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.