February 23, 2022
Penny pinchers and smart savers have developed dozens, perhaps hundreds, of ways to save money on their utility bills.
Have you heard of any of these…?
Putting rocks in the toilet tank to save money on water. Cranking down the thermostat in winter and cranking it up in the summer to save on power. Manically unplugging every appliance that’s not in use.
Maybe you knew a family growing up that used all these strategies to make ends meet. Or maybe it was your family!
But is it really a good idea to cut back on utilities?
If you’re backed into a financial corner or new to saving, it’s not a bad place to start. But if you’re working toward financial independence, you likely have greater obstacles to overcome.
Here’s a breakdown of the average American’s annual consumer spending…
Personal insurance and pensions: $7,246
Cash Contributions: $2,283
Apparel and Services: $1,434
That’s a lot of money flying out the door each year!
Where do utilities fit into the picture? According to Nationwide, families spend an average of $2,060 on utilities each year.
That puts it towards the bottom of the average American’s budget.
Cutting your spending on housing, transportation, or food by one-third would free up more cash flow than reducing your utilities by half.
So before you invest in some space heaters or start lugging rocks into your bathroom, evaluate your overall spending. Are there problem areas where cutting back would create greater results?
If you answer yes, focus your time and attention first on those categories. Find a cheaper apartment or recruit roommates. Carpool with friends. Dine out less.
But if you’ve already budgeted and you still need more cash flow, turning off some lights and using an extra blanket or two at night won’t hurt.
¹ “How much is the average household utility bill?” Nationwide, https://www.nationwide.com/lc/resources/personal-finance/articles/average-cost-of-utilities
² “Average annual expenditures of all consumer units in the United States in 2020, by type,” Statistia, Dec 9, 2021 https://www.statista.com/statistics/247407/average-annual-consumer-spending-in-the-us-by-type/#:~:text=This%20statistic%20shows%20the%20average,amounted%20to%2061%2C334%20U.S.%20dollars.