bill. This is because, with the significant increases announced by suppliers, the regulated market offers lower prices than those on the liberalized market.

To get a real sense of the impact, you can simulate energy prices at ERSE to compare all commercial offers available on the market for electricity (Normal Low Voltage) and natural gas (Low Pressure) consumers in mainland Portugal.







Source: Doutor Finanças