Happy New Year!!
In the spirit of getting back on track after the holidays, I think a lot of us want to get our budgeting under control and pay off some of our holiday bills (I'm looking at you, Mastercard!). But paying bills without the cash available to pay them leads to a vicious cycle: pay credit card with line of credit, pay line of credit when I get paid, but then I don't have money for other bills so. . . pay them with line of credit. . . and so on. In order to actually pay off debt, you need to actually, you know, have money. . . which, obviously if you did, you wouldn't have the debt to begin with!
So, what to do?
Start by finding some money! I don't mean scouting the sidewalks when you're walking the dog or going through old purses. I mean, find money you already have, that's wasting away in your budget! And you do that by reducing your "fixed costs". A "fixed cost" is something you must pay every month - your regular bills, aside from any spending that is more flexible (like shopping trips, entertainment and even food).
Some Fixed Costs and Tips to Reduce Them:
Whether you own or rent, your mortgage / rent is likely one of your largest monthly expenses. It can also be difficult to reduce without moving (although if you have gigantic stacks of debt, downsizing may be preferable to declaring bankruptcy!). If you have a mortgage, contact your lender and see if they have any ways you can reduce your monthly costs - reducing the amount of payments or de-accelerating them (if you had previously accelerated them) are options for freeing up cash in the short term, although both will cost you more in interest long-term so this is something I would only recommend for short periods of time (like while on mat leave, for example). When it's time to renegotiate your mortgage, look for a better interest rate.
Electricity / Gas / Water / Other Utilities / Maintenance Fees
These bills can be pretty big too. Obviously reducing the amount that you use can help to reduce these bills somewhat. Some ways to do that include:
- decrease your home's temperature by 1-2 degrees in the winter (and increase by a similar margin in the summer). If you have a programmable thermostat, you can decrease it more overnight and when you're at work and if you don't, consider picking one up as they don't cost much and if you're capable of following instructions, you can do the install yourself (I did!).
- run appliances like dishwashers, washing machines and dryers during off-peak times
- don't let the water run arbitrarily - turn it off while you brush your teeth, get leaks fixed pronto and don't have extremely long showers
- turn off lights and electronics when you are not using them
- consider getting on a "budget billing plan" if you have trouble budgeting for bills like gas that can vary widely from month-to-month; they will bill you at a fixed cost for the whole year (so less than normal over the winter and more than normal over the summer) and the last bill will be the difference between what you paid and what you used
Cable / Phone / Internet
Unfortunately these bills can be enormous too. I know lots of people say to do without if you can't afford but, I'm sorry, it's 2016 and not having phone or internet is just not feasible! So here are some ideas to reduce these costs:
- only pay for what you need: don't use texting? switch to a plan that doesn't include it! find yourself mostly online at home? consider cancelling or reducing your data plan! don't watch much cable? reduce your package or cancel it and go with an alternate like Netflix, etc.
- ask for better rates: Arm yourself with knowledge of current deals on offer - both from competitors and also the "join us!" deals from your current provider. Call and ask for a better deal - I find pointing out the great deals on offer to entice new people to switch, and mentioning how long I've been a customer, gets results.
- consider switching to a competitor if your company is incapable of beating or matching what they have to offer - we have VOIP phone (with Vonage) for just this reason
- try not to feel attached! unless you are tied into a contract, you can switch companies at any time. If the one you are with isn't treating you, an old friend, as well they treat their new friends, why would you stay? It can be a pain to switch, but it can be a bigger pain not to. . . a pain in your wallet!
Look into the various plans your bank offers - is the one you currently have the right one for you? Or are you getting dinged with extra fees you don't need to be? Look into the offers other banks have as well - there are some banks which offer very low (or no?) fees. . . would they suit your needs? Again, it's a pain to switch (I did it, I know!) but if it's going to help you save in the long-run, isn't it worth it?
Get thee to a broker! You can decrease your insurance costs by having your home, contents, and car insured with the same provider. . . and by ensuring that you are with the company that's best for your needs. I'm not an expert in insurance. . . that's why I go to someone who is :)
While you likely can't do much about your car payment (if you have one), you can reduce unexpected transportation costs by:
- following the rules of the road - no sudden large tickets to pay means more money to pay for things that matter
- regular maintenance - yes, sometimes expensive problems just appear. . . but maintaining your car on a regular basis can prevent many problems down the road (or on the road!)
- don't drive more than you must - save gas by planning your errands and making lists so you don't have to run out and get one thing later
If you don't drive, get the bus/subway/whatever pass that best suits your needs - no need to get a monthly pass if you usually walk everywhere. How many times do you use public transit in a month? How many times would you need to use it to make that pass worthwhile? If you can walk / bike more, it might be worth it. Unfortunately, where I live, not driving is a real hardship :(
Next week, we'll check out some other costs and how to reduce them. You should also check out Gail Vaz-Oxlade's website for more excellent money-saving tips and resources! I adore her :) Until then, happy