Step Four- Truly looking at your needs versus wants.
We've been talking about getting out of debt. We've learned what it means to live within our means and did an exercise to see if we really are living within our means. We've created a budget. We've created our debt pay-down plan. Is there anything more we can do to pay down debt faster? The answer is YES! The solution: looking at our needs versus our wants.
I suppose some of you out there are wondering why I did not start the series with this. The reason is I think it is more important to have a reality check about the amount of debt one is acquiring first. Once some one realizes they are spending more than they are earning they will automatically (hopefully...) cut down on some "wants." Then when they plan their budget they will cut back more. This section is not about choosing between the simple needs versus wants, but the harder ones out there. For example, we all know we need food, clothing, shelter, etc. We all know that we want internet, cable, iphones, tvs, wiis, movies, etc. But when we truly look at our needs versus wants we can kick our debt payback into high gear. It means cutting back even when it's completely within your budget to get it. Let's look at some scenarios and I want you to pick an answer to each, then we will discuss.
- Your baby has outgrown his/her 3-6 month clothing. Do you: A) Go to the mall and buy some clothes from Baby Gap, B) Go to Target or Walmart and buy clothes, C) Check out the clearance rack and consignment stores?
- It's your spouse's birthday. What will you do about his/her cake? A) Go to a baker to have a professionally made cake, B) Buy it from your local grocery store, C) Make one at home
- It's your preschooler's birthday party. Do you: A) Book Chuck E Cheese and invite all the children they know from school, church, soccer, and daycare, B) Have a party at a local park and invite their entire class, C) Have a party at home and invite their close friends and family?
- A movie you want to see is coming to theaters. Do you: A) Go see it in theaters, B) Wait for it to come on DVD and then buy/rent it, C) rent it from the library or from Redbox?
So what does this have to do with debt? Well imagine the savings of moving from a good category (A) category to a better (B) category (or from a better to a best). If you took that money (which you've already budgeted for) and apply it towards your debt you will be working toward paying off your debt sooner and paying less in interest in the long run. Move from an good to a best category and that is even more savings. You could easily find $10-$20 (or more!) a month to put toward debt! It's not a change to your budget or debt pay-down plan, it's just an extra little burst to it.
This week before you spend any money think "is there a way I can get this cheaper?" or "Do I really need this item now or can I wait until I can get it cheaper?" or "Do I need to spend money on this at all?"
Be sure to check out some of my other series for ideas on ways to find those extra ways to save money.