Personal Finance – Page 11

If you're debt-free or close to it, then you're lucky! For everyone else, debt is just a headache. The question is, what can you do today? There are quite a few things you can do, and most of the major ones won't take the joy out of life. Being penny-wise doesn't mean you have to live on macaroni and cheese or re-use your vacuum cleaner bags until they fall apart (though there are people who do this and like it!). But if you want out of debt fast, cutting expenses to the bone is one of the best ways of getting there. We have a few simple budget cuts that can make a big difference. Watch Those Payments Late payments not only mess up your credit score but also cost you money. Sure, most utility and phone companies only charge 1.5% late fees, but they add up. Credit card companies charge a lot more than that! Banks will typically charge you up to $35.00 for overdrawn accounts as well, and that makes a big difference if you get two or three of those in a month. Paying your bills when they're due saves you all those fees. If you want to reduce your debt, switch from plastic to paper at least temporarily. A few studies have shown that people spend 12-18% more money when using credit cards than they do cash. It's much easier to manage your money if you leave the cards at home and switch to debit cards and cash only. That way, you can't spend what you don't have. "I Need That!" Do you need it, or do you want it? You might "need" a new jacket, but that doesn't mean you need a new design team or leather jacket. You probably don't "need" the fanciest juicer on the market either--ordinary blenders work well. When you have a real need for something, ask yourself three things: how long are you planning to keep it and what it will cost in total (not only the upfront costs!), and could you find a cheaper alternative. For instance, you are considering two different sewing machines, one for $100 and one for $200. You'll be using it for five years. The more expensive one has all kinds of excellent stitches--but will you use them? If you will, then the $200 one might be worth it. If you never do anything fancy on your sewing machine, then go with the cheaper one. Watch Out for Impulses If you stop carrying cards, impulse spending drops. If you have cards or are an impulse shopper in general, use shopping lists and stick to them. Make a list before you go shopping and only buy things that are on that list! The Cost of Having Fun Eating out, movies, and cable TV can add up. Hey, you can still enjoy eating out, but make it a memorable occasion rather than a regular thing. It's more satisfying that way. Rent movies or check them out of a library instead of spending $40 or more to see them in the theatres. When it comes to cable, do you need 600 channels? Get the cable package that gives you the channels you watch, and you'll see a big difference in the bill. Bundling your cable, phone, and internet can also be a significant saving. Additional Resources If cutting those expenses to the bone hasn't grabbed you. we have some additional reading that may help. One of the best areas to start with spending cutbacks is groceries; we have our top ten tips to help along the way. For control over your spending in general, this article may help you out. And for a look at how our view on spending and debt have changed over the years, we have a look back in our article here.