Debt Reduction Archives — Page 3 of 30

4 Ways to Find Extra Money to Put on Debt

January 9, 2020 By MelissaB Leave a Comment

4 Ways to Find Extra Money to Put on Debt

If you’re in debt, the common advice to get out of debt as quickly as possible is to get a second job and/or sell stuff. But for some people, getting a second job isn’t an option, and there’s only so much stuff around the house you can sell. However, there are 4 small ways to find extra money to put on debt that aren’t labor intensive but can make an impact on your debt reduction.

4 Ways to Find Extra Money to Put on Debt

You may have more money than you realize that can be mobilized to pay down your debt:

Practice Doing Without a Bit of Money Each Week

For instance, the first four weeks that you do this, just take $1 out of your budget a week to go toward debt repayment. That is only $4 for the first 4 weeks, which almost anyone can do. The next four weeks, make it $2 a week, so now you have $8 for the next four weeks going on debt. By the last four-week cycle of the year, you’re at $13 a week, or $52 extra to go on debt for those four weeks. At the end of a full year, you will have put an additional $364 on your debt.

Save All of Your Change

4 Ways to Find Extra Money to Pay Down Debt — Photo by Josh Appel on Unsplash

If you make a habit of paying in cash, try to save the change that you receive rather than spending it. I used to do this quite regularly, and we would have anywhere from $250 to $300 in change at the end of the year, all of which can be put on debt.

Have a No Spend Month

At least once a year, try to have a no spend month. You can decide if you want the no spend month to be only for groceries, or also for entertainment. Now, this doesn’t mean that you don’t spend at all but that you try to avoid any extraneous purchases. You might “need” to spend $300 on groceries for the month so you stay stocked in produce, milk, bread, etc., but if you usually spend $600 a month on groceries, your no spend grocery month will have netted you $300 in extra money. Some people also say no to eating out or other entertainment during the no spend month to increase their savings.

Roll Extra From Any Budget Category Onto Debt

Let’s say you budget for $700 a month for groceries, but one month, there were great deals at the grocery store, and you only spent $643. You can take that extra $57 and roll it onto debt. Likewise, if your internet bill is $75 a month, but you call up your provider and negotiate a deal and now only have to pay $56 a month for the next 12 months, roll the savings of $19 each month onto your debt.

If, at the end of the month, you sweep all of the extra from any budget category onto your debt, you’ll likely have anywhere from a few dollars to a few hundred dollars to put on your debt.

Windfall Money

Any time you have unexpected money come your way, put it toward your debt. You just got $1,600 back on your tax return? Put it on your debt. You got back a surprise $48 from your former employer? Put it on your debt. You use Rakuten regularly and just got a Big Fat Check for $7.47? Put it on your debt. No amount is too small.

Final Thoughts

While the common advice to pay down debt faster is to get a side gig, if you can’t do that, know that there are many other ways, even on a tight budget, that you can accelerate your debt repayment process.

What other ways have you found to pay down debt more quickly without getting a second job?

Reasons To Continue Family Outings and Vacations While Paying Down Debt

December 16, 2019 By MelissaB Leave a Comment

If you listen to Dave Ramsey, you may have heard his admonishment that you should put all extras and luxuries in your life on hold until your debt is paid off. “Live like no one else so later you can live like no one else” is his mantra. I would agree with him if you can pay off your debt in a year or less. However, I disagree with him if it will take you several years to pay down your debt. There are many reasons to continue family outings and vacations while paying down debt.

Your Children Are Growing

My husband and I dug ourselves out of consumer debt about five years ago. Then, three years ago when one of our children started suddenly having medical and behavioral issues, we found ourselves back in debt thanks to doctor and psychiatrist visits. There were a good 18 months where we were seeing specialists and searching for answers, and we went back into consumer debt. There is also still student loan debt we’re working on.

We stopped taking any vacations and going on family outings because we thought that all of our money should go on our debt. We did this for about two years, and then we realized that our kids are growing up. Our teenager will soon be an adult and out of the house. We only get this time with our kids once!

