
In the midst of a global pandemic and widespread layoffs, not to mention the very real possibility of a looming recession, it has never been more important to dramatically cut monthly spending in order to live on less money.
This is a great option if you have recently been laid off or you and your family are in a position of earning a lower income. It also works very well if you just want to live more frugally so you can boost your emergency savings or payoff debt.
In this post I will review how to save money fast, even on a low income, by using one simple and effective method to dramatically cut your monthly expenses and live on less.
Contents and Quick Links
- 1 Step 1: Print out bank and credit card statements for the last 3 months
- 2 Step 2: Review and categorize every single expense
- 3 Step 3: Review all “can live without” Blue Expenses
- 4 Step 4: Review your “absolutely necessary” Yellow Expenses
- 5 Step 5: Review your “Really, really want to keep” Green Expenses
- 6 Step 6: Rank in order of importance
- 7 Step 7: Cut back until you are comfortable with your spending and saving ability
- 8 Conclusion
- 9 Related reading
Step 1: Print out bank and credit card statements for the last 3 months
The first step to track your finances is to review every single dollar spent over the last three months. To do this, you’ll need to print out all banking and credit card statements.
Note: If you use cash often, this is more difficult. You’ll want to review how much cash you withdrew or had on hand and then estimate how you spent it. Start with an estimate, then start tracking all cash spending for the next few months. You can keep a simple journal, print out a form to keep on hand, use a tracking app on your phone or start a spreadsheet. Just remember to make a note that you can easily review later.
Don’t judge yourself
It’s really important that you do not judge yourself, or your family members, for spending decisions. This is a process to objectively review all spending and decide what expenses should stay or go. Beating yourself up over past spending doesn’t help anything.
Take heart that you are more aware now and ready to make more conscientious decisions on how to spend your money moving forward.
Step 2: Review and categorize every single expense
Going in chronological order, by individual credit card and spending account, review every single dollar you (and your family if it’s more than just you) spent over the last three months.
As you do this you will color code every expense with three separate highlighters.
These colors will represent three different expense categories:
- Yellow Expenses = Absolutely necessary
- Green Expenses = Really, really want to keep
- Blue Expenses = Can live without
Note: Yes, you can use any color coding or other system to categorize that you want. If you don’t have highlighters, you can write in a number 1, 2 or 3 for each expense. Use whatever works for you, makes sense and can easily be reviewed and sorted later.
If you love spreadsheets, add expenses to three different columns. This is a great option because you can then sort and run numbers easily.
Download the free Expense Cutting Workbook to neatly categorize your yellow, green and blue expenses and keep track of what you have cut already and how much money you have saved.
Step 3: Review all “can live without” Blue Expenses
Blue expenses are things like subscriptions you completely forgot you had, like that Shape magazine that keeps showing up my mail box every month even though I stopped reading it 4 years ago.
So often we sign up for monthly services that we only need temporarily but never remember to go back and cancel them.
If you have a gym membership but don’t use it very often, consider cancelling it and doing free / low cost home workouts. Review and cancel all cable packages that you don’t love and use. Most likely you will survive just fine with just Netflix or something similar.
This may not be an easy process, but it’s time to be brutally honest with yourself. If you need to save money and live on less, can you get by without this expense? If the answer is yes, cut it out now. You can always add it back later if you find you miss it.
You can read about my personal experience as I went through this process and found ways to cut out over $700 in unnecessary monthly spending – I Tracked My Finances for One Month and This is What I Learned.
Step 4: Review your “absolutely necessary” Yellow Expenses
These are your essential expenses, like mortgage and rent, debt and loan payments, auto and transportation, food and healthcare.
Review each of these expenses and determine whether they can be lowered or not. You can read up on some ideas and methods to lower your most essential, and often most expenses, household expenses here.
Save for later by adding to your favorite personal finance Pinterest board!

Step 5: Review your “Really, really want to keep” Green Expenses
Now it gets a little more difficult. You’ll need to review the expenses that you really want to keep, but know that you could live without if need be.
Similar to your Blue Expenses, it’s important to think about how much joy and “spark” these expenses provide. Do they make you happy? Will your life be less fulfilling without this thing in your life?
If the answer is a resounding yes, leave it be for now.
If the answer is maybe not so much, then consider cutting it from your budget for now.
Frugality often has a very negative connotation to it. But cutting expenses doesn’t mean cutting joy out of your life. It means keeping only the things which truly make you happy and improve your life. It doesn’t mean feeling deprived, it means focusing on the important.
Step 6: Rank in order of importance
Now that you have all your expenses properly categorized, it’s time to list them (more or less) in order of importance. The expenses within each category that are most important and essential to you stay at the top, ones that you can live without go down towards the bottom.
Step 7: Cut back until you are comfortable with your spending and saving ability
Now for the hard part. Cut out those bottom expenses, as well as all expenses in the “can live without” Blue group.
Keep a tally of how much money you are saving throughout this process. You likely have a pretty good idea of how much money you need to be saving every month. For example, if you were laid off from your job and will no longer be earning your monthly take home pay of $3,000, you’ll want to keep this number in mind as you comb through every expense to cut out.
How close can you get to this $3,000 a month? You’d be surprised just how much you can cut back when you absolutely have to.
Continue this process until you are comfortable with your remaining monthly expenses or feel that there is nothing left to cut back on without dramatically affecting quality of life.
Continue to review your spending every month and make adjustments as needed.
Remember: You can always add expenses back in later. But for now, the goal is to dramatically cut back all unnecessary spending. Give it a try for a few months and see how it feels. Gradually add back in what you can afford, or brainstorm ways to further lower your remaining necessary expenses.
Conclusion
A simple and easy way to immediately save more money and live on less is to review all your monthly expenses, rank spending by most important to least, then cutting out all non-essential spending.
By doing this you can effectively live on one salary, get by on a lower income, or start paying off more debt and saving more money. All very important things to consider when faced with mass layoffs and a looming recession.