The Trick to Saving Money? Slash Costs From Top Down

It's great to cut back on the small stuff by skipping your morning store-bought latte and bringing lunch to work, but what's really going to make a huge difference is saving on the big items. In fact, cutting back on the small purchases can backfire on you because it can feel like you're depriving yourself and may cause you to revert back to old ways.

To make great strides forward, the key is to focus on the big picture, then work your way down to the little things. Start with your biggest expenses, which include housing and transportation, then work your way down to the smaller spending categories, like weekend entertainment. Get started on this top-down saving method with these tips from Forbes:

  • Gather your statements: Gather your statements together from the last six months, preferably those that state your monthly expenses. This includes credit card, savings account, and checking account statements.
  • Categorize them: Start categorizing your expenditures. For example, you can group them by groceries, utilities, rent, transportation, recreation, and more.
  • Figure out your biggest expenses: Figure out your biggest costs every month and list them in order.
  • Brainstorm ways to save: Now that you know which categories are your biggest expenses, brainstorm ways to save on them and tackle them from the top down. Perhaps you can find a roommate or rent a smaller room in your apartment building to lower your monthly housing costs, or maybe you can consider getting rid of your car and taking public transportation instead.

Before you start plotting to do away with your Starbucks habit, tackle your most expensive purchases first to make greater headway toward your saving goals. But remember to do what works for you and your lifestyle. How have you saved on the costlier expenses in your life?