5 ways to spend less money in 2025
Getting in shape is always a popular New Year's resolution, but this year, many Americans are also making financial fitness a top priority. That way, they can get a better handle on their finances, as the inflationary issues that have caused prices of essentials — like housing, gas and groceries — continue to strain their budgets.
Compounding the financial struggles that many households are facing are steep interest rates on credit cards and loans. According to the latest data, credit card rates are averaging about 23% currently — at a time when the average cardholder owes nearly $8,000 on their credit cards.
If you want to gain more control over your finances this year, finding ways to spend less money is crucial. And while cutting costs is helpful — and often necessary — there are other strategies and tactics you can use to reduce expenses and stay on track.
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5 ways to spend less money in 2025
The following strategies could help you spend less money this year, helping you get your finances in good shape for the future:
Lock away funds in a high-rate CD
Experts often recommend "paying yourself first" by stashing money in a savings account before you have the opportunity to spend it. However, you can freely withdraw funds from a traditional savings account, which limits the barrier to spending money.
Instead, consider parking your money in a certificate of deposit (CD), which locks up your money for a specific term in return for a higher-than-average interest rate. It's a little harder to withdraw funds from a CD because doing so will likely trigger an early withdrawal penalty.
By limiting access to your funds, a CD can make it harder to spend impulsively or unnecessarily and earn a tidy yield in the process. You can find top CD accounts offering yields between 4% and 4.5%, roughly 10 times more than standard savings accounts.
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Automate savings and increase retirement contributions
Another way to limit the amount of money you have available to spend is to automate your savings, says W. Michael Lofley, a CFP and financial advisor at HBKS Wealth Advisors.
"If your job allows you to split your direct deposit, consider having a part of your paycheck placed directly into an account that is intentionally difficult or inconvenient to access. Making it hard to access is important; if you can transfer it back to checking with a click of a button, it's more likely you'll spend it," says Lofley.
Along the same lines, Lofley recommends increasing your 401k contributions, especially when you get a raise at work.
"If you get a 4% bump in pay, increase your 401k contributions by 1% or 2%. You still see more money in your paycheck, but you are also building your retirement account and limiting lifestyle creep," Lofley says.
Track your spending
Spending less starts with identifying costs you can easily do without. One easy way to do that is by tracking your expenses.
"I believe the number one way to spend less and free up cash is by starting with expense tracking," says Melissa Caro, CFP and founder of My Retirement Network. "Developing a budget and a system to stick to it takes time and often begins with recognizing your spending habits and understanding where your money is going. While there are plenty of apps available to help, a simple spreadsheet is a great, cost-free place to start."
Your bank's online dashboard may already organize your spending into a chart, or you can do so with an app. Seeing exactly where your money is going can be powerful and motivate you to make smarter spending choices.
Nevermind cutting coffee — it's the large impulse purchases that sting
Financial advisors often recommend cutting expensive coffee runs from your budget. After all, cutting $12 to $20 or more from your weekly expenses will add up over time. They're not wrong. However, you'll likely experience a bigger impact by focusing on managing large or unexpected purchases, says certified financial planner Jesse Sell.
"A few more coffee runs than planned wouldn't typically throw annual or even monthly spending goals completely off track," says Sell. "It is often the larger and impulse purchases that undermine objectives to reduce spending."
Sell recommends establishing a pre-set price tag threshold. Any expense that exceeds the threshold requires a waiting or "cooling" period.
"48 hours would be a reasonable minimum, and higher-priced expenditures could even require a longer period," Sell says.
Pay less interest on credit card debt
Despite recent rate cuts by the Federal Reserve, interest charges on credit cards, personal loans and car loans are still uncomfortably high. Average credit card interest rates are nearly 23% while the average retail card rates are over 30% right now.
Paying interest on borrowed money hurts your wallet, but the good news is you can lower your interest rate or eliminate interest charges in two ways:
- By taking out a debt consolidation loan: These loans let you combine several debts into one loan with a single monthly payment, typically at a lower interest rate. According to the Federal Reserve, the average interest rate on a two-year personal loan is 12.32%, more than 10% lower than the 22.80% average credit card rate.
- By opening a 0% balance transfer credit card: With good credit, you may qualify for a 0% balance transfer card with no interest on transferred balances for a specific period of up to 21 months. This may give you enough time to pay off your balance interest-free.
If you're struggling to make debt payments, you might also look into credit card counseling or debt relief to help you regain control of your finances.
The bottom line
Ultimately, spending less money in 2025 will depend on being intentional with your budget — and your spending. That means prioritizing spending on your needs, not on your wants. Expense tracking can help you spot unnecessary spending and stay on track with your goals. You can also strengthen your finances by reducing your interest charges to free up money while limiting your available funds to help you avoid overspending.