Get Out of Debt, Part 2

In the last post on how to get out of debt, we ended by saying we'd next be discussing some practical ways of cutting your expenses with the goal of using those savings to reduce debt.  As promised, here are a few ideas:

• Look at what you could do without. Involve everyone in the family to “sacrifice” something to get the family debt-free.  Perhaps eliminate the expensive vacation this year, limit children’s camps or activities for a season, and make simple presents instead of buying them.  Work as a team to conquer the “debt monster” and build family unity instead of resentment.
• Cancel your cable. Turn off the TV and spend some time enjoying your family, friends, and the beauty of the world around you.  You’ll be surprised how much more time you have.  At $30 per month (at least!), this tip will net you $360 each year.
• Take your lunch and snacks to work.  You’ll save $2-3 every day on lunch and a dollar or so on snacks.  That adds up to $500 to $1,000 each year!
• Stop smoking.  In addition to the health benefits and lower insurance premiums, you’ll easily save over $1,000 per year kicking a one pack a day habit.
• Reduce “small” spending.  Limit the hundreds of little purchases you make – candy bars, coffee, gum, lunches out, whatever.  Instead set a weekly allowance for such extras.  Saving $2 a day on snack breaks at work yields $500 a year.   
• Cut energy costs. Fans can reduce perceived air temperature by 10 degrees at one-tenth the cost of air-conditioning.  In winter, reversible ceiling fans help heat your house by gently pushing warmer air lower to the living area.  Inspect your home for leaks around windows, doors, pipes, ducts, electrical outlets, and vents that go through walls.  Simply caulking and weather-stripping can cut your bills up to 10%.  Close doors and vents in unused rooms.  Set your thermostat as high as possible in summer and as low as comfortable in winter.  Just a few degrees shift can save significant costs.   
• Reduce insurance expenses.  Shop around for coverage on life, health, car, and homeowner’s to save hundreds of dollars.  Consider raising your deductibles to save 15 to 30 percent on your insurance payments. Review your coverage annually to check rates, applicable discounts, and adequate coverage.   
• Be a savvy shopper. Avoid impulse buying.  If you see something you want, put it on your “wish list”.  If you still want it after two weeks, save when purchasing it by asking for discounts. Most stores mark prices up significantly, giving them plenty of room to lower prices and still make a profit.  Arrive armed with competitive prices from other stores or the Internet.  For best results, offer to buy an item in cash for lower than list price.  The powerful sight of five $100 bills for that $750 couch will be hard for many managers to refuse.
• Eat well and save.  One evening out at even an average priced restaurant can equal half a week’s grocery spending (not including the cost of the babysitter!).  Limit eating out to promotional specials and two-for-one deals.  Bag your lunch and snacks at work and eliminate expensive junk food. At home, cook from scratch as often as possible.  This can be up to six times cheaper than buying a mix, frozen meal or eating out, and is usually more nutritious.
• Buy used - Garage sales, flea markets, consignment sales and thrift stores are treasure chests for discovering great buys for pennies on the dollar.  Dave Ramsey, best-selling author of Financial Peace, regularly buys mint-condition men’s suits at thrift stores for $35 each – much less than their retail value of $500 to $800!

There’s no mystery to getting out of debt.  It comes down to disciplining yourself to spend less money than you make on a consistent, long-term basis.  The above are only a few examples.  Brainstorm with your family about all the potential ways you can save and then make a plan to do them!

Comments

[jim]

Quitting smoking is a great idea - there was an article in The Week about this. Apparently in a study by Ohio State, they found that smokers saved less than non-smokers because they didn't consider smoking in their budget, I discussed it at my blog.

[FMF]

Jim --

Yep, this stuff can really add up. If someone smokes half a pack a day and a pack costs $5, that's $913 per year wasted, if it's a pack a day, that's $1,825 and if it's two packs a day, that's $3,650 -- all money that's literally gone up in smoke.

Then multiply this by five, ten, or twenty years that people smoke, add in what they could have earned if they had invested the money, and consider the extra health care costs of smokers and you can really see that from a financial point of view, smoking does not pay.

If you visit here again, please leave the link to your article. I think people would like to read it.

FMF