Household debt has continued to rise in 2021, with total household debt reaching almost $15 trillion dollars in the second quarter this year. The best way to reduce your debt is to lower your expenses and use the remaining money to pay off any loans. However, that is sometimes easier said than done! If you’re looking for ways to reduce your expenses, these tips can help:
Start By Tracking Your Spending Habits
Ever get to the end of the month and wonder where your paycheck went? The first step of your journey towards cutting your expenses should be identifying where your money is actually going. Pull your digital bank statement to see where you made any debit or credit purchases. You may even want to carry a small notebook for a month or two and record any transactions there. If you use cash, ask for a receipt with every purchase so you have a record of it.
Create a Budget Based on Your Needs
Once you’ve identified where your money is going, it’s time to create a budget—but resist the urge to overcomplicate it!
- Write down your monthly income. This is how much you have to work with each month.
- Identify any “fixed” bills, such as your mortgage/rent, utilities, vehicle payments, etc.
- Identify your “needs”. This includes gas, medications, and food. Sorry, but your streaming service subscription is not a need!
When you’ve taken care of the “must-pay for” items, the remaining amount is discretionary spending. Give yourself a monthly allowance for the “want” items, and put the rest towards building a savings account and paying down your debts.
Make Sure You Actually Want Your Wants!
First, look for any recurring monthly payments you no longer need. How often do you watch cable TV? Do you really need subscriptions to every available streaming service? Are there any subscriptions you forgot you signed up for?
Trouble resisting the temptation of online spending? Consider putting a “freeze” on your credit cards so you’re not able to make any purchases for a while.
Look for Other Ways to Reduce Unnecessary Expenses
Don’t let unnecessary or unexpected expenses derail your financial goals! Think about other areas of your life where you can reduce or avoid costly expenses. For example, heating your home makes up 42% of your monthly energy bill, so consider adjusting your thermostat while you’re away during the day. Avoid a speeding ticket by driving within the speed limit. Limit the number of times you order in, and opt for home-cooked meals instead.
At Briteside Solutions, we’re passionate about helping people create a bright, healthy financial future. If you’re struggling with debt, we can help! Visit our website to learn more about our services—including our Financial Education program—or call (888) 851-0646 to get in touch today!