Trimming the Average Budget: Miscellaneous (Including a Surprising Biggie)

This is part of an ongoing series about how to trim the budget of the average American. As this series focuses on such broad-based tips, some will work for you and some will not. You’re invited to mention in the comments the tips that you found to be the most useful for inclusion in a comprehensive budget trimming guide at the conclusion of this series.

Miscellaneous – $808

“Miscellaneous” seems like a vague category at first, but when I actually dug into the items included in that chunk, I quickly found that one big element makes up most of what falls under “Miscellaneous.”

Finance charges.

Every dime in interest paid on credit cards or consumer loans (besides mortgages and auto loans) falls directly under the “Miscellaneous” category. The number is completely reasonable, too, when you think about the fact that the average American family carries about $8,000 in credit card debt. If they’re paying 10% on that debt, there’s $800 a year.

Obviously, the big solution for cutting this section of your budget is to cut your credit card debt. Here are some steps for doing just that.

Cut up your cards – now. Learn how to live without them. If you like the convenience of using a card, switch to using your debit card but sign for everything – don’t actually use it with your PIN, as you have more protection against fraud if you sign.

Call your credit card companies and ask for a rate reduction. Flip over your card, call the number on the back, and play a little hardball. Here’s my detailed guide for doing this.

Set up a detailed debt repayment plan in writing. Make a list of all of your debts. Order them by size or by interest rate (whichever you prefer – there are advantages either way). Then start paying them off by throwing big extra payments at the top one on your list. Here’s my detailed guide to starting your own debt repayment plan.

Automate, automate, automate. Automate an extra debt payment each month. Instruct your bank (via online banking, of course) to send an extra payment to your most painful debt each month – and then forget about it. Pay your bills as normal. The extra payment will whittle away at your balance over time.

Snowflake it! Whenever you serendipitously acquire a bit of extra money or find a clever new way to save some money, don’t spend it on something frivolous. Instead, sock it away in your piggy bank and, at the end of the month, add that extra money to that month’s extra debt repayment. It’ll help melt away your debts even faster.

Get a “debt buddy.” This works just like a dieting buddy. Find someone who has resolved – like you have – to pay down their debts. Hold each other accountable. Share tips with each other. Engage in frugal activities together. You might just find that it blossoms a whole new lifestyle.

Tell others. This seems scary, but it works. Tell your spouse about your debt situation. Tell your parents about it. Tell a few of your friends. Tell your sister. Then tell them exactly how you’re going to fix the problem. They will become your cheerleaders and your motivators to stay on track.

Use the other tips in this series. If you’re actively working to trim other parts of your budget, you’ll find that you automatically have more money for debt repayment, which helps you to trim away that “miscellaneous” part of your budget even faster.

I want your help! In the comments, please let me know which of the tips you find most useful for trimming these costs. I’ll include the top choices in a comprehensive budget trimming guide at the conclusion of the series.

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26 thoughts on “Trimming the Average Budget: Miscellaneous (Including a Surprising Biggie)

  1. If the problem you are running into is more month than money, the last paragraph is the most important one: cut back on other expenses, and more money will be available for debt payment and emergency fund.

  2. Could you explain how a person is more protected from fraud signing with a debit card than entering a pin? I don’t think I’ve ever heard of this before.

  3. jgonzales says:

    Steven,

    If you sign, it’s covered by Visa or Mastercard (who ever is on your card) for the whole amount. If you use a PIN, it may not be completely covered by your bank. Some banks only cover a certain amount, others only cover after the first $50.

  4. J.D. Roth says:

    I think “the average American family carries about $8,000 in credit card debt” is playing games with statistics. I just edited this portion of my book this morning. According to the Federal Reserve’s 2007 Survey of Consumer Finances (the most recent survey):

    * 73% of American families have at least one credit card
    * Of those families, about 60% carry a balance (meaning 44% of Americans have credit card debt — and if the average American family carries $8,000 in credit card debt, that means that the average for folks who have debt would be $16,000, which seems, well, unlikely)
    * Of those who carry a balance, the *median* owed is $3,000.

    So, about a quarter of Americans owe more than $3,000 on credit cards. About a quarter owe less. And half owe nothing at all. According to the Fed, anyhow.

    That $8,000 number seems…sensational.

  5. KAD says:

    Judging by what I heard on Marketplace this weekend, credit card companies often use the phone call to jack up rates, these days, rather than agreeing to lower them…might be worth double-checking that piece of advice.

