Reduce Your Debt and Minimize Your Monthly Bills

I usually look for the little things that we can do to reduce our spending – things like installing more energy-efficient light bulbs or preparing a meal at home. Those are nice because they are simple and generally only require one little change to create a benefit for your bottom line.

all your worthHowever, in the excellent personal finance book All Your Worth, the authors (Elizabeth Warren and Amelia Warren Tyagi) make the astute point that a person should actually focus on the dollars and not the pennies. In other words, one big change is often worth as much as fifty small ones.

To that end, I’ve compiled a list of sixteen great hardcore tactics for minimizing your monthly bills. Most of these won’t work well in your life – that’s fine. If you can choose just one of these, though, and run with it, you’ll find a lot more breathing room in your financial life.

Transfer all of your debt to something with lower interest
If you’re paying down a lot of debt, it’s definitely well worth your time to see if there are any ways you can consolidate that debt and move it to a lower interest rate. Here are some options.

Call the credit card company and ask for a rate reduction. Flip over your credit card, dial the number on the back, and when you get a live person, ask to speak to a supervisor. Directly ask that supervisor for a rate reduction and, if you don’t get a positive response, suggest you may be moving your debt to another card via balance transfer.

Look for a zero or low-interest balance transfer offer. See if you have any credit card offers available to you that allow for a zero percent balance transfer – or a low interest transfer if your credit isn’t as good. Then use that offer! Transfer your higher interest debts to this balance.

Talk to your local credit union and see if you can get a personal loan or a home equity loan. These may allow you to consolidate at least some of your debt at a lower interest rate, thus saving you significant money over the long run.

Ditch your current car and get a highly fuel-efficient used one
The best bang for the buck you can possibly get in an automobile is a late model used highly fuel efficient car, like a 2005 Honda Insight. With gas prices as high as they currently are, you’re better off switching to such a car sooner rather than later, especially if you’re driving something that’s relatively inefficient in terms of fuel. If you drive 15,000 miles a year and are able to double your fuel efficiency from 18 miles per gallon to 36 miles per gallon, with fuel at $4 a gallon you save $1,667 a year on gas. That’s $138.89 a month.

Ditch your fuel-efficient car and rely on a bicycle and your own two feet
If you’ve already got a fuel efficient vehicle (that 36 miles per gallon one mentioned above, for example), then consider eliminating it if you can and use a bicycle, public transportation, and your own two feet for getting around. This would save $1,667 a year in gas alone over that fuel-efficient car using the mileage situation described above, and that’s not including saving on maintenance, oil changes, potential breakdowns, parking, and insurance. If your current car has a gas mileage worse than that, then the savings are even greater. At this point, if you need a car only a couple times a year, you’re better off getting rid of your car and just getting a rental during those times. If I lived in a large city, I would strongly consider going without a car, getting a carrier for my bike, and just using that for everything.

Form and manage a carpool
If you commute in your car more than even a few miles to work, look into setting up a carpool, or even just sharing a ride with a single other driver. If you can cut your commuting miles in half – and let’s say your total commute is 20 miles, 5 days a week, 48 weeks a year – you reduce your driving miles by 2,400. If you’re driving an “average” car with a fuel efficiency of 24 miles per gallon, that’s 100 gallons of gas – $400 a year right there just by riding to work with the guy down the block.

Rent out a spare room (or rooms) in your home – or share a house with another family
For many families, the mortgage (or rent) eats up a major part of the monthly income. One big way to reduce that is to think outside the box a little – take on a boarder or another family to offset some of the cost. Not only could the household additions help pay the rent bill, but they can also help reduce food costs and other bills.

One place to look for such arrangements is within your own family. Perhaps someone you are related to needs a place to live for a while and thus the opportunity could be mutually beneficial. My wife and I have extended offers like this to both of her sisters individually and there’s a sizeable possibility that at least one of them will take us up on the offer.

Downgrade to smaller living quarters
Another option is to look at downgrading the size of your living quarters, though this may be difficult for some in overheated housing markets. If your living expenses are making your mortgage or rent payments difficult, recognize that there are other living options out there that can save you a lot of money in exchange for less space.

Look at your life right now: do you need all of the space available to you in your living quarters? If the answer is no, it’s worth your while to look into downgrading your living quarters a bit.

Buy a deep freezer, fill it with food on sale, and eat primarily out of it
A deep freezer is a fantastic way to save money as it lets you stock up on food by buying in bulk. You can do things by buying a large portion of a grass-fed cow at once, stocking up on beef, or hitting any exceptional food sales at local grocery stores really hard. Even better, you can also freeze things like whole tomatoes quite easily and unthaw them later on. You can also prepare whole meals in advance and store them in there.

These options all add up to significant food savings, and compared to the cost of a deep freezer, can add up to some serious cash over time. Our deep freezer saved us an estimated $200 over the last nine months, considering the bulk cost of the food we were able to store and the savings due to prepared meals that enabled us to eat cheaply at home.

