GM is downsizing, reducing the number of cars they’re making and the number of employees they have on staff. Even GM’s executives are considering taking a pay cut. Plenty of other businesses are also considering downsizing, or have even started the process.

With big corporations reducing costs, we have to wonder if maybe we should be doing the same. Sure, most of us don’t need to worry about a big corporate bottom line, but we do have to worry about things beyond paying the bills: are we saving enough? will we have enough for retirement? can we cover the costs of an emergency?

It can be hard to bring balance to our spending, especially as the cost of everything seems to be rising. And for some of us, the best option can be downsizing — reducing our needs in order to reduce our costs. Downsizing in your personal life can go from the extreme (selling your house and moving into a smaller residence) to the fairly mild (buying generic rather than brand name). Personally, I’ve eliminated a few luxuries in favor of less expensive pleasures. For instance, rather than rely on expensive cable for my needs, I use Netflix. I don’t really watch enough TV beyond Netflix to justify cable.

Deciding when to downsize isn’t difficult: there are three questions you can ask yourself that can make it clear if it’s time.

1. How’s my spending? Breaking even isn’t good enough. As long as your spending leaves plenty of room for savings, you’re okay. But if you’re only saving a few dollars from each paycheck, it’s time to cut costs.
2. Can I live without it for a week or longer? Think about your expenses (especially those that are reoccurring) in terms of the utility you get out of them. Maybe you’ve started taking more public transportation because of the cost of gas. Maybe you wouldn’t miss your car — or the loan payments, insurance and maintenance costs — if you sold it.
3. Is stuff cluttering up my life? Stuff — clothes, books, whatever — costs money even if you bought it. You have to store it, and it takes up space that better stuff can use. Getting rid of stuff that you don’t want or use can be a beneficial form of downsizing — you can cut your tax bill if you donate it or make money off it if you sell it.

There are other ways to deal with rising bills, of course. If you truly don’t want to cut your costs, or you feel you can’t, you can take another approach. Make more money. Downsizing is generally easier — you don’t have to commit your time long-term to the project. But making the effort to earn more money can counteract rising gas and food bills, at least for now.

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