  6. Ruth says:

    @ J.D. Roth
    The statistics on “average” spending are the same way. It doesn’t mean that an “average” or normal, usual household spends that much, which is the association we tend to make.

  7. lurker carl says:

    I was wondering about the numbers. If $800 is dedicated to interest on consumer credit cards and personal loans, where does the final $8 go?

  8. Jennifer says:

    Yikes! That “tell others” one sounds scary indeed. I’m 38, and I don’t think I feel up to telling my parents what my credit card debt is. I can see it being a real motivator, though!

    The detailed debt reduction plan is very good. I did that as part of my New Year’s resolutions, and I find it focuses me. Instead of me saying “was I going to make an extra payment this week?” I know exactly when I’m making extra payments, and I know when certain debts will be paid off. Keep up the good work!

  9. Shevy says:

    @lurker carl
    Here’s the definition of the misc category:
    Miscellaneous includes safety deposit box rental, checking account fees and other bank service charges, credit card memberships, legal fees, accounting fees, funerals, cemetery lots, union dues, occupational expenses, expenses for other properties, and finance charges other than those for mortgages and vehicles.

    Lucky there are so many folks who *don’t* carry a balance or the amount would be much higher than $808 for this category. Funerals and cemetery plots are really big ticket items that also affect the numbers here. How many folks out there have bought a plot and/or paid ahead of time for their funeral? It can be a huge shock to the family you left behind to have to make those decisions *and pay in full for them* before the funeral. It sounds bad, but I’m guessing that funeral directors know you’ll sign on the dotted line in the middle of your shock and grief but that their chances of getting paid probably decline significantly once the person is buried.

  10. Tricia says:

    Shevy,
    My father died last week, and his whole funeral was prepaid almost 15 years ago. He picked out his own casket, selected the music, even the organist tip was included, the plot, the headstone etc-all paid for. The only items my mother had to pay for were the flowers, the final date engraving (which she is going to prepay for her own date), and the hall/catering. But they also had a burial account, which covered that. We walked in, discussed the plans with the funeral home, and left. I can’t imagine trying to cope with a death AND figure out the money! My parents rocked!

  11. Troy says:

    JD:

    I think your rebuttal is a bit misleading as well. The Study average assumes all households 18 years and older.

    But for most households ages 25-65, which encompases most peoples working years, the average is likely closer to $8,000. About 40% of the population in this country is under 25 and older than 65.

    And about 15% is between 18-25 or 65+.

    This skewes your numbers. What is says is families during their working years are in debt. Lots of them. Yes, they may finally get out once they retire, but until then they are drowning.

  12. chacha1 says:

    @ Tricia, condolences for your loss.
    @ Jennifer, LOL! Yikes indeed. I NEVER talk about my finances with my parents, except to remind them, when they start getting judgy about the fact that DH and I take vacations, that they’re not paying any of my expenses.

    You’d think “miscellaneous” would be the easiest to cut, until you look at everything it covers. That “average CC debt” figure has been kicking around for a long time now … I’ll bet it’s pretty inaccurate.

    Since accounting and legal fees are in the “miscellaneous” category, I’d add a tip – for cutting those in the future – to use Nolo.com to research legal issues so you know what kind of legal services you need (if any); and take a basic accounting (or personal finance!) class at the local community college.

    Apparently some people pay tax preparers to fill out a 1040-EZ, lots of people pay for help filling out a basic 1040, and these things are just not that hard to do once you stop being scared of the IRS publications.

    Or of course, take a class to BECOME a certified tax preparer, and then you have another income possibility. :-)

  13. Leah says:

    I think it was mentioned in another thread, but it’s worth it to point out that signing for a debit card instead of using a PIN costs the merchant significantly more. If you’d like things to be a little bit cheaper overall, it’s worth it to pay in cash.

  14. Ari Herzog says:

    Where’s the logic in cutting credit cards? If you want to protect your money and reduce risk, cut up the debit cards and use credit to pay for things, then pay the balance each month.

  15. Leah says:

    @ #2, steven:

    If you run your debit card as a credit card, it’s treated as a credit transaction, and the governing law is the Consumer Credit Protection Act. Under the CCPA, you are only liable for a total of $50 worth of fraudulent charges.

    If you run your debit card as a debit card using a PIN, the governing law is the Electronic Funds Transfer Act. In the event of unauthorized charges, you’re liable for either $50, $500, or ALL of the charges — your amount of liability depends on whether you know about the charges and how quickly you notify your bank.

    Wikipedia has generally decent information on both of these if you’d like to research further!

