Swayaway1 / Vecteezy

Small Steps Lead to Big Rewards in Debt Reduction

If you’re reading this, you may be deep in-debt or perhaps wanting to do better managing your money. Either way, I hope to share some ways that I go about reducing my out-lay so that I can have money in reserve at the end of the month.

Everyone has bills to pay of some kind. Unless you’re a child, freeloading off your parents / or (unfortunately) cannot work due to health reasons. The ideal is to ensure that every month you have more income than your expenses.

I’m writing to individuals who are struggling or want a little assist when managing their finances. When I first was trying to get out of debt, I needed a framework for how to get my financial life back in order. That’s when I became aware of Total Money Makeover by Dave Ramsey. Ramsey is great if you are new to money matters / or struggling to get any traction with your debt / finances. I read his book in about a week when I first got it.

Generally, we all have two types of expenses: fixed and variable. Those fixed expenses you can expect to make every month and they rarely (perhaps once a year) change. Examples are: mortgage, electric bills, gas, phone, ie. The variable expenses can fluctuate and are harder to get a hold on. These can include: food, medical, gas, charity and even savings.

The goal will be to reduce those both of these expenses to put more money into savings and investments. If you’re just squeaking by, something needs to give.

Ways to reduce expenses

I want to share some of the ways in which I lower my expenses. Sometimes I will take aim at my fixed expenses every 6 months and yearly – just to be sure I’m not overpaying on things. Other expenses, I’m more routinely looking at to lower.

So after I’ve taken a look at my Excel spreadsheet at the end of the month (or year), I will see where my greatest expenditures are. For us, they exist in our food and health category. For many of us (like my family), you could have higher expenses in – let’s say – in the health category because you have a member who has a lot of health issues. This is something that is unfortunate and out of our control (to a greater extent). Your focus may be on trying to increase your income to keep up with those expenses. For some, this may not be feasible due to the amount of money being allocated to health-related issues. I hope to write more on this in the future – but for now, know that I understand your pain. It is one issue that is often neglected in money management articles / books.

After you assess where your greater expenses are, seek to reduce them. Here’s some practical ways that I go about attacking our expenses:

  • Cell phone bill. If you are paying more than $30 for your cell phone today, you are likely paying too much. There are a multitude of affordable cell service providers out there to help you save on this expense that is a fixed expense for many and has replaced many people’s home phone. One provider I use is called Tello. They are a MVNO (Mobile Virtual Network Operator) who buys “space” from the bigger networks and then resells it for less to customers. Other networks include Ting, Consumer Cellular, and Twigby.¬†Looking at my bill with Tello, I pay $10.95/month for unlimited text / talk plus 2GB of data. This is more than enough for me as I work remotely and use the WiFi when available. I also don’t travel a ton, so it isn’t paramount that my service is 99.999% perfect. MVNO’s have gotten a lot better from when I first started using them and are hard to differentiate between the big networks.
  • Insurance. With the internet, there are so many ways you can assume the advantage of a knowledgeable consumer. You aren’t beholden to your insurance agent or other middle-men. You can go direct to the source and seek more affordable options using online services that “broker” for you. I recently reduced my auto and home insurance by over $700 per year, after my agent of many years (who I do appreciate) said they weren’t able to realize any new savings for me. So, I went online and found Gabi. After answering some questions and uploading my current insurance declaration documents to the site, a representative reached out to me with several options for insurance. Now, I do think this is where having an existing relationship with an agent can be vital. You want to ensure the offer Gabi is giving you is an apples to apples comparison. While that is their aim – there were a couple items left off, my agent caught when I showed her the new offers. While Gabi offered these other options, my agent was also a partner with the new provider and was determined to offer a similar package for me. So, I decided to stay with our agency over going with Gabi’s offering. But, it was still important to get a baseline for a better offer. You can go with Gabi to see if what you are currently paying OR your existing provider may wish to offer something comparable. One disclaimer: paying less on insurance is not always better – especially if it is an unheard of insurance company or your getting¬†less than what you have currently. Insurance is one of those things where you are grateful it is in place when you need it.
  • Utilities. Are there ways in which you are paying too much for your utilities? Or, you may even have a water leak in your home (leaky faucet, ie), which is costing you. While utilities are harder to negotiate with, you can affect what you are paying monthly by doing some diligence in ways to reduce your electric and gas bills. One is using LED bulbs (which tend to last longer) and purchasing more energy-efficient appliances. Another idea could be to install a smart thermostat would could more effectively run the temperature in your home.
  • Transportation. If you’re in a city, getting around could be a lot cheaper than if you are living in a rural area. I have a friend who lives in the heart of the city and rarely uses his car, opting for public transportation or is able to walk to most of the places he needs to. There are pros and cons to living in the city vs suburb (or rural). But we spend a lot on transportation – especially if we are financing our vehicles and driving a lot. This past year (through an unfortunate event of losing one vehicle to poor maintenance – ahem), my wife and I went down to one car. One reason was due to going to remote work full=time. But we are now paying for one car’s fuel / insurance vs. two. We’re grateful we also bought the car used from a private party, so we don’t have payments. I love to drive – so reducing some of my leisure trips has been something I’m striving to do as well. This also pertains to auto insurance, but one thing you can look into is asking your insurance provider to send you a smart device that collects data on how you drive. This will lead to reduced rates / but it is more intrusive as the device has visibility on all your driving habits (even how fast you speed up at stop signs).
  • Food. Just over the past year / two, we’ve seen prices creep up on almost everything – including food. I don’t believe that food is something you necessarily want to skimp on as eating well, is good for your health (and future medical bills). However, there are a lot of obvious ways to save, including storing food and coupons. Plus with the smart phone age, there are apps that allow you to save even more on your grocery trips. One is called GetUpside. After checking in to the app, you’ll be able to see some of the participating groceries in your area. They also offer cashback on restaurants and gas in your area. Since I signing up this past summer, I have earned over $100 in cashback rewards (you can cash out the rewards to your Paypal or bank). Also be sure to download your grocery store’s app if it is available for further savings. Since a lot of our food shopping is at Whole Foods (often called, “Whole Paycheck”), we use a credit card that offers an additional 5% cashback on each trip. I don’t advise using a lot of credit cards if they have been an issue for you.

Of course, these aren’t the only ways you can reduce your expenses. I’d love to hear ways in which you are saving money too! In a future post, I would also like to write about how to increase your income.

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