Money Saving Strategies to Reduce Debt and Stress

Do you know how much money you actually have?  Can you name the amount of your fixed expenses each month?  If you are feeling extremely stressed about debt, there is a good chance that you don’t actually know the extent of your debts and assets.  If you want to fix your money problems and get rid of your debt, the first thing you need to do is identify the extent of the problem.

Figure Out How Much You Owe

This first part of the process is the most painful.  You absolutely must sit down with every piece of financial information you can find and organize it to discover just how much trouble you are actually in.  You may find this boring or difficult, and if you have a very hard time doing it you should ask a trusted friend for help or seek financial counselling (often available to low-income people for free.)  Make a list of your fixed expenses, which are expenses that are not variable, like rent or mortgage payments, insurance, the kids’ allowances, non-negotiable payments on things like leased cars, etc.  Then take your variable expenses (there are much more of these) and find the average that you are spending each month on things like utilities, gas, food, clothing, household products and repairs, entertainment, etc.  You have to include absolutely everything and find what your expenses are each month.  Compare this to how much money you have coming in every month.  Now: the moment of truth.  If you are making less money than you are spending, your lifestyle needs to change, and it needs to change now, or your debt will continue to skyrocket.  How can you adjust those numbers to get yourself out of debt?

Reduce Expenses Wherever Possible

Remember that even most fixed expenses are not written in stone; they’re just harder to change.  If your rent is eating up far too much of your income (more than 30%) and making extra income isn’t possible, consider moving.  Try negotiating with the bank to lower your monthly mortgage payments (although you may end up paying more in interest in the long run, so be careful!)

Variable expenses are, in many cases, easy to change, even if it is only by a small amount.  If you managed to lower each of your variable expenses by just 10%, you would have a lot of extra money in your pocket.  Lower your utility bills by remembering to keep lights and televisions/radios off when not in use, by taking it easy on the air conditioning in the summer and the heating in the winter, and being careful not to waste water.  Buy store brand groceries, cut coupons, buy in bulk, resist convenience stores, and shop the sales to cut your grocery bill in half (for most people who do not pay attention to how they buy groceries, this can be done.)  If you live in a city with reliable public transit, consider selling the car, because gas costs and insurance add up to a lot more than a bus pass.  Finally, be brutally honest with yourself about how often you buy a morning coffee instead of having one at home, or buy a fast-food lunch instead of taking one to work, and ask yourself if you really need to go to a bar or get your nails done every week.  If you need motivation to cut down on these activities, break out the calculator and figure out how much you spend per year on them.  I guarantee it will shock you.

These little changes can result in a savings of hundreds of dollars a month.  In fact, simply using the grocery strategies alone can save that much.  Not hundreds of dollars a year – hundreds of dollars a month.

Make A Plan to Pay Down Your Debt

Once you have succeeded in bringing your expenses down to less than your income, you need to look at the debt you have already incurred.  How much do you owe on anything that is not part of your fixed expenses?  This includes loans, lines of credit, and credit cards, as well as any “do not pay until 2014” sales you may have allowed to seduce you.  (In the future, as part of your debt-free/stress-free life plan, you will not be purchasing anything unless you have the money in the bank to pay for it, in full, at the time of purchase.)  It is likely worth your while to consolidate all of these debts.  That is, you take out one low-interest loan or line of credit and use it to pay off all debts (especially credit card debts, which have huge interest rates) in full.  Now, instead of paying 19% here and 24.5% there, you have one lump sum debt on which you are paying a much lower rate – hopefully 10% or lower, depending on your credit.  Now, you figure out the maximum amount per month you can afford to pay, and pay it.  This will get rid of your debt in the quickest way possible.  Don’t forget to put a little aside each month into a savings account for emergencies.  This amount, no matter how small, should be considered a fixed expense.


Following these tips can help make your life debt and stress-free.  Being in control of your finances is very important, and very empowering.  Remember: no matter how bad your situation is, the longer you continue in denial, the worse it will get.  The best day to get on top of your finances is today.