A few years ago, my husband and I looked at our debts, and said, despairingly, “We’re already not spending wastefully! How can we find the extra money to reduce our debt?”
Of course, we were in denial about our wasteful spending and how much extra money we actually had. The truth was that we made plenty of silly money decisions that resulted in waste.
The Average Household Wastes at Least 10% of Its Monthly Income
The real eye-opener for me came when I read that the average household wastes between 10% and 15% of its monthly income. That’s a pretty decent chunk of change. Even if you are on the low end, wasting “only” 10% of your income, that can be pretty substantial.
Consider: If you make $45,000 a year, that means that you receive $3,750 a month. 10% of that is $375. That’s a large amount of wasted money.
Clearly, if you are “average” at least 10% of your monthly income is not going anyplace that is beneficial for you. Instead of continuing in the same vein, consider paying down your debt, and turning your extra money into a debt reduction payment that can benefit your finances in the long run.
Look for Extra Money in the Form of Leaks
Take an honest look at your finances. Look for money leaks. Consider how much you could save if you planned your meals and stuck to a list when you went shopping. Consider what subscriptions you could cut, or how you might be wasting extra money buying things that you don’t actually need.
If you already track your spending, it should be easy to go through everything you’ve spent in the last month or two and identify the extra money in your budget.
If you aren’t tracking your spending, now is the time to start. Track your spending for a month or two. You might find, as you start tracking your spending, that you think about your purchases more carefully.
When you are accountable, by keeping track, you might take a little more time to think about where your money is going. At the end of each month, look for the leaks. You might be surprised at what you find when you are truly honest about your spending habits.
Use that Extra Money to Pay Down Your Debt
Now, it’s time to pay down your debt. As you look for ways to save money and plug your financial leaks, you will be amazed at the better turn your finances take.
Figure out what 10% of your income is, and then hunt for the leaks that add up to that amount. Next month, instead of wasting your extra money, start paying down your debt. Put together a debt pay down plan, and use that money to reduce what you owe.
Once you have paid off your debt, you can take that 10% — no longer wasted — and put it toward your future, using the power of compound interest to your advantage. There is no reason to continue wasting money by keeping with the same spending habits.
Decide what the best thing to spend money on is, and then re-do your budget so that those things are covered, and unimportant things are eliminated.
Photo by Keo101 (Away again)