Tens of millions of Americans are in debt, scraping by any way they can and using what little income they have to pay off the interest, while till trying to keep a roof over their heads and food on their table.
It’s not an easy life. The situation is hard for everyone, but while some families are able to budget effectively, there are others who simply can’t control their spending and suffer as a result. So, whether you’re a lifelong debtor who has always struggled with money, or you’ve just recently dipped into the red and need an escape, these tips to save money on a tight budget can help.
1. Keep Track
This is one of those budgeting tips that many of you will skip over because you’ve heard it all before and you’re not convinced that it will help. Your debt is different to everyone else’s debt, after all, and you know how to plan your budget without writing everything down.
This is the attitude that many debtors have and it is one that has put many of them in that situation in the first place. The truth is, a detailed record of all incomings and outgoings is essential for everyone, regardless of how much those incomings and outgoings are.
By keeping tracking of every cent that comes in and goes out, you know exactly where your money is going, if it’s being spent in places it shouldn’t be, if you can afford to save or pay off debts, and if you can afford that vacation you have set your hopes on.
A budget can help to make everything real because often times we simply don’t acknowledge how much we are spending and how much damage it is doing.
Take drinking as an example, most of us enjoy an occasional drink a couple times a week and don’t think much of it. It’s only $5 here and there after all. But if you’re spending $5 to $10 a time, two to three times a week, in addition to an occasional $50 blowout several times a year on birthdays, Independence Day, Thanksgiving and Christmas, that’s $500 to $1,000 over the course of a year.
And that brings us to our second issue…
2. Watch Your Subscriptions
Cable, broadband, utilities, phone, streaming services, sports channels, apps, subscription boxes—we all have multiple subscriptions and most of us have lost track. It’s easy to add anther subscription to your account when you’re only being charged $2 or $3 a week, because what’s another $8 to $12 a month going to do?
But it all adds up. What’s more, many of those subscriptions increase in price following trial periods and we just let them continue, even though it means we could be paying two to three times mores than we should.
In 2012 it was reported that the average American spends over $850 on monthly subscriptions, ranging from media to health insurance, and in the years since then mobile games, apps, online services and streaming have bumped that figure up further to the point where we’re now spending over $1,000 a month!
That’s an absurd amount of money in anyone’s book and it needs to drop. So start chipping away at it any way you can. Dropping a gym subscription you never use, a streaming service you never watch and a game you don’t play anymore could save you $50 a month, or $600 a year, and that’s just the start.
3. Use Credit Cards Only in Emergencies
Credit cards are great in a pinch, but we have become too reliant on them and may be better off with a simple debit card or even a prepaid card. If you’re faced with an expense that you can’t afford and you only have a debit card, then it’s easy to say no. if you have a credit card then it’s easy to say, “Why not?” and convince yourself to make the purchase.
We do this every day and it results in expenses that we shouldn’t have and an added interest rate that we simply can’t afford. If you were to undo all of the frivolous purchases you have made in the past year, you could be saving hundreds, if not thousands, and that’s before we even consider how much money you would have saved by not paying interest.
A credit card should not be used to justify expenses that you can’t afford, and it should not be used on the basis of,“Buy now, worry later”. It should either be used to build credit, in which case it needs to be paid off every month; as a secure way to make purchases online; or as an “emergencies only” payment method.
No matter how you try to justify it to yourself, that pair of sneakers that you just had to have, or that games console that your child begged you for in the store, are not emergency payments and do not justify the high spend, the high interest, and the massive debt.
4. Save Money on Groceries
We have already discussed how much money the average American household spends on food and how this is increasing. But a lot of this money also goes to waste as we throw away an abundance of fresh food, packed food, and drink.
To save money on groceries the first thing you should do is monitor your waste. Keep a journal of what you throw away every week and then add this up. If you find that you’re only eating half of the bread you buy, then buy half as much. If you’re only drinking one gallon of milk but buy three, starting limiting your spend to one.
It’s simple, but it could save you hundreds of dollars a year. You should also try to use as many coupons, store offers and store discounts as you can. Check clearance aisles late at night and early in the morning, and always opt for fresh as opposed to packaged. Processed food looks cheaper, but it’s not. Calorie-by-calorie and meal-by-meal it’s much cheaper to eat well, but only if you cut expensive foods out of your diet and focus on cheaper cuts of meat/fish, seasonal vegetables, and dried grains.
5. Pay Off Debt Instead of Saving
One of the biggest mistakes that debtors make is to invest a lot of money in a savings account or some other investment opportunity when they are in debt. Investing is usually a good thing and it’s always helpful to get into the habit of investing a little money here and there, but your investment return should always be greater than the extra interest you're paying by not using that money to pay off debts.
In many cases, you can “make” more money by paying off debts than you could by putting money into a savings account. The high APRs charged by loans and credit cards mean that even the smallest of payments could save you hundreds if not thousands over the long-term, significantly more than you could get if you put that money in a savings account.
6. Sell Up
We all have things we no long use or need, from electronics to clothes and more, and these could all be used to give us a cash injection which can then go towards paying off debt. One of the reasons we don’t sell is because we just don’t see the value in it, but it’s also because we can’t bear to let something go cheap when we paid a lot of money for it, even if it’s only gathering dust and will never be used again.
Every little helps. If you have a stack of DVDs you no longer watch then you may only get $0.50 to $1 each, but for 100 DVDs that’s $50 to $100 that can go towards debts. And once you get rid of old phones, gaming consoles, media systems, games and designer clothes/accessories, you could have an extra few hundred in your pocket to go towards paying off your loans.
There are marketplaces on Amazon and Facebook to help you sell locally and nationally and you can also use the apps discussed on our guide to The Best Apps for Selling your Stuff.
So sell up, get some extra cash and put it all towards paying off your loans. Those old CDs and games could be the thing that helps you to get back into the black.