The year is 2020 and you’ve decided this is it. This is the year where I finally become debt-free and get on track towards financial prosperity!
Then you look at your loan balance. How am I going to pay this down? Sure, that recent pay raise was nice, but surely there must be other ways to increase the amount of cash every month in order to make an even bigger debt in your loan repayment. I remember these were the thoughts that ran through my head when I was eliminating my student loan debt as a young new grad
P.S. if you have not refinanced your loans to lower your interest rates, we urge you to do that and save some money: Check out the latest rates and get a up to $750 Bonus
I found that there were a few tweaks or “hacks” that helped ensure my expenses were minimal so that I could pay down my (at the time) $160,000 student loan debt over the course of 2 years.
(1) Set a Hard Cap for Spending (outside of fixed living costs) and Track it
Do you use a credit card, debit card or cash to make purchases outside of rent/mortgage and utilities? Honestly it does not matter what medium you use for payment. There is no need to go full-Dave Ramsey and cut up your credit cards.
The key is to have a hard cap for spending regardless of what payment medium you use. If you are using a credit or debit card, track your expenses and put a limit flag on your spending. If you are using cash, simply withdraw the hard cap limit for the month and do not touch your bank account again. I personally used a hard cap limit of $800/month for my credit card while paying off debt, and I did this while living in one of the most expensive parts of the US - the SF Bay Area.
"I personally used a hard cap limit of $800/month for my credit card while paying off debt, and I did this while living in one of the most expensive parts of the US - the SF Bay Area"
(2) Eliminate All Forms of Media/entertainment that can be Obtained for Free
Subscriptions, books and movie tickets are the most obvious culprit here, however other recreational expenses such as gym memberships and golf course dues play into the equation. First look at your subscriptions. A lot of subscriptions can be shared within friend or family groups for nearly no extra cost or a small cost.
Cut cable or satellite TV. Utilizing an antenna or streaming services are often much cheaper than the archaic dish sitting on your roof. Instead of buying books, visit the local library. As for recreation, look at barebone gyms (versus trendy designer gyms) as well as cheaper alternatives such as local tennis courts and municipal golf courses (versus maintaining an expensive country club membership).
(3) Meal Prep instead of Eating Out
This one can net you hundreds, and possibly thousands of dollars in savings a month! Not only does meal prepping save money, it will also make you healthier if done correctly. I have meal prepped for years for health reasons and have saved quite a bit of money in the process.
Consider this: the average price for lunch ranges between $10-$15. A meal prep consisting of a roast chicken breast, mixed veggies and some brown rice totals to $3.50 per meal. Add up a month’s worth of lunches and you are looking at around $250 to eat out vs $70 to bring your prepped lunch. Now expand this to dinner as well and you can easily see the huge dichotomy that exists!
(4) Eliminate Clothing Shopping
One of the biggest money wastes for the average American according to websites like Business Insider and CNBC is clothing. Now telling you to cut down on trips to Nordstroms and Neiman Marcus may seem a bit disconnected, considering it is coming from a male perspective. However, I urge you to look at your monthly clothing bill and separate needs from wants. If you are frequent shopper, try using the hard cap we mentioned in item #1 to limit purchasing.
Before we move on to #5, let’s address the elephant in the room - Online Shopping. The problem with online shopping is the ease of use. By making online shopping harder to access, you can eliminate temptation. Take this four step approach to limiting online purchases:
Delete all Storefront Specific apps (ex: the Amazon app, the Macy’s app, etc.).
- This forces you to utilize your web browser to jump onto storefront websites to make purchases. This slow down process can be a psychologically valuable stop when tempted to make a purchase.
Unsubscribe from all storefront mailing lists.
- This eliminates temptation that would not be there in the first place.
Do not store your credit card on any storefront website.
- Having credit card information on file makes purchasing drastically easier, but having to enter this information creates an additional block against spontaneous purchasing.
- StayFocused is a chrome extension/App that limits your time on certain websites and can act as a “nanny” against bad shopping habits.
"The problem with online shopping such as Amazon is the ease of use. By making online shopping harder to access, you can eliminate temptation"
(5) Cut the Cost of gas or Avoid altogether
Living in the Bay Area (where gas is close to $5 a gallon) and driving a SUV, have made me well aware of how much gas can tick away at your monthly cashflow. Individual gas station prices often differ based on location - more accessible stations almost always have higher prices. Make sure to search for cheaper gas prices using apps such as Gas Buddy or Google Map. Also, if possible consider walking or riding a bike.
Have Additional Tips for cutting expenses and increasing monthly cash flow? Leave a comment below!