Reasons to Continue Family Outings and Vacations When Paying Down Debt — Photo by Mika Baumeister on Unsplash

Of course, we do our best to save money on family outings, but spending time with our children is now more of a priority, even if we still have debt.

Your Family Is Aging

Our families live far from where we do, so when we started focusing heavily on paying down our debt, we stopped traveling. We went 3.5 years without seeing my extended family. During that time, one uncle died and another got lung cancer. My uncles and aunts are all in their 70s and 80s now. I know there won’t be many times left when we can visit with them.

This fall, my daughters and I made the 2,000 mile trek to visit my extended family, doing what we could to save money. We drove instead of flying; we packed our own food on the trip so we wouldn’t have to eat out; and we stayed at hotels where we could save 20% or more. I’m very glad we made the trip, and we plan to do it again next year.

You Are Creating Memories

As I get older and see my extended family age and my children grow up, I see the importance of making memories with those I love.

I belong to several financial groups on Facebook, and recently on one, a man posted that for the last four years, even though he had debt, he and his family made the decision to take a vacation once a year. They always included the man’s mother. She passed away this Thanksgiving. He wrote that he’s so glad he took the time to vacation with his family and his mother. He’ll always have those memories, even if it will take him about a year longer to pay down his debt.

Of course, you should pay off your debt as quickly as possible to improve your finances. However, keep in mind that nothing is guaranteed in life. There are very good reasons to continue family outings and vacations when paying down debt.

Should You Create Sinking Funds Before You’re Debt Free?

October 21, 2019 By MelissaB Leave a Comment

You have debt. A lot of debt. And now you want to pay it off, IMMEDIATELY! You’re fired up. You’ve read financial blogs, read debt payoff gurus books, and you’re setting up your budget. Should you create sinking funds before your debt free or put all of your money toward debt repayment?

What Are Sinking Funds?

If you’re new to budgeting, sinking funds are money you put aside for irregular expenses you know will come up during the year. Let’s say you spend $1,000 each Christmas, so you decide, in January, to set aside $83 a month in your Christmas sinking fund. When December rolls around, you have all of the money you need to pay for your Christmas gifts debt free.

Create Sinking Funds Before You Pay Off Debt? — Photo by Eugene Zhyvchik on Unsplash

The Argument Against Sinking Funds

Some argue that you shouldn’t set up sinking funds until you’re debt free. What is the point of putting $83 aside for Christmas when you’re paying 15% interest on your credit card? That $83 each month would be better served if you applied it to your credit card and reduced the balance and therefore the amount you’re paying in interest. You’ll get out of debt more quickly this way.

The Flaw With This Kind of Thinking

There is one major flaw with this kind of thinking. What will you do when you need to actually pay one of these irregular expenses?

I live in Arizona, and six months of the year, my air conditioner runs night and day. During those months, my electric bill ranges from $225 to $275, depending on how warm it is outside. Then there are about two months a year in flux when the electric is $125 to $175, and, in the winter, for four months, my electric settles down to $80 a month.

My budget can’t handle such big fluctuations in our electric bill, so every month, I set aside $150 for electric. When summer comes, I have a large sinking fund to help me pay for those hot months when the electric bill will be much higher than $150.

If I didn’t have a sinking fund, how would I pay for the high electric bill in July?

A Happy Compromise

I encourage everyone to set up sinking funds, even if you do have lots of debt. Part of getting out of debt (and staying out of debt) is changing your attitude toward money. What’s the use of putting all of your money on your debt if you have a $1,500 car repair, no money set aside, and you have to charge it and go further back in debt again? That’s not a budget roller coaster I want to be on.

But there is a compromise; if you have extra in the sinking fund after the event is over, apply that money to debt. For instance, let’s go back to the sinking fund of $1,000 at Christmas. Let’s say you’re conservative, shop the deals, and only end up spending $750 on Christmas presents. Great! Take that leftover $250 and apply it to debt. Then, in January start saving for the sinking fund again.

If you’re paying down debt, make sure to create and fund sinking funds. You won’t be sorry, and you’ll be changing your attitude toward money so when you get out of debt, you stay out of debt.

Do you create and fund sinking funds each month? If not, how do you handle it when large, unplanned or irregular expenses come up?