It’s January again, and the 2020 holiday craze is already becoming a distant memory. If you came into the year looking to improve your financial position, you may find your resolve beginning to falter, or you may seem overwhelmed at the task at hand.
Don’t give up! You still have three-quarters of the year left to become debt-free in 2020. But you have to be willing to make some real changes. Here are 5 things to give up if you want to achieve your debt-free goal this year.
1. Not Tracking Your Money
Budget spreadsheets probably aren’t at the top your list of preferred entertainment. But if you actually want to become debt-free this year, you will need a better method than flying-by-the-seat-of-your-pants.
There is something relieving about getting all that spending written down and categorized, rather than just lurking in some corner of your brain always there judging you. And it is empowering to realize you’ve compiled an actionable set of data that can help you make better choices, getting yourself on the path to achieving financial freedom.
So, where do you start? There are a lot of great online tools, of course. Mint, Personal Capital, and other similar websites can automatically sync with your bank accounts, credit cards, and so on. These are great options when you’re in a strong financial situation and just want to ensure things are staying on track.
However, if you’re working to dig yourself out of debt, I recommend using a simple spreadsheet that requires you to be more hands-on with your tracking. Google “budget spreadsheet,” and you’ll find plenty of free options.
You’ve found a way to track what you make and what you spend. Now that you have an idea of your monthly spending, let’s go after some low-hanging fruit.
Subscriptions are an expense category that can sneak up on you because you sign up once, set up your automatic payments, and then kind of forget about it. Most of these subscriptions aren’t really that expensive—cable and internet for $100 per month, SiriusXM for $15 per month, a gym membership for $35 per month. None of these will make or break your finances on their own.
Related: 7 Tips to Organize Your Finances
However, many people may be surprised at how quickly all their small, “inexpensive” subscriptions add up. You may find several hundreds of dollars going to subscriptions that you don’t use or could easily live without for a while.
Seek out all your recurring payments as you work through your first month or two of budgeting. Can you cancel these subscriptions and still be happy? Could you cancel them just long enough to get out of debt?
Be honest with yourself, and you may find a good chunk of change to put toward your monthly debt payments.
3. Expensive Eating
Hate is a strong word, but I really don’t like cooking. I don’t find it relaxing. I don’t like the mess. I hate shopping for the groceries.
If I could find a healthy and budget-friendly way to avoid ever having to cook, I would do it. But the reality is, restaurants and prepared foods are much more costly than getting raw ingredients and making something yourself. This is especially true for those of us with children.
According to the latest data from the U.S. Bureau of Labor and Statistics, the average American household spends about 13 percent of its income on food—both groceries and dining out. If you’re looking to free up money in your budget, my personal rule of thumb is to start by looking at spending categories that take up 10 percent or more of your budget. Based on the statistic above, food will be a category where most Americans can look for opportunities to save.
If you are trying to get out of debt, but you spend 10 percent or more of your income on food, it’s time to bring down your average meal cost. This means less dining out, less prepared food, and maybe even switching grocery stores. It means smart grocery shopping, meal planning, and cooking.
Fortunately, many lifestyle and personal finance bloggers have done the heavy lifting for us! The internet can be your best friend when it comes to finding ways to lower your food expenses. I’ve found more tips, recipes, and meal plans than I can count just by doing a quick Google search.
To my delight, many of the ideas involve easy slow cooker recipes (throw in some basic ingredients, set it for 6 to 8 hours, and go about your day) and weekly plans that suggest making enough food for leftover meals.
4. Car Payments
If you want to better your financial situation, it’s time to join the high mileage club! Remember that U.S. Bureau of Labor and Statistics data? It shows that the average American household spends another 16 to 17 percent of its budget on transportation. While this figure includes fuel and upkeep, the majority of that transportation budget goes to car purchases and payments.
You’ve probably seen people post photos of their pristine, brand new cars on social media. Nice vehicles are undoubtedly a status symbol in our culture. However, did you know there’s a group of people who pride themselves on having old, inexpensive, reliable vehicles? Check out any FI (financial independence) group on Facebook, or follow financially savvy personalities on Instagram, and you’re bound to see people proudly posting photos of their car’s odometer at 100,000 miles, 200,000 miles, and higher!
Why all this excitement about a 2002 Honda Civic with 276,000 miles on it? Because it represents all the money that these high mileage car owners have been able to save and invest instead of spending it on car payments.
Many financially fit people purchase gently used vehicles, have little-to-no debt on the car, and drive them for as long as they can. Some even buy cars for just a few thousand dollars that are already 10 years old with six-figure odometers and manage to drive them for another 10 years.
Do you have to buy a vehicle from the 1990s to get out of debt? Probably not. But could you save hundreds of dollars in car payments per month by trading in your new 2019 vehicle for a 2014 that will run just as well? Absolutely!
5. Expensive Housing
Let’s look at one final fact from that U.S. Bureau of Labor and Statistics data. The average American household spends a whopping 33 percent of its income on housing, making it the single largest expense for most of us each month. Changing your housing situation can help you pay down debts, although it comes with its own set of challenges.
Moving can involve some upfront costs, and it can take time to sell, sublet, and figure out your next move. And if you’re renting or you own a home that you really love, it can be an emotional process, as well. You have to remember why you’re doing it!
Can you handle living with family for just one year if it means you’ll finally be rid of your debt? Could you spend $1,000 to move to a smaller, more budget-friendly home if it means you’ll have an extra $500 per month to put toward paying off your debt? Can you find a way to house hack so that your living costs are dramatically lower than everyone else you know?
You Can Do This!
None of what I’ve shared today is very complicated. It just takes commitment, putting in the work, and maintaining a good mindset to see you through the days when you just want to give in and live with debt forever.
Keep educating yourself. Seek out communities (online and otherwise) that allow you to surround yourself with encouraging voices on your journey. Think about the weight that will be lifted from your shoulders when you’re finally debt-free.