Getting out of debt is NOT hard. True, it does take time, patience, and discipline, but it’s not really that hard. Usually, all that is required is just changing your spending habits.
Often I’ll get asked by people what they should do to get out of debt. Well, if you really think about it, there are a lot of things you can do to get out of debt, but in many ways, most of those things are somewhat out of your control, difficult to accomplish, or will take a lot of time.
For example, it is quite hard to change the interest rate on your credit cards, decrease your balance with no extra funds, increase your salary, go back to school to get more education and qualifications to earn more, or think of a business idea to earn more money. But, what I do tell people is that they should take control of the things they can realistically change immediately, like: starting or rearranging your budget, saving more, and spending less.
So, let’s talk about the quickest and EASIEST way you can get out of debt – SPENDING LESS! Here are the top 25 ways you are WASTING YOUR MONEY:
1. Insurance:
When was the last time you called your insurance company to request lower premiums, raise your deductible, get perks for being a good driver, student, customer who pays on time consistently, etc.? When was the last time you shopped around for a better deal on your home, auto, health, or renters insurance? Did you know an out-of-pocket deductible change from $250 to $1,000 could save you 15% on your annual premiums (take that extra money saved and invest it in an account that earns you interest). Are you using the same insurer for ALL your insurance needs, because doing so provides huge discounts and savings? And, do NOT pay for insurance you don’t need, and never look at any type of insurance as an investment.
2. Late Payment Fees:
Be organized. Set up email notifications. Have payments deducted from your account automatically. Set up your budget so you know when every payment, bill, or balance is due – and schedule to pay them at least a week in advance.
3. Tax Refund:
I’m sure you get excited about getting a ‘refund’ from Uncle Sam each April; but, have you ever considered that adjusting your tax withholding will put more money in your pocket each month, giving you more funds to pay down debts (rather than waiting a year to just get that money and spend it on things that don’t help pay off debt)?
4. Tickets:
Don’t waste your money on speeding and parking tickets. And remember, it’s not just about the cost of the ticket, it is the extra gas spent speeding, the higher rates for insurance once tickets pile up, the cost of repairing a car if in an accident, and the medical bills that result from accidents.
5. Paying Interest and Not Earning It:
If you have a loan that is charging you 4.5% interest, but you have a savings or retirement account earning 8% interest, more of your money should be spent on the investment, not paying down the debt. The opposite is true as well: if you have a credit card charging you 15% and you’re putting your money into a savings account earning you 4% interest, you are losing money. Make sure your money is making money for you. Similarly, don’t just put your money in a typical savings account earning 4% interest, or put the bulk of your money in a free checking account just sitting there not earning interest… put as much money as possible into a high-interest bearing account.
6. Unnecessary Services & Subscriptions:
Ever heard of the internet? Why are you still subscribing to magazines or newspapers that are available for FREE online? How many cable channels can you actually watch? How many of those ‘extra’ features on your cell phone do you regularly use? Is the gym membership a social status thing, or do you use it?
7. Paying Minimum Payments:
Pay your credit card balances off in FULL at the end of each month. If you are in debt however, do NOT pay the minimum payments – pay as much extra principle as you possibly can each month.
8. Eating Out:
$10, $20, $30 per person for dinner, $4-6 for lunch, and doing this multiple times per week. Stop! It will save your money and your health.
9. Brand vs. Generic:
Clever advertising and fancy packaging don’t make products better. From toothpaste to clothing, prescription drugs to groceries, the small difference in quality is not worth the large difference in price.
10. New vs. Used:
Books, furniture, cars, toys, laptops, car seats, tools, bikes, exercise equipment, etc. – they all can be bought ‘used’ and provide as good of quality for a fraction of the cost. Overcome the psychological and social pressures you create in your mind about buying ‘used.’
11. Falling for the Bank’s Traps & Fees:
Never, ever, go off the bank’s records. You should be recording and keeping track of every expenditure. Realize that certain checks or transactions may not have processed in your account when you look at your balance online, which will help avoid spending money you don’t have, resulting in an overdraft fee. Also, don’t pay an ATM fee. If your bank doesn’t have as many ATM’s or branches nearby, switch to another bank. Free checking – ever heard of it?
12. Electric Bill:
Unplug the computer, TV, stereo, Wii, toaster, phone charger, etc. Insulate your home better. Turn off the lights. Buy energy efficient light bulbs and appliances. Turn down the heat. Turn the A/C off, open some windows, and buy a fan. Plant trees on the sunny side of your house. Install a programmable thermostat. Use dimmers, timers, or motion detectors. Seal and weather-strip doors and windows. Air-dry your dishes and clothes. Etc.
