Digging out of debt is a big, necessary commitment. It feels like you’ll never be allowed to spend another dollar. Not to worry! Spending is a part of life, so you don’t need to stop. The key is to spend in ways that will benefit your personal finances. Here are some spending tips that end up saving you money, improving your credit rating, and shrinking your debt.
First, Inspect the Damage
Here’s a secret: the things that challenge us the most bring the greatest rewards. It’s hard to face how much debt you’re in. That’s why it’s so rewarding when you finally do and come up with a plan to get through to the other side. The debt-free side. If you’ve been putting bills in a drawer instead of paying them, keep the debt-free reward in mind as you take a deep breath, rip off the band-aid, and face the music.
It’s time to take your life back. Spread out all of your unpaid bills and credit statements, and begin your attack. You’ve got this.
Make A Plan
Think about your goals. How much exactly do you need to pay off? How long with it take? Talk to a credit counsellor to help you. Ask about the different ways to pay off debt.
It usually makes sense to pay off the debt with the highest interest rate first. This is called the avalanche method. Another method is the snowball method, which is paying off the smallest amounts first.
Jot down ways to cut back on expenses and increase your revenue. There are ways! Consider an extra part-time job. Sell items around the house. Take an overtime shift. Only buy items that are on sale. People pay off debt every day. So can you.
Pay Less Interest
Remember, the goal is to get rid of debt. In the meantime, you can speed things up by paying less interest. Here are a couple of options:
Lock-in. If rates are going up, lock-in. Ask your lender if you can refinance your loans at a low, fixed interest rate. This will make a difference, especially on a car loan or mortgage.
Consolidate. Having trouble keeping track of your different credit cards and loans? Consider rolling all of that debt into one loan, at a lower rate.
Sign up for a 0% introductory interest balance transfer credit card. Some credit card companies offer a zero balance to new customers. You could transfer your other credit card balances to the new card. Just be careful. After a few months, the 0% rate might turn into a high-interest rate. The goal is to pay it off before that happens.
“Buy” Your Freedom From Debt
We all love to spend money on things that bring us joy. Imagine the joy of paying off your debt! It’s hard to make that happen by making only the minimum payment. Start putting any extra dollars towards your debt repayment.
– Did groceries cost $20 less than you expected? Put that $20 towards your debt.
– Did you earn an extra $140 on overtime this week? Put it towards your debt.
– Have you picked up a good side hustle? Make it count – put the money towards your debt.
– Got a crisp $50 bill from Grandma for your birthday? Feel the delight as you put it towards your debt.
– Did you sell furniture or clothing online? Put it towards your debt.
You get the idea. You’ll be amazed at how even the smallest extra payments quickly add up. All extra payments make a huge difference in becoming debt-free.
Saving Money While Shopping
Imagine spending money without that awful pang of guilt that hits you between the ribs. Yes, it’s possible to spend and feel good about yourself. Here’s how:
Be a savvy grocery shopper. You can slash your grocery bill with a little pre-planning. Use coupons. Buy yesterday’s apples from the discount rack and make applesauce. Buy a few items to make a large batch of something you can freeze (soup, chili, stew) – you’ll stretch your dollars into many delicious home-cooked meals.
Start a cash-only diet. The last thing you want is more debt. Keep one or two main credit cards to maintain your credit score, but tuck them away in a drawer. By only spending cash, you’ll end up saving money. Seems counter-intuitive, but it works.
Decide What *Not* To Buy
Take transit. If public transit costs less than driving and paying for parking, get a monthly pass. You can relax, read, or listen to music instead of battling traffic. You’ll also enjoy hefty tax savings.
Have coffee at home. An innocent little purchase like a cup of coffee eats up your money fast, especially if you do it every day. Get up a few minutes early. Start a peaceful routine. Start each day with a coffee in the comfort of your home. Want one for the road? Invest in a travel mug and fill it with your own fresh coffee.
Take your lunch to work. You might be surprised at how restaurant lunches can drill a deep hole in your finances. Pack a delicious lunch that you can eat in a beautiful park, or at your desk. Make sure you have enough wholesome snacks to keep you satisfied all day. You’ll be saving money and probably eating healthier too.
Shop at the right time. This will make a big difference: don’t grocery shop when you’re hungry. If you shop when you’re full, you can make wiser decisions. Hungry shoppers tend to spend more money and buy more junk.
Avoid temptation altogether. The best way to break a habit is to replace it with a better one. If it’s hard to browse online shopping sites without buying something, download a book from the library instead. If walking into a drugstore sets you back $60 every time, walk to the park instead. Stay with the program and you’ll be taking good care of yourself and saving money.
Focus on needs not wants. It would be pretty hard, maybe even impossible, to live in today’s world without spending money. Until you are out of debt, make a commitment to only buy what you need. Toilet paper? Need. Eggs and bread? Need. A new comic book for your collection, or new lipstick? Wait until you’re out of debt and then reward yourself. Sometimes saving money is just as simple as that.
You can absolutely spend while saving money. It’s just about how you spend. If you really like spending money put extra time and attention into the times you spend money on what you need. Really appreciate and soak in those times and you’ll find you won’t crave spending as much. Remember, you’re not punishing yourself, you’re working towards the reward of a wonderful debt-free life.
If you need a little guidance or support along the way to being debt-free, our Credit Counsellors are just a call away.