There are a whole host of ways to save on your expenses, and trying to utilize them all can be overwhelming without an organized approach. For those who are looking to revamp their expense budget or to start saving a little (or a lot) of money on their monthly expenses, I recommend taking it slow at first. Good money management is about discipline, and you should approach it as long-term personal development and a lifestyle change, one that will allow you to live a better lifestyle in the coming years.

With this in mind, I recommend what I call the Top Down Approach to trimming your monthly expenses. When trying to figure out places to save, first focus on your largest expense and think of one way to lower that bill, then work your way down the list. In this way, your work will be focused first on getting a discount that will make the biggest cash difference toward your bottom line. A 2% reduction in your big rent bill means more money than a 5% discount on clothing.

For many people, I suspect that largest expense is the monthly mortgage payment or rent. Now before you skip right over it and say, “Well obviously there’s no way I can lower my monthly rent”, think about it. In many cases, there probably is. I recently wrote about how I saved $500 on my monthly rent by doing a little bit of homework. If your apartment lease isn’t up for awhile, why not approach your landlord and tell him you are willing to sign a lease extension if he is willing to negotiate the rent? In this bad economic environment, he may be very happy knowing he can lock in a reliable tenant for another year. If you have a mortgage, why not consider refinancing? Mortgage rates today are the lowest they’ve been in years, and shaving just a point off of your mortgage rate can save you hundreds of dollars over the course of a year. It is important to look at your potential for saving from the point of view of the other party. What do they need? What might you be able to offer them in return for a little bit of savings?

After focusing on your highest expense, work your way down the list. My next highest expense happens to be my monthly food bill. There are several free programs out there, like Rewards Network, that allow you to save 10-40% when eating out without doing nearly anything different at all. Many supermarkets offer cash back or coupon programs that require you only to keep a fob on your keychain.

Next up, my cell phone bill. Did you know that many universities, government organizations, and private companies have worked out deals with cell phone providers to provide students or employees with a discount on their bill? If you need a cell phone to do your job, see if your employer will foot some of the bill for you.

There are plenty of ways to save money on your monthly expenses. Focus first on the biggest expenses without glossing over any of them. Really think about clever ways to save. By concentrating on the big expenses, you’ll be getting biggest return on your time and energy.

Were there any unnecessary expenses we could cut down on? Perhaps. But before asking ourselves to sacrifice, why not ask the people that we were paying to sacrifice instead?

I’ve done this a few times in the past. Most of the time, simply calling up a service provider of yours and asking them for a discount on your monthly bill will work small wonders. The key is to be well prepared in order to make the discount seem as natural as possible to your provider.

I targeted my cable company and phone company.

Every few weeks, I would receive an offer in the mail for cable service that seemed, at face value, to be a better deal than the one I had. $74 per month for cable, phone, and internet. We were paying $60 for cable alone! In actuality, the deal wasn’t as good as it seemed after extra fees plus a lack of cable channels were factored in. This didn’t matter though. All I needed to do was convince the service rep that I believed the deal was better. I called up Time Warner cable and told them about the competitor’s deal.

Me: Hi, I’m calling about a competing deal I received in the mail. RCN is offering $74 per month for cable, phone, and internet. Their cable package alone is much cheaper than my current one. Can you guys make me a comparable offer on my cable bill?
Rep: It looks like you already have one of our best base packages, sir. If you had a higher package, we would be able to help, but I’m afraid there’s nothing we can do.

I had to turn up the heat!

Me: Well, if you cannot give me a better deal, I’ll have no choice but to switch services to your competitor.
Rep: …Please hold for moment, sir.

That got the ball rolling. After being put on hold, I was offered $5 off my monthly bill plus a load of extra channels that we didn’t currently have. Not as good as I expected, but I took the offer, sensing it was all they would give me. The $5 amounts to almost 10% off of our $60 bill, not to mention the fact that I can watch Meerkat Manor all I want now.

After the cable company, I searched the Internet for offers from phone companies and played the same game with Verizon. When their rep sensed I had done a little work, he capitulated rather easily. $15 off of our $85 bill. I took the 17% discount and went on my way.

These figures may seems small, but as I wrote in another post, even small discounts can make a big difference in savings. We saved 9% of our after-tax income in February. If we were able to get, say, 10% discounts on all our expenses comparable to these two (a tall order to be sure), we’d be doubling the amount we could save every month.

As I mentioned when I wrote about getting $500 off of my rent, doing your homework will go a long way toward being taken seriously by the opposite party, and simply making it natural for them to capitulate to your requests. Now go get some discounts! If you like, you can even try to play the “bad economy card” in conjunction with doing your homework. “Times are tough and I don’t know if I’ll have my job for long.” This may give you some added leverage in getting that discount.