  16. Shevy says:

    @Tricia
    I’m sorry for your loss but, you’re right, your parents really rock! It is rare, rare, rare to prepare that thoroughly for such an event and they are to be commended for having done so, far in advance.

  17. Tricia says:

    Shevy,
    AND, they did this while raising a family, saving the money to prepay everything. My mother’s funeral will not be as elaborate, she wants to be cremated, no mass or wake. I made her write her own ‘obituary’ a few years ago, my reasoning being that we wouldn’t know where she went to school, when she graduated or all those other details for the paper. It was a fun time I tell ya!

  18. As far as I can tell, paying anything in finance charges to me equates to either stupidity, apathy, or lack of financial means.

    If you can afford not to pay anything in finance charges and you still are, then you are either too stupid or lazy to do anything about it.

    If you are paying them because of no other choice, it is time to get your finances in order, and NEVER pay them again.

    They will kill you, absolutely kill you, and you will be fighting them forever, if you do not eliminate them from your life

  19. Steven says:

    @2 Steven + @15 Leah

    On a debit card, you’ve got the same protection no matter which way you process the transaction, you are only liable for up to $50 if you report it within 2 days.

    If a company chooses to, like Visa and Mastercard, they can offer the same protection as a credit card voluntarily, but are not required to do so by law.

    On a credit card, you aren’t liable for any fraudulent charges if you report it. Also, payment of the fraudulent charges means you have accepted that the charges are legitimate.

    @12 chacha1

    There are volunteer organizations that are more than happy to train you in basic tax law for a few days of your time in return. They will teach you what you need to know so you are able to assist low income families fill out their taxes. Not only do you learn something, you help out other families that are clueless about the tax system, and will probably end up getting ripped off just to have a 1040EZ filled out for them.

  20. Sandy says:

    Gosh..back when I kept a ledger budget book, under miscellaneous would go things like..picture developing, Girl Scout cookies, odds and ends items that didn’t neatly fall into any other category. So if I understand this article correctly, if all of your misc. spending is just debt financing, under what category are all those other odds and ends items falling into? Shouldn’t the category be “Debt Repayment”, not “Miscellaneous”?

  21. Kevin says:

    I agree with J.D. – the claim that “the average American family carries about $8,000 in credit card debt” is inaccurate. Even in the article Trent linked to, the closest statement that supports Trent’s claim is:

    “The average amount of credit card debt in households with more than one card is now more than $8,000″

    Note the key phrase “with more than one card.” That’s not at all the same as “the average American family.” Lots of families only have 1 card, or none at all.

    There are lies, damn lies, and statistics.

    That said, Trent’s main point stands – finance charges are a cancer on a household’s finances. The trend in recent years has been growing worse and worse. I suspect the trend has reversed (or at least slowed a little) due to the massive credit crunch of the past 2 years, but it’s too early to find supporting data. And even if I’m right, it will probably only be a temporary change, and given enough time, consumers will return to their borrowing ways in greater numbers than ever before.

    But not the readers of Trent’s site. :)

  22. michael bash says:

    I read thar cutting up a credit card is a meaningless gesture. You have to cancel it with the company. Otherwise charges can still accrue, a non-use fee being a good example.

  23. Christine T. says:

    @Steven #19
    Which organizations do that. That sounds like something I could do.

  24. prodgod says:

    @David/Yourfinances101: That’s a little harsh. I have a tremendous amount of CC debt because I AM financially responsible. I feel a moral obligation to pay debts that many others would’ve opted out of via bankruptcy long ago. I’d rather pay a few points every year than walk away. $8,000 in CC debt? I’ll have a party when it drops that low. Believe it or not, just a few years ago, I was paying that much in finance charges every year.

    I find it admirable when people state that they’ve never carried a CC balance and never had a car payment and never this and never that. I have to think they’ve probably never owned a business and never taken many risks and “never” lots of other things, too.

    My point? Aw, heck…I forgot.

  25. jgonzales says:

    #22, Michael Bash

    It’s a meaningless gesture to the credit card company, but it’s a huge gesture to the person who does the cutting. It means that while I still have to pay off the current balance, I can’t go add more.

  26. Steven says:

    @23 Christine T.

    Finally found a link. Here’s a list of organizations that got grant money from the IRS.

    www . irs . gov/pub/irs-tl/2010_vita_grants.pdf

    Training classes might have ended by now, they usually hold classes in December – January I believe. Not sure, but this would probably be a good start by contacting some of these organizations.

    (trying to get around the moderation because of the link)

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