Expenses Not to Cut When Your Finances Are Tight

After the holidays and as a new year begins, reconciling your finances often means taking a critical look at how much more money you spent in contrast to the income you actually brought home. Tightening your financial belt is often an essential step, or simply a way to get your finances stabilized and save toward financial goals for the new year.

If your financial plan includes cutting expenses in the new year, you may be unsure about where to start. While there may be some obvious expenses you can cut back, here are a few expenses you should not cut.

Car Insurance

Car insurance may seem like an unneeded expense, especially if you’re a good driver with an excellent driving record. However, not only is car insurance usually mandated by law, what you’d have to pay out of pocket if you did get into an accident in both physical damages to your car and/or another’s car, and possibly injuries to someone else, would be much more than what you pay every month for your car insurance.

Tip: If you are driving less due to the pandemic, your insurance company might offer you a reduced rate. Check with your insurance agent or insurance company for details.

Health Insurance

When money is tight, you might be tempted to whittle down the high cost of health insurance. This is not a good idea. You might save a little money in the short term, but it could cost you dearly in the long term. Nearly 66% of bankruptcies are filed over medical expenses.

If something should happen to you or a family member, the medical expenses could be astronomically high. A better option is to consider changing plans to a plan that costs less money every month. Though this typically means you will have a higher deductible, at least you’ll know the most you’ll have to pay in a worst-case scenario.


Many people have rid themselves of landlines. A cellphone is the only phone they use. According to a study by The National Interest, only 40% of American households still have landlines. Even if you have a landline, cellphones are more than a way to communicate — you can use it to do your banking, shopping, reading, listening to music and browsing the internet. What you can do when times are financially tight is to negotiate with your service provider for a lower cost plan. You can also switch to a new service if you’re not under a contract.

Internet Service

While you may not call the internet a necessity, now more than ever many of us work and go to school from home. The internet has become a lifeline in our work, socialization and entertainment. We are living in a digital age so not having access to the internet can impair such things as banking, staying in touch with distant friends and family, and enabling online shopping. If your budget allows, it’s worth keeping your internet service. What you can do, however, is negotiate with your internet provider for a different plan that costs less.

Paying Off Debt

Debt is an expense that increases if you don’t pay it — most credit cards and loans have an interest rate that accumulates rapidly. Making a minimum payment that doesn’t touch the interest rate will only haunt you in the long run when your debt swells to a level that becomes unmanageable. Work on paying off your credit cards with the highest interest rate first.

Eating Healthy Food

Healthy eating can be difficult when finances are tight. While it’s OK to buy the somewhat less healthy version of products you eat regularly. There are ways to afford healthy food all year. As an example, you might not be able to afford all organic foods, but you can focus on buying the organic foods that are on the Environmental Working Group’s “Dirty Dozen,” such as spinach and strawberries. Other ways to save are using coupons, buying products on sale, buying in bulk and limiting waste by making sure you eat up all leftovers.

While there are areas of spending that you will want to reduce or terminate when you are in a financial bind, you don’t want to cut out things that will put you further behind in the long term.

Creative Commons License
This work is licensed under a Creative Commons
Attribution 4.0 International License.

Published by W. M. Brown

I am a retired U.S. expat living in Ecuador. I was a business owner for 32 years before retiring in 2012.

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