Get Out of Debt in 2012: Cutting The Fat

By now you’ve seen how much debt you owe and devised some sort of a budget. Is that working well for you?

If you’ve followed the jar method of budgeting, you should have had about two weeks of testing this method out. How’s it going? You should be able to project out and see if you will be able to stay within your spending limit for each category – if there are no emergencies.

I’ve found that the “miscellaneous” or “entertainment” jar is where money often disappears the fastest, leaving the savings jar empty or with a few pennies rattling around at the end of the month. Is that what you’ve experienced? If so, it’s fine. We are going to change that for you with today’s lesson. We are not going to restructure your entire debt, we’re just shaking things up a bit.

After you’ve spent some time following a budget, usually where every penny is accounted for, you may begin to notice that you can probably make a few minor changes in one or two areas to save a bit of money. Chances are that you cannot change your rent or mortgage easily. Your student loans and credit card debt can be changed as well, but that will take some effort. Instead, I like to start with the jar with which we have the most control – entertainment.

Think back to the past two weeks. Where have you spent money from your entertainment or miscellaneous jar? Do you see the latest movies every week? Are you buying new clothes from the clearance sales? Lots and lots of mocha-choca-latta-ya-ya ( I had to slip that Lady Marmalade reference in there)? How often are you eating out?

As individuals living in the western world, we tend to like being entertained…a lot. We just don’t realize it. We think of it as a right to have every cable channel, plus the 4G phone, plus high speed internet at home, plus being able to buy lunch and maybe even dinner every day, plus picking up that awesome jacket on sale at Macy’s that you just won’t see again because it’s such a good deal, and oh, they have it in my size. Or maybe that’s just me.

Having those things are great, but how necessary are they? How happy do they make you? How much happier would you be with an extra $100 in your saving account every month?

I’m speaking as the converted here. I never, ever, had money left over after spending, I promise, EVERY SINGLE DIME EVERY SINGLE MONTH. I lived for years like that. In fact, I asked, if living paycheck-to-paycheck was so bad once. And yes, it is.

For the first time in my life I actually have a savings account, and while it’s nothing spectacular, I have a tiny emergency fund. If I blow a tire, I can actually pay for it without having to depend on a credit card. It’s an amazingly liberating feeling.

Now, for those of you who pay for everything with your credit cards for the points and then pay it off, you’re in a different place, so this doesn’t apply to you. My brother does that to get handsome cash back checks every couple of months. It works so well for him that he even wrote about how he’s making money with his credit card. Until we’ve all gotten our spending under control, this really doesn’t apply.

Over the next two weeks, I want you to rethink your entertainment jar. Take 10% out of that jar and put it into your savings jar, then find a way to cut your entertainment spending to make up for the difference.

I’m not asking you to live like a hermit. I’m not telling you to give up your latte.  I’m asking you to make a conscious decision to sacrifice a little or shop around for a better deal.  One change that I made was moving my phone service from AT&T to Simple Mobile. For $40 a month with tax included I get unlimited talk, text and 3G web.  Before that I was paying more for less service.  I didn’t give up my cell phone, I just shopped around.  Because we don’t watch that many movies, we got rid of our premium cable channels (bye-bye HBO) and we get 2 movies every week from the Redbox instead.  I ditched the $29.99 plan for about $10 in movies instead.  Some weeks, we don’t even pick up any movies.  Small changes add up.

So, your assignment this week is to trim a little bit of the fat.  Find a way to save 10% off of your entertainment budget and stick the savings into your saving jar.

If at any time you’d like to catch up to this course, or if you want to begin from lesson 1, you can always select the “Get Out Of Debt Course” under categories. Everything will be nicely organized for you in order of appearance. Remember, let’s make this a GOOD 2012.

See you in two weeks.

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10 thoughts on “Get Out of Debt in 2012: Cutting The Fat

  • Hi,
    What started to send me into a head spin was the price of communications ie: telephone,cable,internet and cell phone. I’ve brought ours from well over $250 a month to just under $160. I’ve got every deal I could possibly get and now again in March the price is going up for services.

    We may just end up cancelling cable all together and a bundle pack on my cell phone. Paying $2 thousand a year for this stuff is just outrageous. In Canada we get stuffed over with pricing for these items compared to the UK.

    Thanks for another great article.

    • It’s amazing how we have all of these new technologies but the price just keeps on going up. I never dreamed that I would be paying well over $200 per month for cable, but there we were, like sheep.

      I ditched my big company wireless service and moved to prepaid for $40 a month. It’s been great! We moved our home phone to the cable service, but my ears are on Vonage because it’s cheaper. I’ve just been so much more open to trying new things these days.

  • My phone/ Internet/ cell bill is where I am currently working on ‘trimming the fat’. We recently ordered the Magic Jack: but I haven’t reviewed it yet. We are also planning to switch our internet to a less expensive company soon. This makes me a bit nervous as I work from home online and need reliable Internet. I know this new company will provide reliable service but I am apprehensive about the possibility of losing online access during the switch.. We will do it soon and I’ll blog about how it went.

  • It’s so easy to “trim the fat” if you’re willing to get creative. Cutting out all entertainment is no good… but finding free entertainment is incredibly satisfying!

  • Cutting the fat has become challenging with prices on everything sky-rocketing. However, it s a good tip to save 10% of your entertainment budget, since that is the easiest to cut from. This will quickly add to your emergency fund.

  • There is always some fat to trim, but it’s important not to cut all the fun and like Julie wrote find some cheaper or free alternatives instead of getting rid of all the fun in your life because it costs money…

  • Too many people just pay what is demanded of them when they get their car or home insurance renewal through the mail. It should be standard practice to compare insurance rates with several companies to ensure you are still getting the best deal. Same goes for utilities too.

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