7 Ways to Climb Out of Debt in the New Year

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Hope everyone had a very Merry Christmas yesterday, and a Happy Boxing Day today! I’ve got a rockin’ post for you today contributed by Jacob at Cash Cow Couple. He and his wife, Vanessa, know how to tackle debt and eliminate it with incredible efficiency. If you’ve been struggling with debt, the start of a fresh year is a perfect opportunity for you to make a plan and take action to kick that debt down once and for all. I’ll let Jacob take it from here and share with us 7 ways to get out of debt in 2014:

get out of debt

While growing our blog, my wife and I have met many people who struggle with debt. Some are haunted by bad decisions and loans taken during the college years, others have a really difficult time with the concept of spending less than they earn, or are plagued by bad habits. Or perhaps you’ve already made progress, maybe you’ve recently done a complete lifestyle 180 – moving from consumer to saver, but you still carry the past debt baggage that can be so hard to shake.

The good news is that debt can be conquered. We did it, and rather quickly. In our first 9 months of marriage, we paid off a combined $19,000 in student loan debt. That’s not a fact we openly brag about. It’s one we share to inspire.

With a few lifestyle changes and some mental fortitude, you can destroy the debt that you carry. Saving money allows you to pay off additional debt, or find additional investments to grow your wealth. Today, I’d like to share 7 ways that we personally use to save more money.

1. Live in a Smaller House

I can’t count the number of times I’ve heard people attempt to justify their mortgage on the grounds that it’s a great investment. First of all, your personal residence is not a good investment. At best, it’s historically kept up with inflation, but that’s it. If you want an investment, check out the interest that the credit card company is collecting off your hanging balance. That’s an investment.

Secondly, even if it were an investment, most people are overleveraged. They own too much house based on their income and spending levels. That’s why they can’t seem to do anything except barely make minimum payments each month.

If you need cash flow for debt, own a small house or rent something cheap. Do what it takes to climb out of debt, then consider getting something a little “nicer.”

2. Carpool (or Find an Alternative, or Move Closer to Work)

The IRS estimates that it costs .57 cents to drive one mile. Let’s assume a typical commuter travels 15 miles to and from work each day. Let’s assume you are worth $20/hour as an employee. So you each drive 30 miles per day, which I’ll assume leaves you with an exact 1 hour round trip commute between leaving, driving, traffic, parking, etc.

So you have an hour of your time, or $20, plus 30 miles commute * .57 cents/mile = $17 in driving costs. Your commute weighs in at a hefty $37, each and every day. That’s worth almost 2 hours of time, gone. Not to mention the literal hour of your time that is spent sitting in a car.

First off, consider moving closer to your job so you can ride a bike to work. If you refuse to move, how about riding with someone else or riding the bus?

3. Kill Retail Clothing

According to BLS statistics from 2011, Americans spend an average of $1,700 on clothing. That is INSANITY! There is a better -and more financially sound – way of clothing yourself:

  • Sell the clothes you don’t wear.
  • Wear the ones in your closet that still have the tag attached.
  • If you must buy more, look at garage sales, thrift stores, or similar places
  • If you must buy new, be patient and buy during huge sales.

4. Find an MVNO and Drop Your Cell Phone Plan

Paying $80/month still for a cell phone plan? Inconceivable. With mobile virtual network operators, or MVNOs, becoming more popular, it’s also becoming easier to switch to a cheaper cell phone service. With providers like Republic Wireless offering unlimited talk and text for $10/month, it’s time to switch. The times have changed, and so should your cell phone plan.

5. Unplug Everything

I want you to think about all the electronics you have plugged in at the moment. I know, difficult task. Now consider the last time you used the item. Most likely, it’s been a while, or it’s infrequent.

Electronics draw power all the time, even if in standby or off mode. This is known as vampire power. You should unplug everything (or have a power strip that can be powered completely off) when not in use. It can save you several hundred dollars in energy costs each year.

6. Skip Vacation (Unless You Couch Surf)

Vacation can be nice, but it sure can be expensive. And despite what you’ve heard, all Americans are not entitled to 2 weeks of luxury beachfront resort vacations each and every year. Consider staying around home and finding cheap things to do. Or if you’re really awesome, sign up at couchsurfing.org and take a trip for free (minus transportation costs).

7. Be a Saver, Not a Spender

This is the most important part. Yes, all of the tips above can help you spend less, but they aren’t strict rules. And if you don’t have the desire to change your habits or stop consuming, you won’t do it.

Without a doubt, the most important thing you can do is change your mindset from spender to saver. It’s very possible and I’ve witness many transformations.

When you start understanding that in this country, there are countless ways to save money and extract huge value for pennies on the dollar, you’ll begin to change the way you consume. That will lead to more changes, which will transform your financial situation.

Are you ready to make a plan and commit to eliminating your debt in 2014? In what ways are you planning to cut costs so more money can go toward your debt repayment strategy?

Author Bio: I’m Jacob, one half of the Cash Cow Couple. My wife and I enjoy teaching others how to live an abundant life on a very modest salary through proper saving and investing.

 

19 Responses

  1. Dee @ Color Me Frugal

    December 26, 2013 8:30 am

    Great tips! Living in a small house is an especially important one- buying a house that’s too big or too expensive for you can have a significant negative impact on your finances (for years!) I also love the tip about unplugging everything- we are good about doing this with our kitchen appliances like the toaster and coffee machine but often forget about the other things in the house that stay plugged in. I’ll have to work on that in 2014!

    Reply
  2. E.M.

    December 26, 2013 10:26 pm

    I am following most of these right now, but in the new year, I do plan on dropping Verizon (finally). I’m hoping that a switch to a cheaper provider goes smoothly. I’m also planning to move to a lower cost of living area. I currently live about 5 minutes away from my job, haven’t really made any clothing purchases this year, and am certainly a saver over a spender. Good tips!

    Reply
  3. Jen @ Frugal Rules

    December 26, 2013 10:34 pm

    I find number 7 to be the greatest tip among the great tips you shared in this post. I used to spend on things that I thought I owe to my self for working hard but realized it got me stuck in a sorry financial position. I learned though and now working on being more of a saver than a spender.

    Reply
  4. KK @ Student Debt Survivor

    December 29, 2013 10:30 pm

    Wear the clothing with the tags made me laugh (guilty!). I have far more clothes then I need or could wear in even a month. I’m not a fashionista by any means, but I have been known to buy 2-3 of the same shirt if I find a good sale and it fits well.

    Reply

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