With all that said, there’s still one issue in favor of PC’s – they generally cost less. (In my mind, the increased cost for a Mac is well worth it, but let’s put that aside for now.) So, with cost in mind, here’s a few tips on how to get that Mac you want for as little cash as possible. We’ll take a 15″ MacBook Pro retailing for about $2,250 as an example.

1. Use educational or company discounts. Apple offers educational discounts for many schools in the US and around the world. Chances are, if you’re a student, teacher, or administrator working in a school, you will qualify for a discount somewhere in the range of 10%. Apple also has discount agreements with many companies, so that their employees can get a few bucks off of their computer purchases (or purchases of any Apple products). Typically, these discounts are a little less than the ones in the educational store.
Discount: 10%, or $225

2. Get a free printer and sell it. Apple also has a standing offer for buyers purchasing a new computer. They offer $100 toward the purchase of a new printer. If you already have a printer, all the better. Take the offer and buy a printer that costs $100 from Apple. They will refund the purchase price for you, and you can take your free printer and sell it somewhere like eBay, effectively taking your purchase price down even further. In my experience, I’ve found sales on eBay will net me about 75% of my purchase price after fees.
Effective Discount: $75

3. Wait until the summer, get a free iPod, and sell it. Historically, Apple run its Back-to-School promotion every year from June to September, whereby it offers a free iPod to students purchasing a new computer. A buyer could take the iPod and sell it on eBay along with the printer to net even more of an effective discount. Last year, Apple offered students a free 8GB iPod Touch, which retails for $299.
Effective Discount: $225

Let’s tally up our savings!

Original purchase price: $2,250
- Educational/corporate discount: $225
- Printer sold: $75
- iPod sold: $225
= $1,725

That’s a total of $525 in savings, or 23% or the original purchase price! Quite a deal!

I’ll note here that some of the steps above require the buyer to be a student (or for a student to at least “help” you with your purchase). For to who can’t take advantage of those, Apple sells refurbished computers for a discount of roughly 15%, another great way to save some cash.

At first glance, some of the rewards can seem paltry. For instance, the Chase Freedom card offers 3% cash back on purchases that fall into one of 15 categories and 1% cash back on everything else. Many offers on FatWallet provide low single digit savings. Not exactly mind-blowing amounts. So is it worth it?

Is it worth signing up for and keeping track of these accounts for what amounts to a few percentage points off of your expenses?

I’m going to argue that the answer is a resounding yes for most people. And it all has to do with the low amount of their income that most people save.

These days, according to the US Department of Commerce, Americans on average save about 4% of their after-tax income. The other 96% goes out the door toward goods and services – rent, food, clothing, that new gadget you were just dying to have. The low savings rate means that even small discounts on your expenses can make a big difference in the amount you can save. Take a look at the table below.

On the left, you can see a typical month’s worth of savings for someone who socks away 4% of their after-tax income. $3,000 comes in, $2,880 goes toward expenses, and the rest is saved – $120.

On the other hand, imagine using discounts, coupons, or rewards programs that save you 4% every month on all your expenses. Those discounts nearly double the amount you can save, bringing it up to $235! The 4% in discounts is effectively added to your savings rate, making it nearly 8% instead of 4%!

Rewards or discount amounts should not be looked at on their own. They seem small by themselves. Rather, they should be compared to the percentage of your income that you are able to save.

The less you are saving, the more willing you should be to use discounts or rewards programs. For someone who saves a lot of their income, the 4% in rewards won’t make nearly as much of a difference. But for someone who saves little to no percentage of their income, getting a small percentage of expenses back via coupons, discounts, or rewards can make the difference between saving little to nothing and saving multiples more.

The key is to think about your discounts in relation to the percentage of income you can put away.

Here’s how it works. You sign up for an account at rewardsnetwork.com, and place a credit card on record. Every time you eat at a restaurant that’s part of the network, you’ll get a certain percentage of your bill back as cash. That’s it. There is no coupon clipping or codes to remember. Rewards Network tracks credit card usage at each of its participating restaurants, and when it sees your card used, it credits your card with the reported amount of cash back.

You can search for participating restaurants on the Rewards Network website and see how much cash back each place is offering. The majority of eateries in my neighborhood are offering 10% back, but there are others offering 20% and even 40%! The list of restaurants on the site also comes complete with a description of each place and reviews by users, so you can decide on a great place to eat in addition to one that will also pay you a little cash.

Savvy savers will also realize that you can double or even triple up on the savings by using Rewards Network in combination with restaurant coupons (from Entertainment for instance) and after reserving a table at a place like OpenTable.

