A few weeks ago, Sarah W. Caron, a reporter for Manilla.com and Yahoo! Finance asked me what suggestions I had for people struggling with credit card debt. (You can find out what I told her by visiting this link: “4 Savvy Ways to End Credit Card Dependency”).
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Although I had some good suggestions—I’ll admit, I AM a little partial!—the reality is that credit card debt is just one of many forms of debt that many consumers struggle with.
With that in mind, I came up with a list of 25 ways to help you save money and get rid of debt once and for all.
1. Start using the “B” word
Calm down, I’m not talking about THAT “b” word. The “b” word I’m talking about is “budget,” or as I like to call it, a “spending plan.”
Face it, if you’re in debt that means you’re spending more than you’re earning, and odds are you don’t know where you’re spending your money at or what you’re spending it on.
Check out some cool (free) programs like Mvelopes and Mint.com to help get you started with a spending plan.
2. Stop using credit cards
Credit cards are NOT evil—IF you use them properly. The problem is that most people don’t know how to use them properly. If you carry a credit card balance over from month to month, you’re one of those people.
Therefore, until you learn how to use a spending plan (i.e. budget) and start spending less than you earn, you need to stop using your credit cards!
3. Save for short-term emergencies
Before you start trying to get rid of any debt, make sure you have $500-$2,500 or so (enough to cover your highest insurance deductible) in a savings account for any short-term emergencies.
That way when an unplanned expense pops up, you won’t go further into debt than you already are because you will have the funds to pay for that unplanned emergency.
4. Sell some stuff
Problem: Most people have too much “stuff.”
Solution: Take as much of that stuff as you can and sell it on eBay or Craigslist, host a garage sale, give it to charity and take the tax write-off…whatever it takes to get rid of it and put some cash in your pocket.
You’ll not only have some extra money to pay down your debt, but you’ll also not have to worry about being featured on an episode of the A&E show “Hoarders” any time soon!
5. Get a part-time job…
If you need some extra cash, consider working somewhere part-time 1-2 nights a week or on a Saturday to make some extra cash.
6. …or get paid to do something you’re good at.
Like to spend time outside and own a weed-eater?
Let your friends and family know you’re looking to make some extra money and odds are someone will take you up on your offer. (In fact, give me a call because I can’t stand weed-eating.)
Bottom line…
Everyone’s got a skill other people are willing to pay for…figure out what it is and do it in your spare time for some extra cash.
7. Sell your car
If you have a car loan and you owe less than what the car is worth, consider selling the car and “downsizing” until you can save up enough to pay cash for the car you’d really like without going into debt.
8. Start paying down debt with the highest interest rate…
This is typically called the “Avalanche Method.”
You start by paying minimum payments on everything except for the debt with the highest interest rate. Funnel all your extra cash towards that debt and when it’s paid off, move on to the debt with the next highest interest rate.
The result: all else being equal, you’ll pay the least amount in interest over the life of the debt and get out of debt in the least amount of time.
9. …Or the lowest balance.
With this method (typically called the “Snowball method”), instead of focusing on the debt with the highest interest rate first, you instead focus on the debt with the lowest balance and work your way up.
The result: all other things being equal, you’ll pay more in interest than the avalanche method, but for many people the emotional “quick win” that paying off the smaller debt provides helps them stay motivated when trying to get rid of debt once and for all.
10. Take advantage of free (or almost free) services
Take advantage of free services like the library, free or low cost community or church events, and services you may pay for already but aren’t utilizing the full array of benefits (i.e. Netflix, Amazon Prime, AAA discounts, etc.).
11. Automate as much as you can
There’s almost no reason you should have to write a check or pay a bill manually these days. Most banks, credit cards, loans, 401(k) plans, etc. offer a free bill paying, “autopay,” or automatic transfer feature. The more automatic it is the better so that you don’t have to think about doing it…it just happens.
12. Monitor your credit reports
Everyone can access their credit reports from the 3 major credit bureaus annually for free. Visit www.annualcreditreport.com to get yours and correct or dispute any errors that you see.
