MONEY TROUBLE

How to Stay Debt Free All Year

The case of the disappearing bank account seems to be part of the life of more and more consumers these days.

While the cost of everything from dairy products to snack foods to toilet paper seems to be on the rise, incomes are not keeping pace. Trying to keep your head above water and your credit out of the dumpster is becoming increasingly difficult.

Perhaps the most important strategy to take is to create a simple spending plan that defines how much you can spend within a specific time frame, such as one month. Once the limit has been reached, there’s no more spending at all.

With a strategy like this one, you should list necessary expenses first. These are the ones that must be paid or your life will be seriously affected.

1. Break down your expenses

The first tier of necessary expenses includes items such as the monthly mortgage payment, medical prescriptions, grocery allotment, electricity costs, water bills, gas for home use, fuel for the vehicles, car payments, doctor and dental fees, and taxes.

On the secondary tier, you should list such expenses as current insurance premiums, telephone use, and trash fees.

Finally, expenses such as credit card payments, television services, and Internet services should appear.

If the amount of liquid or disposable cash is eaten up before you get to the third tier, then cutting back on some expense in a previous tier becomes absolutely necessary.

The first step in deciding where you can possibly cut back is to look at each expense and find at least one strategy for lowering the cost.

2. Restructure

Start restructuring the budget with the third tier since that is where the expenses are more or less optional. If you cut back on credit card usage, the very next bill will be smaller than the previous one.

Therefore, simply by incorporating a cut back in your charging habits, you can lower your monthly living costs.

3. Reconsider your costs

Next, find a way to cut back your use of television or Internet services. Call the company and request a downgrade in services or shop around for a cheaper company.

For your electric, gas, and water bills, you can look for small ways to cut back on the expense. Perhaps something as simple as using surge protectors that you turn off at night can help to save a lot of money on electrical appliances such as televisions and computers.

In order to lower your car payments or your mortgage, you can check into refinancing the loans.

To lower insurance costs, have higher deductibles set in place or shop around for better rates. Downsize your fleet and sell off the spare car. Car pool with someone and save on fuel.

If you look long enough and hard enough, you can find small ways to improve on your spending habits. Over the course of a year, you might just save up enough to pay off one of your debts in full.

Need help?

If you're feeling overwhelmed with financial frustrations, you don't have to face them alone. Take advantage of our free and confidential financial counseling resources. 

Even if things are tough right now, they don't have to be forever. Remember, you can do this. We can help. 

If you're currently trying to pay down your debts, use this calculator to find out how long it will take for you to be debt-free.