Eliminate most beverage buying – switch to drinking tap water
If you drink soda, considering cutting out that habit and replacing it with water. It doesn’t change your health a bit, but if you can cut out three sodas a day, you’re saving about $20 a month. More than that and it’s gravy.

My technique is simply to fill bottles and put them in the fridge so I can grab them reflexively like I used to do with sodas.

Adopt cloth diapering from the start if you have kids
We’ve looked at real world analyses of cloth diapering and done our own, and we’ve come to the conclusion that if you’re having multiple children and are willing to invest in good cloth diapers up front, it’s way cheaper than doing it on your own.

Here’s the plan: ask for high-quality cloth diapers at any baby showers you have (we love bumGenius) and then stock up on the rest you need before the baby arrives. I recommend at least twenty diapers to start with, then adding more if you find your routine can use them. Then just establish a diaper washing routine – we wash ours twice a week in a careful routine. bumGenius (the ones we use) break even against Pampers Swaddlers (the disposables we used) in about seventy washings or so, and then after that it’s pure gravy, as your cost per diaper just gets lower and lower.

If you’re planning on having more than one kid and can get some of these diapers at a baby shower, jump on board now. This big choice will save you a ton of money over time.

Eliminate all hobbies that require buying new stuff with any regularity
If you’re engaged in a hobby that requires you to buy new stuff on a regular basis, like golf or gaming, consider looking for a new hobby, or at least one that requires less investment. In the past, I had a hobby (Magic: the Gathering) that required significant cash outlay on a regular basis – as much as $100 per month – to stay involved. It was a giant money drain and it took up time that I could have been devoting to other hobbies or to self-improvement.

If you’re involved in such a hobby, take some time to identify some of your other interests – particularly ones that are cheaper – and get involved in those interests. Reading is a cheaper hobby than golf, for example. Jogging is a cheaper hobby than collecting records. Learning an instrument from an older used model is far cheaper than collecting DVDs.

Eliminate your Netflix subscription or monthly allotment of rentals and hit the library
Many people who subscribe to Netflix or hit their local video rental store often are unaware of the free film rentals available to them at their local library. Head over there and check out what they have available – my library has an astounding collection of great films that we’re slowly going through over time. I’ll pretty much check out anything made in the 1940s, for example (that decade was the golden age of film, in my opinion).

If you can take that line item out of your budget, you’ve just whacked off at least $10 a month without any effort.

Avoid the bookstore (and amazon) and hit up your local library and PaperBackSwap
Even though I read several books a week, I haven’t purchased a book in several months. How do I do this? I hit the local library hard, checking out an armful once every other week, and I also hit PaperBackSwap hard as well.

Compared to my previous reading habits, which would have me buying an armful of books at the bookstore every few weeks, this has been a huge cash saver. It turned a relatively expensive hobby into one that borders on free – and is intellectually lifting as well.

Eliminate your cell phone bill and go to a prepaid phone
This works well if you don’t use many minutes at all each month – and I certainly don’t. I just want a cell phone that works in a pinch when I need it and nothing else, so why pay that $60 monthly bill?

Do a bit of shopping around and make sure you find the right offer for you – one with enough minutes for your needs but without that costly monthly bill. For us, I estimate that over the long haul I could easily save $40 a month to make this switch – the only thing keeping me from switching right now is the termination costs on my current contract, which is winding down right now.

Eliminate your land line and go exclusively to Skype
Similarly, I now use Skype for all of my phone usage when at home. I have a wireless phone that I carry around the house and use that for phone conversations, and I have a camera and microphone for videoconferencing. I can call any number in the U.S. and Canada and it only costs $2.95 a month – plus I get some minutes to use calling anywhere in the world.

This is a huge savings for us – about $38 a month cheaper and that doesn’t include any long distance charges that used to come from our landline. I find it just as convenient as our old service and a lot cheaper each month.

Switch banks for your primary checking and savings
Before I switched banks, I was getting hit with almost $20 a month in various maintenance fees and ATM charges – far too much. I eventually switched to ING Direct as my primary bank and haven’t been hit with any fee in over a year – not only that, I’m now earning significant interest on my checking balance and the online banking is much easier.

It’s not as hard as you think to switch, but it does require some effort. If your bank is dinging you with a lot of fees, though, this can be a huge money saver – and it can earn you some money, too.

Do your clothes shopping at a consignment shop
Most people shop for clothes and buy exclusively new stuff, not realizing they can get nearly new clothing for pennies on the dollar by checking out thrift stores and consignment shops. Start your clothes shopping at your local consignment shop instead of at your local department store and see how much you can save – you can often get the same quality clothes you normally buy for much cheaper, or much higher quality clothes for the same prices you normally pay.

I’ve not purchased a single article of clothing (aside from some socks in a pinch) at full price in more than a year and my wardrobe is doing just fine. Even better, it’s added up to a lot of cash in my pocket.