Ideas for Reducing Your Monthly Expenses – Your Personal Turn Around! The Big 3 Gold Nugget(s) plus some grains of sand.
Gold Nugget: Transportation
- Transportation
In North America the cost of owning a vehicle is your second largest expense, after housing. Our cities are not built with strong public transit options and in many areas vehicle ownership is almost a necessity.
When you get your first promotion, do not run out and replace your trusty Mazda 3! Keep it and run it into the ground. The best vehicle you can own is the one that is paid for.
Alternate idea: Sell your car.
This does not mean you park your car in the garage and take the bus twice a week. No, this means selling your car, cancelling insurance, eliminating maintenance and fuel expenses and take the bus for two years.
Have an impact.
When can you buy your dream car?
Use the 10% of net worth rule. That is, you can purchase a car that is no more than 10% of your net worth. Once your net worth is more than $5 Million, you can own any car you want.
I think once you have done the work to get your net worth to $5 Million, you may decide you have other things to do with the $500k the Ferrari dealership wants for that new model.
Buying anything is different when you are parting with cash. Debt has made consuming beyond our means far too easy.
Gold Nugget: Negotiate Debt Settlement
2. Negotiate Debt Settlement with your creditors
Corporations restructure debt regularly. It is true, debt is written off and moved in leveraged buyouts by the stroke of the pen.
When it comes to personal debt, there is no forgiveness, no flexibility and few options once you are indebted.
Banks will work with you, as long as the terms work for them.
Once you are indebted to a level that you become a perceived risk; your leverage is gone and your personal banking officer may lecture you on needing a budget or give you advice on how they run their personal finances.
Yes, the same person that received an incentive for signing you up for the line of credit, points credit card, overdraft, savings, chequing (checking), safe deposit box and your margin investment account.
If you are currently in the 42% of consumers who is deferring payments this year, and 39% who plan to continue deferring payments, you may be searching for options. Undoubtedly, if you are not able to meet all your obligations.
You are likely hearing the increased advertising for debt relief and bankruptcy support. Many people are in this situation.
Grains of Sand: Before You Head Down That Avenues
Here are options for you:
Consolidate your debt into a single loan with fixed terms for repayment (restructuring)
Transfer all your debt onto a single credit card – high interest, careful with the terms of low introductory interest rates on balance transfers
Discuss your situation with your creditors and ask for debt restricting support. Keep in mind these are professional debt collectors, they are going to push your buttons and they deal with thousands of people who intend not to pay. The banks have all the power and you have no backing. You are going to have to be prepared to push your cause.
What is your bottom line? In my 9 to 5 we call this BATNA or Better Than A Negotiated Agreement. Maybe your absolute bottom line is bankruptcy.
That one hurts right, just saying the word, bankruptcy.
We have feelings associated with this. Many people will let their kids go hungry while they service debt payments just so they don’t have to face bankruptcy.
On the other side of this balance, corporations at times enter bankruptcy protection as part of strategy to restructure and reduce expenses. What works for them, must also work for you.
If you have hungry kids at home, bankruptcy is a Robin Hood move, not a failure.
I am not suggesting you lie; I am saying that you clearly state the facts of your position with conviction and offer your only alternative. Do the work of facing the potential of going bankrupt, get over the feelings associated with this and when you are ready for that potential outcome negotiate a better option. Now, Robin Hood, the creditor may have an interest in working with you.
Gold Nugget: Live The Digital Nomad Lifestyle
3. Live the Digital Nomad lifestyle
Not all of us can live in hotels. In fact, this year, few of us are living in hotels. Your highest expense is your living arrangements.
If you are renting, ensure your current rent is in line with what is available on the market today. Seeing lower rent options? Move.
If you own your home, you have already been contacted by your bank to refinance your mortgage at these lovely low interest rates. Your focus should be on reducing expenses in all other areas so you can make lump sum payments on your mortgage, if your new terms still allow you to do this. You did read the fine print, right?
If you are among the many who have lost employment this year watch for upcoming incentives as the world re-opens. The Travel and Tourism industry is relying on leisure travelers for this income as business travel restrictions continue into the years ahead. This may lead to strong incentives for travel and accommodation and it may be the ideal time for you to start that business you have always wanted to run. With banks jittering with debt profit withdrawal travel credit card incentives may also be strong in the next few years, use at your own risk.
Grain of Sand: Reduce Fees and Memberships
4. End unused memberships, annual fees and subscriptions
At a minimum, review your statements and identify what recurring fees you are paying, cancel anything that you had forgotten about and are no longer using.
Contact your gym and make sure you have been credited with the months that you paid for and could not use because of gym closures this year.
Grain of Sand: Revisit Monthly Bills
5. Revisit your cellular data plan and home internet package
Check your cell phone data utilization and adjust your plan to maximize the cost/service ratio. If you do not use your 20G of monthly data, do not pay for it.
You may have signed up for an introductory home internet service designed to capture new customers. These introductory packages provide lower costs for a fixed period. How much has your bill increased since the package ended? What are the competitors offering now? How fast should your network speed really be so that you can stream Friends?
Grain of Sand: Stop Paying The Bank Fees
6. Switch to no-fee banking
Search for no-fee banking options and consider moving your day-to-day banking to a no fee platform. This can complicate bill payments and add additional passwords to your ever-growing list. It also serves the purpose of removing your daily funds from the reach of your main creditor.
Increase Cashflow
7. Increase your income.
I know technically increasing income does not actually reduce expenses. While you are searching for ways to cut costs you must always look for ways to increase income. You get wealthy by pursuing both, on an ongoing basis. If you were a business called “You Inc.” your obligation as a business owner would be to create value for customers and generating income for stakeholders while keeping costs low. Run your personal finances like you are a business.
Do these things quickly if you can, then take your time and enjoy it. Money will come and go but you can’t get this time back.
Additionally, all of our posts in the Personal Finance Series can be found here.
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