My Debt Relief Plan

Know Your Expenses

January 18th, 2008

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Debt reduction starts with knowing your expenses

Let’s evaluate those expenses. There are two types of expenses - Fixed and Variable. We can dramatically alter the monthly expense bill and reduce your debt by determining which expenses to cut back on

Fixed Expenses- these are the bills that you pay that arrive every monthly or quarterly. You pay for essential services like electricity, and telephone. You may opt out of these expenses if your debt is serious but it is not recommended. You’ll need the telephone to do research and assist you lower your debt. You’ll need electricity as a basic requirement of living.

These bills are going to keep coming. The secret is to minimize them. Write your own check list to see how you can minimize each of your fixed expenses.

Electricity-Can I make sure lights are turned off when not needed? Can I change the bulbs to lower cost usage types? Do I need the refrigerator running on high? Is the TV on needlessly? Do I have to boil the kettle ten times a day? Cover pots with lids to prevent up to two-thirds of potential heat loss. If available, use the no-heat fan or air dry setting in your dishwasher.

Don’t bother pre-rinsing dishes that contain only a normal amount of residue. Pre-rinsing uses up additional hot water. Dry two or more loads in a row, so that the second one benefits from the heat already in the machine. Don’t over-dry clothes. Use the machine’s moisture sensor if it has one. Try using the cool-down cycle, which uses heat already in the machine to finish drying. Set a goal to save 10% of your energy. This is not only good for the environment but means 10% reduction in utility payment.

Telephone- Do I really need to make a call? Are there any special plans my service provider can give me? Is it cheaper to use the telephone after hours? Can I make the call from work? Should I pre-pay my phone service?

Food- Are there any specials being advertised? Can I buy in bulk? Should I consider a food voucher from a welfare agency? (Only temporary)

The next type of expense you should be aware of is the variable expense. These expenses can be avoided.

Variable Expenses- These expenses are associated with everyday choices we make in purchases. They are usually not essential items, but are part of our current life style. Again make a list of these expenses and ask yourself these questions

Do I really need this item? (Newspapers, Video’s/DVD’s,)

Is there a cheaper item available somewhere else? (Coffee)

Can I go without until my debt problem is over? (Alcohol)

These measures are only temporary. Unless you commit to undertaking some changes in your expenses on a temporary basis, you will have your debt for a much longer time period than you need to.

Cut down on convenience. Change your own oil. Wash your own car. Bar-B-Que instead of hamburgers out for little league. Shampoo your own carpet. Look at all areas of your life. If you want to save, start here.

Share a newspaper or get Sunday only. If you take a Sunday paper, do you need another Sunday paper? How many cable premium stations, movies, and “pay events” do you have? How many do you need?

Bring/bag your lunch instead of buying.

Go through your last 6 months bank statement and find out where and how much you spent. What can you change?

The average person spends 112% more on a credit card than they would if paying cash. Never go to a Mall (or anywhere else) with a credit card without knowing EXACTLY what you are after— use a list.

Compulsive buying items are gold mines for a retailer and are right at the checkout stand. Get in the habit of putting your hands in your pocket or at least off everything else when approaching the checkout.

Late fees cost money. Pay bills on time.

Do not carry cash in your pocket. Cash spends itself. If you have to go through the trouble of cashing a check or withdrawing from the bank, you might think twice about the purchase.

Happy Expense Reduction!

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Entry Filed under: Debt, Debt Relief, Settlements, Debt Reduction, Debt Consolidation, Blog Carnival