|
10 Things You Can Do Immediately to Slash Debt and Spending
Any financial planning process begins with a change in
financial behavior and expectations. The degree of change varies
based on financial priorities, but in the end, it's about
adopting new habits and abandoning others.
Before you take any of the following steps, it makes sense to
talk to an expert who can help you see your whole financial
picture. A CERTIFIED FINANCIAL PLANNER™ professional can
examine all your sources of income and expenses and find the
most efficient ways to cut expenses, pay off debt and boost the
money you have for saving and investing.
In the meantime, here are some ideas:
Refinance if you can. Mortgage rates are still at
historically low levels. You'll need at least 10 percent equity
(20% of equity will save you the PMI insurance cost) in your
home and a credit score exceeding 720 to qualify for the best
rates, but start negotiating with your current lender first and
see how well you do.
Track your spending for a week. Either on paper or on
the computer, write down every dollar you spend in the average
week (and cut off credit card use during that week). At the end
of that week, start marking out non-essential items just to see
how much you could live without. Start with coffee and
restaurant or carryout meals and work backward from there.
Make a budget. Once you've established how your income
covers the essential expenses you must plan for, and a few
inexpensive treats that should stay in, build a budget that
includes specific amounts you can allocate toward debt. Keep a
running total of your spending going forward, and revisit how
that budget is working on a monthly basis until you start to see
some positive results, and then you can review the performance
of that budget a little less frequently.
Reset your entertainment expectations. Find ways to
save money with friends — cook more meals at home or rent a
movie instead of going out to see one. Also, get used to
checking entertainment listings for free events that interest
you.
If you can do it safely, take over home and auto
maintenance yourself. The do-it-yourself movement is in a
new phase with the economic downturn. For any home or auto
maintenance chores you may have during the year, learn as much
as you can about those tasks and estimate the cost of materials
and your time before doing them yourself. Previous generations
made do-it-yourself a necessity. See if that option is right for
you and you might save considerable money doing it. Also, for
bigger jobs, pair up with friends and family and you can help
each other save money.
Set a new gift policy with your adult friends and family.
Does everyone on your gift list over the age of 21 really need a
present for birthdays and major holidays? Suggest to family and
friends to have a gift drawing, a budget limit, a moratorium on
gifts, or some other alternative where you trade off gifts for
quality time. Even though the holidays are a few months away,
it's not too early to think about reining in the traditional
holiday overspending.
Go debit. Debit cards wearing a bankcard logo are
typically welcome at most stores where credit cards are
accepted. This way, you pay cash without carrying cash. If you
don't have such a card, you can get one from your bank to
replace your traditional ATM card, but remember to tell them to
limit your buying power on the card to only what you have in
your account. And use the overdraft protection to avoid fees.
Revamp your shopping list. Give this a shot: start a
central weekly shopping list on a single piece of paper and add
a dollar value for each. Write everything you think you need to
buy on that single sheet, from groceries to clothes for the
kids. That way, you'll see all your proposed spending in front
of you, and you can get a closer look at what your true
priorities are. You'll be surprised at all the
"essentials" that are not really that essential that
you can cross off before you spend.
Talk to your family about spending. When you're
talking to kids about budgeting and lowering your expenses, you
have to walk a fine line between discipline and fear. But
setting money priorities is part of growing up, and it's
essential to discuss and agree upon them as a family.
Buy used for yourself. Make someone else's poor luck
your good luck. If you need clothing, a car or a new watch to
replace the old one that's past fixing, it might be worthwhile
to buy second-hand. The best places to find these gems are on
the internet on places like craigslist. Plenty of people have
unloaded items in relatively good shape to bring in cash during
the recent downturn. You might do very well, and if anyone asks,
don't call it used; call it "vintage."
October 2009 — This column is produced by the Financial
Planning Association, the membership organization for the
financial planning community, and is provided by Don McCarty of
Financial Decision Partners, a local member of the FPA.
|
