Where Do I Find Extra Money To Pay Off My Debt?
Ok. I promised you that I would help you find some extra money that you could put towards your debt so you can be debt free as quickly as possible. So here we go. This is where I have to put my "Mom" hat on and I’ll have to be firm. There are a few things we need to get clear first.
1. You’re going to have to do some things. There are many reasons that could have put you so far in debt in the first place. Perhaps being young, naïve, and unaware. Perhaps it was self-indulgence, otherwise known as the "buy now, pay later" bug. Perhaps life just handed you the fuzzy end of the lollypop a few times and now you’re left raising children on your own doing the best you can with a limited income. Whatever the reasons, it doesn’t matter. Remember the circumstances as a learning experience, so you don’t let this happen again. But be PROUD of yourself because you have made the brave decision to look that Debt Monster in the face and DEFEAT him! You have to do this NOW, while you can still win. If you don’t do this now it will at some point be impossible to win. Trust me, you do NOT want to go there.
2. I do not have a crystal ball into your life to determine where you are able to cut costs and save money. Only you can do that. I will offer numerous suggestions to get you started. Some you may already be doing, others may not apply to you. It’s up to YOU to take ownership and go through every aspect of your life and see where you can modify your lifestyle to save money. Doing this will also give you a feeling of taking control over the debt reducing situation. A very empowering feeling.
3. You need to have a fabulous attitude about this, determined, empowered, and excited. Remember, the more money you are able to pull together from your lifestyle to pay towards debt reduction, the quicker your debt will be paid off, and the more money you will have as disposable income when your debt IS paid off. Imagine what your life will be like when you have an extra $500 or $800 dollars every month.
Okay, let’s start searching for spare money. During this search you’re looking for any money spent on something you are willing to do without, even if it’s just temporary. Also take note that I live in Canada. Some of the dollar amounts or saving amounts may be different depending on the province you live in or the country. Things might be a bit different in the U.S. but the concepts will be the same anywhere.
This first tip you can do while you're searching for the others. For at least 2 weeks (1 month would be better) keep a log of absolutely every penny that you spend and what it's for. If you buy a newspaper write it down; a pack of gum, write it down. When you're standing in line at the grocery store and you impulsively pick up a chocolate bar or a magazine don't include that in your groceries. Write it down seperately. NO CHEATING. This is where you will see a significant amount of money being wasted. This is a lesson that will stay with you forever. You will quickly see how expensive impulse shopping is.
Day to Day Living Tips
Lunches - Bring them! Do you eat out for lunch every day? Start packing a lunch and maybe buy your lunch once a week only. This alone can save you upwards of $10-$15 every day. 15 X 4=60 each week. That’s $240 every month. That’s a terrific start! I’m already excited. Bringing your lunch doesn’t have to mean sandwiches either. You could make yourself a nice salad with dressing on the side. I personally take an hour to an hour and a half on my day off and prepare my lunches for the week. (I know if I leave it until the night before or that morning it won’t happen.) It’s usually a hot meal like fish with rice and vegetables. I put each lunch in a container so all I have to do that morning is grab a container and go. I microwave it at lunchtime and all is well. Yes, this means that I eat the same thing all week. If you want different meals, spend extra time and prepare them.
Beer/Wine - However much you drink, cut it in half. If you’re not exactly sure how much you spend or are inclined to have conservative memory, I suggest you go through your bank statements for at least 3 months. You’ll be amazed at some of the other things you’ll find in there as well. Typically people spend a great deal of money they don’t even realize they’re spending. So be sure to go through at least 3 months worth of statements before you finalize your "debt reducing money" list. You might also want to call this your "financial freedom" money.
Spending Money - I suggest you give yourself an allowance every week for all your spending money. This should be in cash. You will no longer use your debit card for small daily purchases. Coffee is a good example. Start making coffee at home and put it in a to-go mug. Maybe treat yourself to a coffee shop coffee once each week. Coffee in a coffee shop is about $1.50. 2 per day, 5 days per week is $15.00, which equals about $60 every month. Are you seeing how the little things add up? If you spend cash instead of debit you will better realize how much you’re actually spending. Also remember that, for you, the bank is only open one day each week. So you can’t spend your weekly allowance in 2 days and run to the ATM for more allowance. When it’s gone you’re done until next week. Determined, remember? :)
Use rags instead of paper towels. Rags are reusable and more environmentally friendly.
Shop at consignment stores and charity shops. You can get some terrific name brand purchases for a fraction of the cost. You are also helping someone else when you support this charity store.
Eat at home. Restaurants or take-out is expensive, not particularly healthy for you, and likely doesn’t taste as good as your own home cooking. Eat out as a treat rather than part of you regular routine.
When you do go to a restaurant, don’t buy drinks. Water with lemon is free and better for you. If you want the occasional cocktail have it at home. It’s much less expensive and you don’t have to worry about driving.
Freeze foods before they spoil or buy only what you need. Vegetables like onions and peppers are common to cook with and can be pricey. Buy them when they’re on sale and chop them up and freeze what you don’t use. They’re great in stews, chilli, spaghetti sauce, etc.
Return your bottles for deposit refund. You’re going to the grocery store anyway. Those pennies quickly add up to dollars in YOUR pocket.
Never grocery shop when you’re hungry. If you can, don’t bring the children with you. All the expensive kid stuff is at their eye level.
