We all know that we’re supposed to plan for times of financial hardship. If things were ideal, we would never have to worry about financial troubles and money would flow freely and the words ‘budget’ and ‘spending cuts’ wouldn’t exist in our vocabularies.
Unfortunately, this isn’t the case. As the total US household debt tips a staggering $13 trillion, it’s clear that most people spend more money than they have, or can repay. From personal credit cards to lines of credit, to car loans and more, the average American household spends most of its time well into the red.
Is there such a thing as “good debt”?
In the economic system we live in, carrying some amount of debt is normal and perfectly reasonable. Mortgages are a common form of debt that almost everyone has, along with student loans, and car loans. While still considered debt, these particular types of debt are viewed with less scrutiny than other types of debt, such as personal credit card debt.
Student loans enrich a person and will also help them earn higher lifetime salaries than those with high school diplomas. Mortgages let you build equity by owning real estate, and while cars are depreciating assets they are also necessary evils due to the way our cities are built and the cost of living in a downtown core.
However, even these conventional sources of debt need to be balanced against a person’s salary and needs. Yes, you probably need a car, but do you need an Audi R8 to get to and from work? Or a massive Ford F250 when you’ve never hauled a load or swung a hammer in your life?
Most likely not.
The same goes for houses. Wanting to own a home is a common goal for most people; however, the cost of your mortgage and utilities should be carefully weighed against your salary, lest you end up “house poor.”
When to make a change
While it’s never too soon to reassess your spending habits, cut costs, and start a savings fund, there are certain moments in a person’s life where you may find yourself at a financial crossroads and realize that you have to make a change, or risk ending up in severe financial hardship.
Overloaded credit cards that you are only making minimum payments on or a lifestyle that is well outside your means are all easy ways to end up struggling financially with no end in sight.
If you’ve reached a point in your life where you’ve decided to make a financial change, you are going to need some money-saving tips to get the ball rolling. To that end, here are 10 Money-Saving Tips That Will Help You Get Through the Month:
Ah, budgeting. The necessary evil. We don’t know how many times we’ve heard people exclaim: “I’ve tried to budget, but I just can’t do it!” but that’s just because they haven’t found the budget that works for them. There are hundreds of ways to build a budget. You have to find and develop the budget that works for you and is easy to stick to.
To create a successful budget plan, you first need to calculate your expenses and determine your total income. From here, it’s your income, minus your essential expenses, and then figuring out what money you have left and how you want to divvy that remaining money. Don’t forget to have a section for savings! It would be better if you tried your best to put aside at least 10% of every cheque you receive.
Understanding your financial goals and making a plan on how to reach them is a fundamentally important aspect of building and maintaining a budget. Having a feasible goal for your finances, whether that’s getting out of debt, saving for retirement, or saving for a big purchase, will make it easier to stick to your budget and give you something to aim for when you start wondering why you’re limiting yourself.
Cut your entertainment
If you’ve tracked your purchases (which you should be doing) and are noticing that much of your money is being eaten up by eating out, drinks with friends, or other forms of entertainment, it’s time to look into ways to cut your spending habits. It can be easy to lose track of $5 or $10 spent on lunches out or a drink here and there, but these small expenditures can quickly add up.
Eat at home
Following the above, you’d be surprised how much of your money can trickle away when you forgo making your own food. Many people are guilty of getting lunches out or grabbing dinner to-go. While these may seem like minor expenses, they can add up quick. Instead, take the time to make extra food at dinner that you can pack into lunches, and meal plan so that you always know what you’re preparing for supper. Look for recipes that are cheap and filling, like quinoa salads or stews that can be made overnight in the CrockPot. Not only will it save you money, it will also cut your stress by knowing that your lunch is taken care of.
Cut monthly bills
Do you pay an exorbitant amount for cable TV, but rarely watch it? Or have a landline that rings so seldom that it scares you when it does? Consider canceling these services or shopping around for cheaper providers that can give you a more competitive rate. You can also call your current provider and negotiate for better prices. While your provider won’t freely offer it, if you’re considering leaving and like the service, many companies have customer retention departments that exist solely to encourage current customers to stay with the company.
Look for unnecessary monthly costs
We often sign up for monthly bills that seem small at the time, but then promptly forget about them or never use them. If you have services that are nibbling away at your finances with $10 or $20 charges a month, see if you can go without. These are often online services, such as fitness memberships or coaching services. Another thing people often lose money on is free trials. Many of these trials go automatically into paid memberships if you’re not careful. When signing up for any free trial, make sure you read the fine print to understand what will happen when your trial will over, how to cancel, and what it will cost you if it automatically renews.
Get a cheaper car
Whether you love your car or not, if you are paying more than 10% of your income, then you’re spending too much. While a car might seem like a status symbol, there is no shame in driving a more affordable vehicle to make sure you have more actual money in the bank. If you still owe on your car, trade it in against a more modest model with good gas efficiency. That being said, unless you’re in dire straits don’t buy something you hate. Know what you want from a car (within reason) and buy within that framework.
Watch your grocery bill
Your grocery bill has a lot of wiggle room–and you may not even know it! Many people grocery shop without using coupons or watching for sales. If you’re willing to shop around, you’ll find that you can get competitive prices at other stores or can take advantage of lucrative savings by watching flyers and using coupons. Many grocery stores also have points’ systems that reward you with free groceries if you use one of their associated credit cards. So long as the credit card doesn’t have an annual charge and is only used for groceries, it can be an easy way to get free groceries. Another popular option is to go vegetarian once or twice a week. Cutting meat out of your diet a few days a week is a great way to save some money.
Refinance your home
By taking advantage of the current low-interest rates by refinancing your home, you can reroute some of that saved money towards your debt. Using a service like Loan Review HQ will allow you to accurately gauge what refinancing option will be the best for you and what kind of money you could be looking at saving. You can also do something called a cash-out refinancing. This can give you some money to pay off high-interest debt or make a big purchase. However, be sure that you have enough equity in your home that doing a cash-out refinancing won’t leave you with a loan-to-value ratio of more than 80%. Going above 80% means you will have to buy mortgage insurance, which will cost you extra annually.
Buy big ticket items off season
If you can wait until the off-season to buy things like barbecues, generators, electric fireplaces and the like. These items are expensive but have a lot of wiggle room in their prices that will vary wildly as the seasons come and go. In fall, most stores will be itching to clear our barbecues from their warehouses and will sell off the remaining stock at a deeply discounted rate that you can take advantage of.