There are tons of tips for how to live frugally to pay off debt, but today, I have gathered some of what I feel are the best ways for you to focus your income to get rid of debt and create financial freedom. Some simple changes in how you view money can truly make all the difference in the world.
How To Live Frugally To Pay Off Debt
Create a functional household budget.
A functional household budget is actually looking at your true reliable monthly income and true reliable monthly expenses. Fluctuating pay from part-time jobs that aren’t consistent, sales online or occasional side jobs are not consistent and shouldn’t be included. Focus on what is your primary income, then create a list of all of your regularly occurring expenses. This list should include things like housing, utilities, transportation, health, savings, groceries and similar items.
If you need help setting up a budget, The Budget Binder Kit I created will help you out.
A functional budget shows you what you have coming in and going out each month. If you have less coming in than going out, it’s time to look closely at the differences. Is the difference because your income is too low, or is it because you’re making poor spending choices? It’s often a combination of both poor spending habits and an income issue. If you cannot easily change your income status, it is time to look at what your expenses actually are and streamline as much as possible. That means eliminating things that are not necessities until you are in the clear and able to meet your needs.
Understand wants versus needs.
This is one of the biggest things to understand when you want to know how to live frugally to pay off debt. It boils down to what is coming in as income and going out as expenses. Typically the expenses that are necessary are what have to go. What is necessary to some is not to others. For my online business I have to have high-speed Internet with faster speeds than some. Others can do fine with a lower plan or simply using their cellular phone carrier for using the Internet. What is a necessity to me is a want for them. Take the time to look in detail at each item on your expense sheet and determine what can be removed as a want until you are better able to afford it.
Things to consider that are typically wants and not needs:
- Newer vehicle
- Larger home or living space
- Pampering like: manicures, pedicures, professional hair styling, massages or spa treatments
- Eating out
- Entertainment like: new video games, movie theater tickets, or amusement parks
Make savings a priority.
Ultimately if you want to live frugally to pay off debt, you need to also consider saving money in the process. For most families, debt racks up because of a lack of savings to pay for expenses that occur unexpectedly. A savings account is not just for vacations and future purchases, but for a rainy day. Job loss, poor health, vehicle repairs or even a new roof on your home can all happen out of nowhere and quickly incur debt if you do not have a savings fund in place.
Everything about how to live frugally will fall into place under these windows. Once you realize what you have coming and going out each month, you can begin to focus on how and where to save money. Using coupons, eliminating expenses and cutting corners can all be done better once you understand what your true financial needs are.