Trim Your Budget to Buy Your Dream Home (Part 2)
Posted on: September 25, 2014
Once you’ve created a budget, you have a detailed tool that can help you figure out where to spend and where you can cut back. Some expenses are normal and may even be necessary, but most families have plenty of areas where they can cut back and free up cash in their budget.
Reduce or eliminate consumer debt.
Consumer debt isn’t inherently a bad thing, but it costs you a lot of money. Three credit cards, a personal loan and an auto loan can cost you hundreds of dollars every month, and that’s money you could be spending elsewhere – or better yet, saving. Rearrange your finances to reduce consumer debt, and you’ll ultimately free up money you can use elsewhere.
If you’ve got money in savings you can use to reduce consumer debt, do it. You may earn 1% on your money in savings, if you’re lucky, while consumer debt typically costs anywhere from 7%-25% every month. The math is simple; you’re not making enough money by keeping it in savings to offset the amount of money you’re spending on interest on your consumer debt. Don’t deplete savings to the point that you don’t have an emergency fund, but if you are fortunate enough to have excess money in savings, use it to pay down or reduce consumer debt.
Determine which items are necessary and which items are luxury.
Food is a necessity. However, dining out every night is a luxury. While it’s unreasonable to expect yourself to curb your dining out habits entirely, look for ways you can cut this expense. Likewise for other unnecessary expenses.
While complete deprivation of all your basic wants and desires in life isn’t sustainable long-term, look for ways you can alter your spending habits to keep more money in your pocket. Use generic items instead of name-brand, cut back on your cable service and replace Starbucks with a coffee from home. These are just some of the many ideas
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