You need to lower household spending if you want to make your debt consolidation efforts a success. It is true that earning more money will make things easier to pay off. However, it is harder to start earning more because you need to involve your employer or another business to help you increase your income.
When it comes to spending, you have full control over it. If you need immediate funds, you can simply decide to stop spending on something and you will get the extra money that you need. You do not have to involve anyone else apart from the family or everyone in the household. You can control what expenses you can cut back on.
But that is not the only reason why you need to lower household spending. The truth is, Americans need to improve their spending habits. One of the reasons why Americans have always struggled with debts is because of how they spend their income. Even those with six-figure incomes are drowning in debt because of bad spending habits.
If you really want to conquer debt and keep it from destroying your life, you have to learn how to lower household spending. It’s not just about lowering the amount. It is more of learning how to be smart with how you spend your money.
Tips to lower household spending to help with debt payments
There are many benefits to lowering your monthly household expenses. Most of it will lead to the improvement of your finances. For instance, if you have a lot of debts, lowering your expenses will help support your efforts to pay it back.
According to reports, overspending is a problem for both young (25 years old and below) and old (65 years old and above) generations. These are the people who are most likely to spend more than what they are earning.
Obviously, overspending will lead to debt. We usually rely on credit to cover the expenses that our income cannot cover. Over time, this will accumulate until you can no longer keep up with the payments.
You need to put a stop to this. The best way to start is to lower household spending.
But how exactly can you do that? Here are spending categories that you can work on.
Housing and rent
The biggest expense of American households goes to their mortgage or rent. Admittedly, it is harder to lower this expense. Your only option is to move to a small home to keep your costs low. Or you can choose to move to a place with a lower cost of living. Both options will lower household spending significantly but it will entail a huge effort and upfront costs to make it happen. But if you really need to implement a huge change in your finances, this is what you can do. A smaller house means lower utility bills too. So it can really work well for you.
This is one area that people spend freely on. They do not feel guilty because it is a necessity after all. However, if you think about, this is where a lot of people waste money on. There are so many ways to lower household spending through your food budget. You can start by cooking your meals from scratch. No matter how complicated the dish is, it will always come out cheaper compared to eating out. It will also be healthier. Other ways you can save on food expenses is to buy generic and in bulk, limit dining out or getting take out, or use coupons for your groceries. You can even start planting your own produce in your garden.
With the winter season upon us, it is not unlikely that people are anticipating a rise in their energy bills. If you want to keep your monthly budget low so you can continue to meet debt payments, you might want to look into your energy consumption. There are so many tips to lower your energy bills. You can start using LED or CFL light bulbs. Having a programmable thermostat will keep your heating and cooling costs low without compromising the comfort in your house.
When electrical devices and appliances are not being used, make it a habit to unplug them. These will still consume electricity while on standby mode. You can use power strips to make it easier to turn these devices and appliances on and off.
Another thing that you can save on is transportation. If you can commute and use public transportation to save money, then opt for that. In fact, if you can do without a car, then just let it go. Vehicles depreciate in value and costs a lot to maintain. Unless you physically need a car, you can probably make do without it. There are many options to conveniently go around if you have to – like Uber or Lyft. If your work is near enough, you can opt to ride a bike to work. You can also carpool if you have neighbors that work in the same area as you.
In case you plan to keep your car, you should ensure that maintenance will be kept low. This means checking the oil, tires, and engine regularly. Save up for a car maintenance fund so you won’t have to borrow money to pay for an emergency repair.
This area has a lot of room to lower household spending. But this is also the one that is a bit more controversial. Entertainment costs are defined differently between households. What some may think as unnecessary may be important for some to have a quality lifestyle. For instance, subscriptions may seem like a waste of money but if you are a writer, you need all the inspiration that you can get.
It is important to determine what is really important to you. While you are not discouraged from having an entertainment budget, you need to identify what will really help you achieve the life that will make you happy. It has to come from within and not influenced by what goes on around you. That will help you cut back on entertainment costs and make sure you are spending on what is really valuable.
Why lower household expenses help with debt consolidation
When you lower household spending, it will bring a lot of positive effects on your finances. To be specific, it can help support your debt consolidation efforts.
Here are three different ways it can do this.
Secures your debt payments
Overspending opens the possibility of using the money that was intended for something else. One of the funds that might be affected is your monthly debt payments. Instead of using it to pay off debt, the money will be used to buy food or pay for your rent so you will not be evicted. Or it can be used to spend on a needed medicine. Making the effort to lower your monthly expenses will ensure that you will not go beyond what your income can afford. That means your debt payments and the rest of your spending categories will be kept safe.
Encourages you to start budgeting
Before you can successfully lower household spending, you will be encouraged to start a budget plan. This is the best way for you to determine where your income goes to each month. It will help you identify the areas that you can cut back on.
Since you already established a budget, why not keep on using it? This is something that you should always have. Whether you have a lot of money or you are struggling to make ends meet, you need to have a budget plan. It keeps you from overspending and also gives you an overview of your current financial situation.
Forces you to be cautious of spending
Finally, when you start to lower household spending, it will develop the habit of being cautious about your expenses. There is one report that showed how some people are prone to be impulsive purchases. In fact, statistics reveal that these unplanned purchases amount to $109 each month. If these are not planned, it can quickly get out of hand. It can lead you to overspend and that can endanger your debt payments and other priority expenses.