Very savvy savers will realize that you can even use these discounts to get a free meal or more if you dine in groups. If you and four friends went to a bar with a 20% Rewards Network discount and each of your friends paid cash for their share of the bill, you could put the entire bill on your credit card and collect the cash from them. You’d effectively be paying your 20% of the bill, but you’d get that money back! Some might find this deceitful, so another approach is to simply share the wealth and tell your friends that everyone gets 20% off. Not bad.

Rewards Network has mobile device applications too, so you can search for cash back restaurants on-the-go, on your iPhone or Blackberry. You can also register up to five credit or debit cards on your account, and the percentage of money that you get back includes tax and your tip!

Bottom line: If you dine out (ever), the Rewards Network program is the best around for receiving valuable cash back discounts. And it’s effortless to do so.

To put the $15 decrease in further perspective, my wife and I live in New York City in a 1-bedroom apartment that cost us $3,200 a month in 2008. A $15 decrease amounted to a 0.5% drop in rent. I thought about the offer for about a few minutes. With the backdrop of economic turmoil, couldn’t we expect better than mere half a percent taken off our rent? After all, over the past year, the equity markets have dropped by over 38%, home prices have fallen by 18% across the nation, and unemployment has risen from 5.1% to 8.5% and is still increasing rapidly. I figured with the prices of almost all other assets falling and with more people unemployed and less able to afford their rent, shouldn’t the rental company be willing to relinquish more than just $15 a month to have a dependable tenant stick around?

I thought about calling up the leasing office in my building and making that argument. I think it would have worked to some extent. But the problem wasn’t simply that I knew my leasing company was trying to short-change us with a mere $15 discount. It was that I needed to know *by how much* they were short-changing us. What price would the leasing company be willing to accept from a reliable tenant? $3,100… $3,000… lower? This brings me to my first point in any financial negotiation:

Do your homework – Obtain comparable prices.

I needed to know what kind of rental rates were available from other comparable apartment buildings in my neighborhood. Then, I could approach my leasing rep with that information. 

Too many people don’t do their homework when making an important purchase. Instead, they rely on approaching the salesperson with *what they want*, as opposed to what they could get elsewhere. But the salesperson’s job is to rent apartments, lease cars, or sell mattresses for the highest price. He does it all day! You’re not likely to finagle a great deal out of him by smooth-talking and such. In fact, if you go in unprepared, a good salesperson will detect this weakness in your demeanor and be even more unwilling to budge in negotiations. Being prepared helps to:

Take the negotiation out of the “personal realm”.

Being armed with comparable pricing evens the playing field. It takes away a bit of the personal nature of negotiating (where the salesperson probably has the edge) and leaves only raw facts on the table.

With that in mind, I spent about 3 weeks visiting other 1-bedroom apartments in New York that I thought were comparable to mine. And guess what I found. Most were priced around $2,900 per month with 1 month of rent free on a 1-year lease. That free month brings the rent down to $2,658 when distributed over 1 year. Suddenly, my $15 drop in rent to $3,185 didn’t look like such a good deal!

My wife and I thought about the apartments I visited, and we narrowed down the possibilities to one apartment building that we would be happy to move into for around $2,600 if our leasing company was too stubborn about our rent. The location of that building was slightly more inconvenient than our current one, but the building was beautiful and the price was right. 

Given that it would cost us about $2,000 to move (or $166 per month over the course of 1 year) and it would be a hassle, we decided that we would be willing to pay at most $2,850 to stay in our current apartment.

Armed with this information, I scheduled a meeting with my leasing rep. We exchanged pleasantries, and I presented the details very simply. We could live in a beautiful, comparable apartment for $2,600 per month. If you cannot make a comparable offer, we will have to move there. I even gave him the contact information for the other building so he could verify all the information himself.

As soon as he saw I did my homework, his mood changed. He opened up to me. He took out his daily apartment list and showed me what facts he was dealing with. That day, they were asking $3,050 to rent comparable apartments to mine to new tenants. But, I countered, new tenants would also receive one month of rent free, dropping their effective rent to $2,795. I was willing to pay $2,800 per month and no more. He appreciated my honesty, knowing I wasn’t just another whining customer, but that I:

Let the facts be my guide.

Three days later, I received a call from my leasing rep. After some slight haggling, he met my breaking price – $2,850 per month. He even threw in two free gym memberships for me and my wife ($89 each otherwise)!

Remember the rules when making a big purchase or entering into a big agreement in order to level the playing field between you and your counterparty:

1. Do your homework – Obtain comparable prices.
2. Take the negotiation out of the “personal realm”. 
3. Let the facts be my guide.

By the way, these tactics may also work for those of you looking to lower your rent, even if your lease is not expiring soon. Approach your leasing rep and offer to sign a renewed 1-year lease at a lower rate. Many leasing reps will be happy to get the renewal in this bad economic environment and may be willing to accept the lower rent that comes along with it.