Tag: personal finance

American Consumers Buried In Debt!

Statistics show the average Americans are over burden with debt.  This causes individuals and/or households the inability to save for emergencies and future investments.   According to Forbes survey 63% of Americans would struggle with a five hundred dollar emergency.  Bankrates.com states 76% of Americans are living paycheck to paycheck.  The US currently has $12.76 trillion in household debt, eclipsing the debt level of 2008.  This will have long term effects on the US economy.  How did our nations mentality change from a thrift saving society to consumers of debt?

In the early 1900s America was the largest creditor in the world.  Individuals worked any job to provide family income.  Household priority was to provide the basic necessities of life.  The mentality of these individuals was not only one of survival but also wealth building for future generations.

The world economy is only healthy as its populace.  In other words each of us controls the future of the economy.

The good news is we can change our current course back to a nation of savers but it will be tough.  This requires changes in our way of thinking on ourselves and finances.   We must change our lifestyle by sacrificing today’s desires for future necessities.

The first step to changing your life is creating a budget.  A monthly budget provides a list of incomes and expenses.  The difference between these two categories will produce either a net positive or negative cash flow.  A negative cash flow indicates you are spending more than income earned.  The following steps must be performed in order to produce a positive cash flow.

  • Review all expense items.

All items under the expense category must be reviewed for necessary and desirable identifications.  Desires require service cancellation or selling of products to reduce expenses.   Items grouped under necessary require cost review.   Any necessities containing lower cost solutions require service downgrade.  Remaining items require negotiating tactics to lower expenses.  In fact everything should be viewed as negotiable.

  • Evaluate job prospects and take on a second job

Review your current job situation within the current company.  Search for opportunities for promotions, advancement in your career path and increase in your salary.  This may require a change with companies to accomplish your goal.  A second job or very low cost business is required to produce additional income.

  • Sell unused products in storage.

Identify products not used in the last few months.  This merchandise should be put on sale via online resellers, local community yard sale or alternative selling mechanisms for cash.  Cash will be applied to existing monthly expenses.

  • Review Bank Statement.

Inspect monthly bank statement  for minimum balance, atm, hard copy statement, return deposit, overdraft, checking account, inactivate or other legible charges.  Educate yourself on bank policy to avoid atms fees.  Become more attune with your finances and stop spending more than you make causing bank penalities.

  • Stop creating additional debt.

Stop adding debt by making use of financial debt instruments.  Increasing your debt levels will only make your current financial situation worse.

  • Request interest rate deduction or consolidate to lower interest rate.

Negotiate with your lender(s) on lowering your current debt interest rate.  Ensure all agreed upon revisions  are received in writing prior to making any settlement.  It may be beneficial to transfer high interest rate debt to 0% accounts.  Read disclaimers for policies and terms associated with the program.

  • Search for better insurance premiums.

Car and home owners should shop their existing coverage with competitors every 3 years.   When performing this task ensure you are receiving equal or greater coverage for lower cost.  Unfortunately,  most insurance companies do not provide incentives to stay long term customers.

  • Change cell phone providers and plan.

Perform an assessment on cell phone usage.  It’s possible your paying for services you are  not using.  Researching existing cell phone providers supporting your location for lower cost with equal coverage.  Converting from a contract to prepaid or pay as you go plan could provide a cost savings.  In today’s competitive market spending over $75 a month is very excessive.

If your cell phone is your primary communication device cancel your landline line to cut monthly expenses.

  • Reduce energy expenses.

Lower thermostat during the winter and raise in the summer.  Adjusting temperature by 7-10 degrees can save you 10% according to Energy.com.  Reduce hot water heater temperature.   Every 10 degree decrease saves 3-5% in heating cost.  Wash cloths in cold water instead of hot.  According to Energy.com, heating the water comprises 90% of energy use when operating a washing machine.  Cold water works fine with everything excluding oil stains.  Use a clothes line or rack instead of a dryer to save on energy.

  • Downsize Living Space.

Analyze your monthly rental or home cost.  It’s possible your spending too much on monthly  rental and home expense.  Depending upon annual salary, spending more than 35% of your income on house or rental payment is excessive. This may require you to find a new rental or home with a smaller living space.  When renting find a roommate to help reduce cost.  If you’re a home owner, rent one of the floors to help pay the mortgage.  Please review local tax and law implications for becoming a landlord.

  • Performing your own maintenance and repairs.

Discontinue easy to perform services such as lawn care to reduce monthly expenses.  If for some reason your unable to perform this task hire a teenager at a discounted rate.  Car services can be very costly.  Performing your own maintenance such as fluid, filter changes and tune ups can save hundreds if not thousands of dollars a year.  Clean your own vehicle instead of paying someone else.  Keep tire pressure at recommended levels for optimum gas mileage.  There are several free self help internet videos that can help assist.  Carpool with a group of individuals or make use of public transportation to save on gas and vehicle maintenance expenses.

Basic home care falls in the same category as car service.

Hiring professional services to perform advanced work such as hvac maintenance is understandable.  Schedule proper yearly maintenance to prevent future troubles.

  • Reduce grocery bill.

Perform price comparison amongst grocery competitors for brand and store name products.  Enroll in store membership cards for special discounts.  Join company email subscriptions for weekly and monthly coupon offers.  View local newpaper ads for coupons.  Utilize online websites such as Valuepak, Coupons.com, The Krazy Coupon Lady and company brand product sites.  Create a grocery list prior to shopping.  Never shop when hungry.  Brown bag your lunch for work instead of eating out.

  • Reduce Entertainment Expense.

Search online using your favorite web browser searching for “things to do” and “free things to do” adding  your current location.  This should provide the most available activities in your area.  Use online websites such as trip advisor.  Check your local chamber of commerce for local events in your area.

The following are some cost cutting tips:

  • Viewing movies in a theater can be very expensive for any family.  Have a family night by renting a movie from redbox and purchase snacks from the local store at a much lower cost.
  • Attend free museum exhibits and historical home tours (if available)
  • Connect with your local library to rent free books instead of purchasing online.  Cancel magazine and video game subscriptions.  Instead use free online magazines, audio & digital books and videos games with a free library membership.  Don’t forget most facilities host free movie night at least once a month.
  • Have a family picnic at your local park.  The children can burn their energy by attending the playgrounds.
  • Play board games with family, friends and relatives.
  • Become a member of your local church and get involve with activities.
  • Walk or ride a bicycle through the park for some exercise.
  • Visit your free (if applicable) local zoo.
  • Try cutting the chord with your cable and/or satellite service.  Watch many free streaming television series online, subscribe to low cost monthly services like Netflix or Hulu or purchase a roku/apple tv device.  I currently own a roku, if you enjoy westerns and old classic films this device is for you.  They just added sports oriented channels to the program selection.
  • Ride your bicycle instead of  driving your vehicle if within your reasonable distance.

Restaurant Dining

  • Commit to a reduced set number of days dining at restaurants.  Preparing meals at home is very cost effective.
  • Search online for restaurant week.  You can obtain some very appetizing meals for low cost during special events.
  • Use online websites such as restaurant.com for coupon offers.
  • Obtain restaurant daily specials taking advantage of your favorite meal.  Use social media and official websites to gather information.

The number of free or low cost activities available is dependent upon your location.

  • Reduce Grooming Cost.

Save money by performing your own manicure and pedicure services.  Have a friend or family relative cut your hair.  These are high cost saving solutions.

These are just a few cost saving steps to obtain a positive cash flow budget.  The current goal is to cut monthly expenses without adding any new debt.  Once a positive cash flow is established we can move onto the next stage which will be covered in another blog.