Steps for Reducing your Consumer Debt

If you’re feeling the pinch in your wallet, you’re not alone. Recent statistics on consumer debt state that the average credit card debt in U.S. households is $15,799. You may be among those included in the consumer debt total of $2.43 trillion-yes, trillion-as of May, 2011. You can trim your debt by using a few methods to reduce your spending.  

According to CNNMoney, you need to know where your money is going. Start by gathering your bills and listing everything you spend money on each month. Utilities, car payments, house payments or rent and the like are monthly occurrences for most of us. Then there’s groceries, gas, entertainment that may fluctuate quite a bit from one month to the next. For these expenses, calculate a reasonable monthly average and add to the total. 

The day-to-day purchases can easily get out of hand. If you get cash from the ATM and can’t remember what you spent it on a few days later, you are probably wasting money on impulse purchases and budget busters that add up over time. The vending machine at work, fancy lattes, buying bread at a convenience store because you forgot it at the grocery store all contribute to the money drain. 

Cable TV is another huge money drain. The days of cheap cable are gone, with many consumers paying almost $200 a month for expanded cable packages and internet. If you are falling behind on your payments or bouncing checks, this is a sign that drastic measures must be taken to save money. Trim down to a minimal package, or at least get rid of channels and services you don’t use.

You can potentially save hundreds of dollars a year by addressing big-ticket items. Compare what you pay for health, auto, and home insurance. Many companies will off a discount if you purchase all your insurance through them. Premiums can vary dramatically from one insurance company to the next. 

If you are planning a move, compare home prices and rents before deciding. This is a huge step not to be taken lightly. If you pick a home with a house payment $150 a month less than another home, but it is several miles from your job, your increased gas expense can easily exceed any savings you might have. 

When considering a new car purchase, don’t shop by monthly payments alone. Hopefully, you won’t be buying a brand-new car which will depreciate a few thousand when you drive it off the lot. Choose the best mileage possible and forgo the loaded-out, leathered-up models. Cloth seats and fewer fancy buttons on the dash can save a great deal. Don’t forget to check with your insurance company to see what the premiums will run. A cheaper car that has a higher insurance cost because its a two-seater can end up costing more in the long run.

Find ways to conserve energy to lower power bills. Turning off unused lights, turning the heat down even a couple degrees in winter, and making sure your home is well-insulated can save money every month. If you have an older home that’s less energy efficient, consider upgrading insulation. If that is too far out of your budget, check seals around doors and windows for air leaks. Fix that leaky faucet and only wash full loads of laundry in cold water.  

Buy in bulk when you can, especially for non-perishables. Take a calculator with you to the store and compare the cost per ounce on grocery items. Manufacturers use a variety of sizes and odd pricing to make it difficult for you to compare to the competitor. Don’t just grab your usual brand. Another brand may be much less expensive per unit. Always try to pay the lowest unit cost. 

One of the best strategies is to never use credit cards, except for a real emergency such as a car repair. If you continue using them, you will never get them paid off, especially if you only pay the minimum amount every month. Charging instead of paying cash is a huge red flag that some financial housekeeping is in order. 

By trimming impulse purchases, comparing prices on everything from insurance to groceries, and not buying things you don’t need, almost everyone can find ways to whittle their monthly spending. Those extra dollars saved can go towards reducing your debt. It’s a great reward to see those monthly balances drop.