5 DEBT REDUCTION TIPS
Has anyone noticed the insane prices of EVERYTHING right now??
Grocery pricing is predicted to increase by 2.5-3.5% this year and gas is through the roof right now. So, with all your bills going up significantly, how can you possibly find room in your budget for debt reduction? I’ll be honest, it won’t be easy, and it won’t come without serious sacrificing. But keep your end goal in mind, early retirement! And as an added bonus, the spending practices you put in place to reduce your debt are also the ones you’ll use to live on a tight budget once you do retire.
Practice makes perfect!
So here are debt reduction strategies that you can try. Full disclosure- I’m not a financial expert, I’m just sharing some techniques I’ve researched, and in some cases applied to my own financial planning.
1. Tally all your monthly subscriptions: These can add up quickly over time and if you’re looking for an easy way to “find” money, cancelling some of these monthly subscriptions can really help. Here is a list of just a few monthly extras people often pay for. (keep in mind, the figures in the chart may be different depending on where you live and the package you’ve signed-up for)
Also, because you may be streaming a lot of different programs in place of a monthly cable bill you are probably paying more for your internet service too.
2. Consolidate your debt: This can be very beneficial, but not always easy depending on the country you live in and the type of consolidation loans available. We have very successfully renegotiated our mortgage to include high interest loans and debt under a very low mortgage rate. This saved us hundreds of dollars a month and we didn’t need to extend the length of our mortgage. It’s not always that easy though. You may not have the equity to play with or you may not have a mortgage at all! Take the time to look at the pros and cons of consolidation to figure out what works best for you.
I found a good article on Forbes.com that lists the Pros and Cons of consolidating loans: https://www.forbes.com/advisor/personal-loans/pros-and-cons-of-debt-consolidation/
3. Meal Planning: I know, this means cooking at home more often, which sucks, but it really can save you significant money! When you map out your meals for the week (or even longer) your grocery shopping with precision and with less impulse buying. In addition, you will reduce the amount of waste in your refrigerator (anyone else have veggies rotting in the crisper??)
When meal planning think about how a meal can be used in different ways or created in portions that you can freeze for easy reheating in subsequent weeks. Below if a favorite multi-meal I use:
On Sunday: Make a large meat-based spaghetti sauce. I simply sauté onions, mushrooms, garlic, carrots and add a large family pack of ground beef (3-5lbs). I add a couple cans of crushed tomatoes, oregano, a little sugar, salt, pepper to taste. We will eat this on pasta for a night or two and then to extend the meal I simply add a packet of chili mix and a can of kidney beans (or 6 bean medley) to it and VOILA, you now have chili for a night or two. Put the chili on rice or a baked potato with some shredded cheese and sour cream. In total, you spend around 40$ and you have 4 dinners (and maybe some lunches). That’s $10 dollars for dinner for a family of 4. Compare that to eating out or buying pre-made meals and it adds up to a huge savings.
I think I will revisit this topic in an upcoming blog because I have endless ways to save money on your grocery bills and menu ideas.
4. Watch your online shopping habits: Over 80% of consumers across the globe shop online. Covid forced many of us to shop online for groceries and all our household items and we all discovered just how easy and convenient that is. The negative side to the convenience is that you we tend to overspend when you shopping habits go from weekly and monthly purchases to daily purchasing. Factor in that both you and your partner may be ordering things separately and not coordinating your purchases, you may be spending far more than either of you realize.
To avoid overspending be sure to have a budget for groceries and household items. Make an agreement on who will be placing the orders and when. And once you create a budget, stick to it!
Here’s a site that can help you plan out your spending: https://www.nerdwallet.com/article/finance/budget-worksheet
5. Avoid credit card debt: This ties in closely with #4. The most common way to pay for your online purchases is via credit card. Has anyone ever looked at their monthly statement and been shocked at how high it is? If you can’t afford to pay your credit card balance off each month then you will be incurring large interest payments. And once you fall behind it continues to compound until you find yourself only affording the minimum payment. This is why it’s critical to communicate with your partner, consolidate your purchasing habits and work within your budgets.
Some alternatives to using your visa for online spending would be to Use a Debit Card for Online Shopping or set-up a PayPal or other merchant account. This way you are only spending money you actually have in your bank account.
It all adds up!
There are so many ways to save money, even during these crazy times!! If you have any suggestions you would like to share please write them in the comments section :-)
Happy Savings!