If you have personal debt (e.g., credit cards, loans) that you can’t seem to pay down, you need to start living differently by cutting back on your spending or obtaining extra income. It may be hard to do but essential. You don’t need to deprive yourself of the things you love but you cannot pay back at a slower rate than the debt accumulates. Simply look for ways to take control of your spending. It is not impossible. Here are a few ways that you can make this happen:
Pay with Cash
Use cash to prevent overspending, withdrawing only the cash you’ve budgeted each day so you know how much you are spending. Never mind about collecting air miles or points on a credit card as these values are typically much lower than the interest rate if you fail to pay the balance in full. Cash is socially acceptable with your friends and often preferred by vendors. Sometimes there is a discount possible if paying with cash.
Don’t carry Your Credit Card on You
If you do not have your credit cards with you, you cannot charge anything on them. Consider keeping only one card and leaving it at home. If credit cards are too tempting to leave at home, then put them with your other important documents in your safety deposit box at the bank or leave them somewhere else safe and not too easily accessible.
Make a List before Shopping
Consider a pre-printed shopping list that you check off as you need items before heading to the store. Once at the store, don’t get distracted by other items on the shelf – items needed would be on your list already.
Avoid Shopping where there are Limited-Time Membership Fees
Recognize the tendency to overspend in order to cover the cost of your limited-time membership.
Don’t go into Places you cannot Afford
If you know you cannot afford it, why waste your time? Sometimes it is better not to satisfy your curiosity about what is available or what others might buy. The temptation may be too great to resist.
Avoid Browsing
Avoid browsing (e.g., at shopping malls or car dealerships). If you must go, do so with a purpose. Don’t get caught up buying online or from a catalogue. Making browsing or shopping a lesser part of your life.
Buy what You Need at a Store that You can Afford
Buy groceries near home at a “basic” or “no frills” store. The prices and quality are fair, with possibly no special delicatessen, bakery, seafood market, or prepared-food offerings contained within which may tempt you to go over budget.
Purchase clothing you need from a department store or reuse store where most items you might need can be found at one place, “one-stop,” instead of at a small specialty shop which carries fewer items. Don’t get caught up with buying more than you need at one time as the novelty of any store items purchased will wear off over time.
Pharmacy items and prescriptions can often be purchased with lower dispensing fees where you buy your groceries. Stand-alone drug stores typically charge higher dispensing fees for prescriptions and, along with vitamin stores, they may have more selections that tempt you to go over budget.
Remember, your circumstances will change over time and you may be able to afford more later. The goal currently is to prioritize your spending and live within your means while you are working on paying your debt.
Check Your Loyalty Points for Birthday and Holiday Gifts
There is nothing wrong with using a loyalty-points card to buy gift cards or gifts for friends and family. Some people only take holidays after accumulating points.
Avoid Emotional Shopping
Don’t shop when you are hungry, bored, stressed or upset as you might impulse buy to feel better. Just as spending affects your mood, your mood affects your spending.
Before Spending, ask if You “Want” or “Need” It
When you are trying to control your spending, it is important to stop and ask yourself if this is something you want or need. You might consider a note on your wallet or your debit card which asks you “want or need?” at the point of purchase. Wants are easier to live without and hardest to refrain from. If you have determined that you are going to buy the item, ask yourself if you can delay when you buy it until your next pay or next month. If so, then delay the purchase.
Know the Return Policy before You Buy
Don’t feel uncomfortable to ask what the store return policy is before committing to a purchase. This is where a department store purchase may be preferred over a smaller or specialty shop since department stores usually offer store returns in cash or store credit from which you can choose from numerous alternatives. Smaller or specialty stores may not offer full returns but may only offer store credit and the alternative choices may be fewer. The return time for the purchased item from the larger store may also be for a longer time period.
If you have found that you made an impulse purchase in error and can return the item, then do so. If you cannot obtain a refund and can only get store credit, find out how long the credit is good for, if there is a limit. Look around before leaving the store to see if there is anything you might need instead and otherwise use that credit the next time you need something they sell or can buy a gift for someone else if an event is coming up.
Enlist the Help of Family and Friends
Tell your family and friends that you are trying a new budget and might want help with spending less. For example, you might suggest meeting a friend for coffee instead of for lunch or dinner. Or, you might both be better off financially with visiting each other at your respective homes instead of going shopping together or an evening out. Another idea is to put a spending cap on gifts when celebrating events or create personal gifts or service gifts (offer babysitting or lawn mowing) until your circumstances change.
Assess Your Bank and Credit Card Statement Activity Monthly
Review your bank statements for the total deposited and withdrawn in your bank account monthly if not weekly. Also review the total accumulated on your credit card, including interest. Assess how you are faring with changing your spending habits as the months pass. Some months will be better than others. See if you can figure out why.
Have a Spending Plan for each Pay Cheque
Know exactly how much money is coming in on payday and what expenses need to be paid now as well as into the next month (taxes, insurance, rent, etc.). One of those “to-be-paid” expenses should be your debt payment. Make this spending plan part of an overall budget.
Bill Payment Methods
The traditional snail-mail payment method works. You have, in hand, a copy of your debt owed. It is a tangible reminder to pay a bill. Keep it paid in full each month.
Paying bills electronically and through automatic payment plans has become popular. Only if you keep your bank account topped up for these payments is this system useful. You are less likely to miss a bill payment this way, but only if you review your account amount monthly so that automatic payments do not become overdrafts.
Hold off on using any Credit Cards until Your Debt is Paid Off
Paying your debt is top priority. Use cash instead of a credit card. Remember, a credit card is money borrowed, a debt, a loan. It is not cash. If you are trying to stay out of debt, use your cash (not loaned cash or cash advances).
If you must use your credit card, make only those purchases you know you can pay the full balance on at the end of the month. If there are any purchases that were not paid fully from last month’s credit card statement, then hold off on any further purchases until you see a zero balance owed.
Double Down
If permitted without penalty, put extra money (if available) into home or car payments to get the debt paid down as soon as possible.
Use these strategies to make progress with your debt, spending less where possible. Learn more about budgeting and saving for education or retirement to make gains. Don’t be embarrassed to tell friends you are trying a new approach at budgeting and ask how they manage their debt to see if you can learn tips.
Debt Overload
If you have tried several ways to reduce your debt on your own and debt is still mounting, then you may need a different plan. At A.C. Waring & Associates Inc., our debt and credit counsellors will be able to assist you in your debt repayment planning and the options you have to resolve stressful overloads. Our Chartered Public Accountant and Bankruptcy Trustee can also talk to you about options available to you if your debt is overwhelming. Contact us at A.C. Waring & Associates Inc. for a free consultation at 1-800-463-3328 or 780-424-9944.
