Consolidating several debts is actually quite simple. The concept is easy to understand. You simply calculate the sum of your multiple debts, open a new credit account, transfer the debt to this new account, and then focus on the account where all your debts now reside.
While it seems like a very easy debt solution, not everyone successfully achieves debt freedom. For one thing, the program is not for everybody. And even if it is, simply consolidating several debts will not solve your problem. It is a great start to your debt relief efforts because it will simplify your repayment plan. But in as far as the actual payments are concerned, you still have a long way to go.
Always remember that debt consolidation is a good idea but you need to put in work to make the program successful. It will not be able to do it on its own.
Fortunately for you, there are ways to make it easier to succeed in consolidating several debts. One of them is by living a frugal lifestyle.
Frugality does not mean you are going to live cheap. That is far from the real definition of frugal living. When you are frugal, you learn how to prioritize. You will only spend on what is important and necessary for you to live the quality of life that fits your personality. That can mean buying that Starbucks latte because it helps you work productively. It can also mean canceling your cable subscription and focusing on your Internet connection because you use the latter more.
As you can see, frugal living is all about getting to know what is important to you and focusing your limited resources on that. So how can this lifestyle help you succeed in consolidating several debts?
Frugal living helps you financially
When you are frugal, you spend not just on what is necessary. You also spend on things that you know will benefit your financial future. It puts you in the right mindset that will help you make the right decisions about your debt relief program. If you have to stop spending on some things in favor of your debt payments, it will be easier for you to make the sacrifice. You know that paying off debts should be your priority right now.
So what are the exact ways that frugal living can help you succeed in consolidating several debts?
You save some extra money monthly
Consolidating several debts under one account can help you manage your payments better. It gives you the ability to focus on one payment every month. Debt consolidation also offers the chance for a lower monthly payment. If you combine that with a frugal approach, you get to see some extra money in your finances monthly. This is a great start since CNBC shares that about 20% of American consumers do not save any of their income at all.
On one hand, it is also a good idea to use your frugal living to increase your debt payment fund. When you increase your monthly payments and you pay the extra money towards the principal amount, that will shorten your repayment plan. It will also help you save money in the long run. Either way will make you save money monthly.
You get to prioritize needs over wants
When you decide to live a frugal lifestyle, you put more importance on the things you need in life. You will think twice about spending on things that are mere wants in your life. You will prioritize your debt payments, utilities, food, and groceries. Buying new clothes will take a back seat if you still have enough in your wardrobe. The weekly night out with friends will probably have to be sacrificed too – maybe not totally but it will decrease. Think about the type of lifestyle that you want to lead and identify the wants. Focus on that. What you do not spend on can be used on something more worthwhile and valuable – like your debt payment fund.
You become more creative
Frugal living also helps you become more creative in saving money. NY Post shares that people spend $70,000 average in their lifetime on takeout and delivery. That is a big amount of money you can cut down with a frugal approach. If you can cut that down in half, that could be used to either pay for or fund a college education.
How do you cut it down? You have to start getting creative with your food consumption. For one, you can start planning your meals. Look at the members of your household and plan your meals. You can also look into buying bulk for things you need a lot or. When you get home, cook in batches to save time throughout the week.
Of course, food and groceries are just one area that you can get creative. Look into your other household expenses to find areas you can save on. Frugal living forces you to be creative and the more you can do this, the better it complements your debt consolidation because you save more money at the end of the month.
How can it help debt consolidation
As mentioned earlier, frugal living can be a great partner to your debt consolidation loan. Here are some of the reasons why.
You get the chance to be more aggressive with payments
There are a lot of reasons why you enroll in debt consolidation but the biggest one is being able to bundle up your payments under one account. This way, you only have to focus on one payment. When you live a frugal lifestyle, you end up with a lot more savings at the end of the month. This money can be used to make extra payments on your consolidated loan. The sooner you pay it off, the faster you can start planning for other financial targets you have.
Ability to focus on other areas of your life
When you live a frugal lifestyle, it is synonymous with a minimalistic approach. You no longer buy things you do not need. Combine that with debt consolidation which combines payments under one account, you have more time to focus on what is important for you. It can be a hobby you want to pursue or ramping up on retirement savings so you can retire earlier.
Frugal living works in tandem with you are consolidating several debts. They both have the ability to give you extra money at the end of the month and frees up your time to pursue other passions in life.