13. Transfer, consolidate, or refinance your debt (proceed with caution)
I don’t typically recommend this because if you do this without changing the underlying behavior (i.e. overspending) then you’ll end up in more debt than you were to begin with.
With that said, sometimes it may make sense to consolidate, transfer, or refinance your debt to take advantage of a lower interest rate.
14. Have a “monthly money date” with your spouse
Money is one of the biggest causes of arguments for many marriages. To fix this, try having a “monthly money date” with your spouse to go over the budget and talk about financial issues. Try to make it more fun by ordering a pizza or some take out so at least you don’t have to cook and do dishes afterwards.
15. Stop buying new when used or almost new will do
With most items, the used or almost new version is just as good as the new and it’s usually substantially cheaper—sometimes 50% off or more—when compared to the new item!
Are there items where it’s ALWAYS worth it to buy new, no matter how much you save?
Sure…coffins, contact lenses, and underwear…just to name a few.
16. Make gifts instead of buying them
It’ll be cheaper AND most people will really appreciate the thought and time you put into the gift.
17. Fire your (fill in the blank) “guy”
Need your lawn mowed? I got a guy for that.
Need your car worked on? I got a guy for that.
How about a room painted? I got a guy for that too.
The problem is that all these “guys” (or “gals”) cost money. If you’re trying to save money or get out of debt though, you need to do as much as possible on your own. Try and figure out what things you really can’t (or absolutely don’t want to) do yourself and only pay people to do those things.
18. Ask, “Do I really need this?” when making purchasing decisions
Most items we think are needs are really just wants.
Cell phone? Maybe a need.
The newest smartphone? Definitely a want.
Car? A need for many.
Brand new $30,000 4×4 pickup truck? Do you even have to ask?
You get the idea.
19. Pay more (a LOT more) than the minimum payment
If you just pay the minimum payment each month, you’ll be in debt the longest amount of time possible AND you’ll pay the most in interest.
20. Cut your cable bill
Many shows that you watch on prime time cable TV are now available on the network’s website for free, so why are you still paying for cable? Keep the high speed internet and watch everything online.
Better yet, stop watching TV completely. I’ve never met someone on their deathbed who said, “I wish I had spent more time watching television.”
21. Teach your kids about money
Many parents spend unbelievable amounts of money on their children’s sports, school activities, clothing, etc. when they probably shouldn’t (i.e. see wants vs. needs above).
Try talking to your kids about why saving and/or reducing debt is important to you because if you don’t teach your kids about money, then society will.
Need some ideas?
Check out this infographic with tips on how to teach your kid about money at every age.
22. Quit trying to keep up with the Joneses
Will Rogers once said…
Too many people spend money they don’t have, on things they don’t need, to impress people they don’t care about.
Sad, but true for many people. Don’t be one of them.
23. Splurge a little
If you don’t treat yourself every once in a while, you’ll lose motivation and won’t save as much or get out of debt as quickly. Keep it small though because the whole point is to keep you motivated, not to spend money like there’s no tomorrow.
24. Don’t step over dollars to pick up pennies
The point is to make sure you’re spending your time on tasks that are of high value either financially, emotionally, spiritually, etc.
For example, if you’re a doctor who works 50+ hours a week and makes $300,000 a year, it might be more valuable to you to shell out $40-50/week and pay someone to mow your lawn so you can spend time with your kids on Saturday instead of doing yard work all day.
25. Buy the best quality you can afford
My wife and I have used ratings from Consumer Reports and many other product ratings and review websites/publications to make a myriad of informed purchasing decisions.
Although we’ve rarely bought the “top rated” or most expensive car, printer, vacuum, or techno-gadget, we’ve always tried to buy the best quality we can afford and to date, we’ve never been disappointed.
Have fun with it
Saving money and getting rid of debt doesn’t have to be boring. Make it a family affair, be creative, and have fun with it!
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