Use a grocery list. This will help to prevent impulse purchases and limit your shopping to what you really need. This is effective both in grocery shopping and department store shopping. When you do see something you want that’s not on your list write down the name of the item, the cost and the store that it’s in. Do NOT purchase it. Wait for 3 days, and then decide if you still want it or can you do without it. This will absolutely reduce those impulse purchases.
Plan your errands both for time and geography. So if you planned to grocery shop on Saturday and you were going to go to the drug store on Tuesday, and the drug store is beside the grocery store, doing them at the same will reduce driving (saving gas), and save time.
ENERGY STAR-approved light fixtures will use 75% less energy than standard incandescent ones. A torchiere is a portable lamp designed to direct light upward for indirect illumination. Replacing a 300-watt halogen torchiere with a 55-watt compact fluorescent torchiere, when operating for three hours every day, will save about $199 in electricity over the life of the compact fluorescent bulb. There is an additional cost savings, as the life span of halogen bulbs is only one-third that of CFLs, so in the same time frame you have to buy three halogen bulbs. (confirmed by current BC Hydro) http://www.bchydro.com/guides_tips/green-your-home/lighting_guide/Use_Energy_Efficient_Lamps_and_Fixtures.html Last Modified: Sep 18, 2009)
Get your news online instead of buying a newspaper or share a paper with a friend or neighbour.
For entertainment play cards and games with your family instead of spending a lot of money on external entertainment.
For Birthdays and Christmas go back to the basics. Make homemade decorations and gifts instead of buying. Give gift certificates for "doing dishes" or "washing the car" or "good for 3 hugs".
ATM withdrawals - Don’t do them! This is where you withdraw cash from any other bank machine besides your own. That machine will charge you a minimum of $1.50 each time. Typically your bank will also charge you $1.50 for the same transaction. That’s a minimum of a $3.00 charge to withdraw cash. That can add up very quickly. Do that twice every week for a cost of $24.00 each month or $312.00 each year. If you make it a habit to use your own bank that $312 each year can turn into savings since there is no charge to use your own banks ATM.
NSF fees - Don’t let it happen to you! Perhaps you wrote a post dated cheque and the recipient cashed it early, before the funds are there. Your bank will give you an NSF (insufficient funds) charge of about $42.50. There may also be a charge from the recipient side in excess of $20.00. These are expensive charges that can easily be avoided. See if your bank can offer you Overdraft Protection. This is good, cheap insurance to protect you against NSF fees. Typically there is a nominal monthly fee of $3.00 for the service. Should the above scenario happen, the bank would cover your cheque up to the value of your Overdraft Protection. You’ll pay interest on the amount you borrowed until the day that you pay it back. But it's still a lot cheaper than $42.50.
Monthly Account fees - Watch them! This is a 2 tip in 1. First, make sure you’re in the right account for your usage. Most accounts allow a certain amount of free transactions and it’s .65 for each additional transaction. Let’s say that you decided on the cheapest account, which allows 10 transactions for $3.95/month. But you typically will use 30 transactions. So now you’re paying $3.95 for the account plus .65 for 20 additional transactions .65 X 20 = 13.00 + 3.95 = $16.95. So in reality you have paid $16.95 for your account when had you chosen the right account for your usage, you would have paid $12.95; a savings of $4.00 per month.
Second tip about bank accounts. Often there is an option to waive the monthly fee by maintaining a minimum balance. It is a FABULOUS idea to do this if you can. Depending on the type of account you have you can save anywhere from $47 to over $150 per year.
Credit Cards - Don’t pay that interest! The best solution with credit cards is to pay the balance off in full every month, that way you don’t pay any interest. If that’s not possible call your credit card companies and ask them if they have a low interest balance transfer rate. This may give you some interest relief for 6-12 months where you may be paying 4.9% instead of the usual 19.9%.
Pay your credit cards on time! Most cards charge a higher interest rate if you’re late on your payments. Why pay more interest that you have to.
Make sure you never go over your limit. Most cards will charge an overlimit fee for exceeding the limit. Often this could be as much as $20. That $20 would be best served going towards paying down the balance, not adding to it.
When you heat with gas, for every one-degree you turn your thermostat lower you save up to 5% on your annual gas heating costs. (confirmed by current Teresan gas brochure Hot tips booklet - energy-saving ideas for your home copyright 2009).
When heating with hydro, turning the heat down by just two degrees can reduce your home hydro heating costs by 5%. (confirmed by current BC hydro site http://www.bchydro.com/guides_tips/green-your-home/heating_guide/manage_thermostat.html Last Modified: Sep 18, 2009)
Programmable thermostats are inexpensive, priced between $25 and $100, and can pay for themselves in a matter of months. Buy one that is easy for you to use. If you program your thermostat to set back the temperature by five degrees for eight hours of every night, you will save approximately 10% on your heating bill. If you also set back the temperature while you are away from home in the day, you will see even bigger savings. These can be used for both heat and cooling. (confirmed by current BC hydro http://www.bchydro.com/buyersguide/heating___cooling.html#Thermostats Last Modified: Sep 18, 2009)
Increase deductible on both your home and auto insurance. You can instantly reduce your premiums just by increasing your deductible. Caution here however; remember to put this savings away to accommodate any emergencies that you may have. It’s one thing to save money, but you do need to be prepared.
Okay, you’ve worked hard now by going through this list. You’ve also likely found a number of other places to save money. Hopefully you now have compiled at least $500 each month of money you didn’t realize that you had. Now go back to my article called Credit Card Bills and More Credit Card Bills - I Don't Want to Pay Any More! And start attacking your debt. Start working towards your financial freedom! And please let me know if this hub was helpful to you.