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Take this debt and SACK it week 3 – C is for Cut

'IMG_6764' photo (c) 2008, nrkbeta - license: http://creativecommons.org/licenses/by-sa/2.0/

Welcome to week 3 of the Take this debt and SACK it plan.  In week 1, we took Stock and made a list of all our debts.  In week 2, we Allocated our payments strategically by ranking our debts in the optimal payback order.

This week, we’re going to find some ways to free up some money to make bigger payments and therefore SACK our debt even faster.

For those of you just joining us now, you will probably find some useful tips here even before completing steps 1 and 2.  Once you’ve finished with this post, go back to step 1 and then to step 2 to catch up.

You’ve probably figured out by now that it will take some time to dig yourself out of debt.  Making small payments is better than no payments.  If you have only a small amount of debt that you’re trying to get rid of, maybe the small payments are enough.  But, what if you have a large amount of debt or you’re trying to get rid of it even quicker?

The rest of this post will give you a few cost-cutting tips.  Perhaps you’ll find a few that you can use.  Add your savings to your debt payment.  A little goes a long way.  Each extra bit that you add will help you pay down your principal faster and save you interest costs.

Search your closets

Do you have any merchandise sitting in a back closet that has not been used yet?  If the tags are still on or it’s in its package, bring it back to the store where you bought it.  If you have the receipt, most stores will take it back even if you’re beyond their stated return or exchange period.  As long as you’re not trying to return a poodle skirt you bought in 1967, then you may be surprised at what they will take back.  If you don’t have the receipt, some stores will give you store credit instead of a refund.  This could be useful at stores that carry a wide variety of merchandise.  You could return that lawn ornament you bought at Walmart and use the store credit to buy stuff you actually need – like food or shampoo.  Even when you’re in debt, you still need to nourish your body and wash your hair.  Instead of shelling out new money for these items, you can re-use money that you have recovered by returning things that you don’t need.

Search your freezer

Even though food is at the top of the purchase priority list even while repaying debt, it’s possible that there is already enough of it in your house to feed your family for quite some time.  Do you have a freezer full of leftovers that you never seem to get around to eating?  Start using them.  Add the savings to your debt payment.   There is a place for careful shopping and stocking up when items are on sale and I do this too, but every once in a while it’s necessary to purposely dwindle your food inventory.  Otherwise, you end up throwing out food that’s been in there for too long, erasing the savings you’ve made by shopping the sales in the first place.

Recurring expenses

The next place to look for savings is in items that are paid on an on-going basis.  If you figure out how to reduce these expenses, then the savings will repeat over and over again.

Earlier this year, my husband and I went through our expenses trying to reduce what we were spending by a few hundred dollars a month.  The first place we looked for savings was with our phone/internet/satellite television service provider.  Why there first?  Primarily because every time I paid their bill, it bugged me.  I felt like the amount was too high for what we were getting.  The second reason we started there was because I really just don’t like dealing with them.  Logical?  Maybe not.  Effective?  Absolutely.  I was motivated to pay them the least amount possible.  Remember the emotional motivation that we talked about in week 1?

It turns out that we were able to save a good chunk of money in this one place.  The long distance plan that we had was the best deal around when we got it, but that was at least 5 years ago.  Over time, the amount being charged had slowly inched upwards and our calling pattern had changed.  After looking at the new deals available on the company’s web site, we were able to reduce our bill by $15/month with just one phone call.

Next we cut back our TV package because we weren’t watching the channels enough to justify the cost.  Another $24/month, for a cumulative savings of $39.  So far, so good.  When we got our bill the next month, there was a new “network charge” that appeared that we weren’t expecting.  This seems to happen every time we change something with this company and is another reason that they drive me crazy.  Instead of ignoring the charge because it wasn’t that much, my husband called back and politely explained that they hadn’t told us about the hidden charge.  I don’t know all the details of the conversation (I leave the room whenever he calls them to save my own sanity), but somehow by the end, they had given us another monthly credit that was actually more than the network charge they levied on the account.  They called it a “bonus discount”, but I think it would be more appropriately named “the discount for customers who actually pay attention.”  Now our ongoing bill is $45 less than what we were paying before.  We put in the effort to trim it once and we’re getting the payback over many months.  I now have a note in my task list to check rates on different web sites on an annual basis to make sure that we’re still getting the best deal possible.  Could you trim your monthly communication costs and add the savings to your debt repayment?

Other places to look for savings could be in banking fees and insurance expenses.  About 18 months ago, we switched our chequing account from a bank that was charging us $15/month to a no-fee account.  It took a few hours of my time at the beginning to redirect payroll deposits and automatic withdrawals, but once it was done, the $15 savings kept happening and I didn’t have to do anything else.  I spent the time up front when I was motivated to do it and we have saved about $270 so far.  Could you save money on your banking fees too?

As much as I would like to, I haven’t been able to trim our insurance expenses.  I’m confident in our life and house insurance rates, but if anyone has had success with an online site for car insurance quotes, I’d love to hear about it in the comments.  I’ve tried a few and they come up quite a bit higher than what we’re paying.  Perhaps this means that we’re already getting the best rate possible.  Or perhaps it means that I’m not looking in the right place.

If you have any other tips on how to save money with recurring expenses, I’d love to hear them – please leave a comment so others can benefit from your wisdom.  How much did you save on your recurring expenses?

Assignments for the week (choose 1 or more):

  • return any unused merchandise to the store for refund or store credit
  • use some leftovers from your freezer
  • look at your recurring expenses and see if there is any way to reduce them

Coming up next week – K is for Keep track

September 30, 2012

4 responses on "Take this debt and SACK it week 3 - C is for Cut"

  1. I am beginning on this journey for the first time, and we’ve been married 22 years 🙁 *blush* . I got £11 (British pounds, so around $18) off our BT bill – broadband and calls, no TV. Now, having to go through the Direct Debit a/c to try and find other savings.

    We’ve already begun the ‘freezer’ thing – three full freezers means a *lot* of blessing, and a *lot* of don’t-need-to-buys for a wee while 🙂 .

    All the money stuff is left to me – and I’m not good at the whole budgeting business, have never been taught anything, so I’m really starting with baby steps. I know it began with a change of heart, so now trying to learn how to put the ‘heart change’ into ‘practical change’ … Praying as I go…

    Thanks for the tips. And the encouragement. Will keep up with your blog now that I found it.

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