One of the main reasons why people push off debts until a later time is they aren’t sure they can afford it AND keep up with their many rituals and lifestyle choices.
For example, if you go to Starbucks every morning, is that a luxury you’re willing to get rid of to save money? You can save $140/month by brewing your own coffee. If that’s a luxury you don’t want to abandon, that’s your right, but being in debt isn’t just a small problem you can push off until later.
Saving money should be your highest priority. You don’t have to give up all the things you love, though. There should be a happy medium where you get to enjoy life while handling your debt masterfully.
Here are 5 things to consider:
1) What does this indulgence mean to me?
Does it sincerely help you in some way? Maybe that morning coffee is a ritual you’ve been doing since college and it helps you get on your feet the right way. That’s great! But you’ll have to weigh the financial risk versus the reward.
The reality is, coffee in the morning can be done much cheaper and you can find a new way to wake up and be energized for the day that doesn’t involve coffee at all. If you’re unwilling to sacrifice this indulgence, then you’ll have to cut corners in other ways to make up for the pricy decision to stick with expensive Starbucks.
Take stock of the things you love and be willing to part with some of them, while keeping others. You’re going to have to figure out ways to save money for a little while until your debts are mostly paid off and you become financially free. You’ll have a lot more money to spend on the other side of debt mountain.
2) What are the benefits of this luxury?
When you sit down to write a list of all the things you buy throughout the month, whether it’s coffee, Netflix, expensive cable channels, unlimited phone plan, etc, you should be able to tackle each one and ask a simple question: what do I really get out of this? Do I need it? Is it THAT important to have?
3) Would I really miss it that much?
You might find that a lot of your spending is on frivolous things that you really can do without. There are alternatives, such as keeping Netflix and Hulu instead of cable, which will save you a massive bundle. If you think you’ll miss your local stations too much, get a TV antenna and those channels will come for free.
Again, it’s okay to keep a few indulgences, but really look to see where you can cut some of your monthly payments down as far as you can.
4) Look for bundled deals.
Right now, my phone plan offers Netflix and Hulu free. That’s a great bundle deal that saves me a bit of money each month. Let’s say you take a little more time to clip coupons for grocery shopping and go on days that offer 10 for $10.
Becoming financially free is all about making better decisions. You can do it, even if you have Champaign taste on a beer budget. Pick your battles. Eat out with coupons while cooking at home more often. Using a Kroger card at the store can save you $.10/gallon on gas, which adds up.
5) Add up your total potential savings.
After making your list and writing down the cost each of each of those things, you’ll start to see the big picture. Simply removing costly cable and eating at home will save you as much as $3,000 in a single year! I bet there’s a lot you could do with that extra money, which includes paying off debt and/or putting it away for a rainy day.
The secret to financial freedom is not getting caught up in thinking you need this or that and splurging at a time when you can barely afford it. Many Americans have debt up to their eyeballs, but don’t know how to say “NO!” to themselves when the next shiny toy comes out. This is why debt is at its highest levels in history.
Sacrificing some now will create a more successful you in the long run.