13. Dollar Store:
If your ego and pride are keeping you from entering the dollar store, get over it. Let me name just a few things that if you bought these at your dollar store, you would get the same exact product for a quarter of the cost: greeting or b-day cards, cleaning supplies, shampoos and soaps, holiday decorations, gift wrap or balloons, candy, paper goods, etc.
14. Buying on Impulse or After Solicitation:
Make time to think before you buy. Resist the urge to just buy something, especially if you are buying because you are having a bad day or feel you deserve it, etc. Go home, think about it, sleep on it, then make a decision as to whether you actually ‘need’ it. Don’t let people ‘sell’ you or convince you that you need it. Stay in control, exercise discipline, and allow time to think (away from the situation) before purchasing.
15. 401(k) Match:
If your employer offers a 401(k) match and you are not taking advantage of it, why not? You are wasting money on things you don’t need, and missing out on FREE money.
16. Grocery Shopping & Couponing:
When you go grocery shopping, make sure you write down a list and stick to that list. Never go shopping when you are feeling hungry, depressed, or frustrated (you’re bound to spend more during these times). Do you use coupons? You should. Whether just going grocery shopping, or going out to eat, getting a haircut, to the movies, etc. – there are coupons everywhere on the internet. Check out: www.coupons.com, www.smartsource.com, www.couponmom.com. Lastly, get a membership at a wholesale grocery outlet (like Costco or Sam’s Club) and buy in bulk.
17. Taking Advantage of Freebies:
At www.Hulu.com you can watch full episodes of more than 300 shows, for free. Next time you call directory assistance, call 1-800-FREE-411. Dust off the library card and realize you can get most books, music, magazines, newspapers, and movies there for free (well, I guess you are paying taxes). Don’t pay for a credit report, you get one for free each year at www.annualcreditreport.com. Take advantage of ALL the free things just given away on sites like http://www.craigslist.org/about/sites#US (choose your city), and http://www.freecycle.org/. Take advantage of Skype (http://www.skype.com) for free phone calls. If you or a child is going to college, apply for financial aid at http://www.fafsa.ed.gov/. The list could go on and on. Go on the internet and find freebies.
18. Transportation:
Take public transportation to work… you’ll save money on gas, won’t have to pay for parking garages, and you’ll save by making more ‘time’ doing things that earn you more money rather than just sitting in traffic. Bike to work. Carpool.
19. Unnecessary Drinks:
How many times do you walk past a perfectly fine coffee maker in your kitchen, or at work, just to drive to Starbucks? Why do you spend money on bottled water… in case you forgot, you can get water for FREE everywhere (and, is bottled water actually better or healthier)? And do you really want me to list the negative health ramifications and wasted money spent on energy drinks and soda?
20. Warranties:
Next time you go to BestBuy, Circuit City, the cell phone store, or even Wal-Mart, just realize that most electronic products are built to last anywhere from 3-5 years; and 9 out of 10 times, no major problems happen to products during that time. So remind me why you would spend money on buying the extended warranties (which many times cost 25% of the value of the item being bought)?
21. Oil Changes & Car Services:
Do you change your oil every 3,000 miles religiously? Did you know most cars require oil to be changed every 5,000-7,000 miles? However, if you are not doing regular oil changes, you are also wasting money because the cost of repairing your car for not taking care of it will be far more than the money you did save by skipping oil changes. Also, get your car serviced at the regular 30,000 mile mark to avoid major car expenses for lack of maintenance.
22. Buying Lottery Tickets:
Do I really need to say anything?
23. Leftovers:
Don’t throw food away. Save on your food and grocery bill and eat leftovers. Throwing away food is literally throwing away money.
24. Clearance & After Holiday Sales:
Buy things on clearance. Pay attention to sales and buy needed things during those sales. Instead of buying presents and decorations before the holiday, wait until after when everything is 50-75% off.
25. Not Having a Savings Account:
Perhaps the best advice to ensure you do not waste money is to open a savings account today and put 10% of all your income in that account. That way when any emergency or un-anticipated expense comes up (or even when the fun wants, toys, and vacations come up), you have cash and don’t go further into debt by whipping out the credit card and buying things on credit, which results in interest being charged and you spending even more money.
So, take control of the realistic and immediate things you can do today to get out of debt. First and foremost, STOP WASTING MONEY on things you should not be spending your money on.
