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Debt Elimination: Step 1 – Creative Ways to Cut Expenses

image by Brad_Chaffee

You want to be debt free, right?  Excellent!  This post is all about the first of the five steps I teach about how to eliminate debt.  Before we get into the details of this step, I’ll go ahead and give you the five steps, in order.  They are:

  1. Cut Expenses
  2. Maximize Income
  3. Get Current on Everything
  4. Use the Dave Ramsey Debt Snowball to Arrange Your Debts
  5. Make a Call Every Time You’re Ready to Pay Something Off

Simple enough?  I hope so.  Let’s get into the details of Step 1: Cutting Expenses.

What to Cut

There are lots of bills the average American pays just because an envelope shows up and says money is owed.  I talk to people all the time who pay too much for cable, internet, cell phones, home phones, vacation clubs, car payments, insurance, etc., etc., etc.  While I can’t give a blanket answer for things you should cut, I do have a simple process to help.  Look at everything.  Yep – pull out every bill, review it carefully and ask if it is a necessary (or at least a worthwhile) expense.  If it isn’t, cut it out completely (if possible) or reduce it (at a minimum).

How to Cut

Don’t assume the amount showing on the bill is the best rate out there.  Consider a common example – internet service.  Where we lived there were four possible vendors to provide high-speed internet service.  When we wanted service, I called each of them and told them what I needed and got their price.  I told them I was going to call their three competitors and whichever had the best price got my business.  I actually told them, “I have no loyalty to anything but price for this product.”  While there are some pretty crappy internet services out there, all four options for me were good.  My rate options ranged from $20-60 per month.  I went with a $30/month option because it was the cheapest for the speed I wanted.  Savings per year = $360.  The process took me about an hour.  As you look at your bills, look to see if there is anything on there that another vendor offers.  Call them and get a price.  As long as you’re not under contract, you are likely going to save some money by switching providers or by at least threatening your current provider that you’ll leave if they’re not the best price.

One other thought on this section before we move on.  If you have charges you’re not certain about on a bill, call to find out why they’re there.  For example, cell phone replacement insurance.  With my current carrier, it is $7 per month and I have to pay a $100 deductible if I have to use the insurance.  I bought a good, used phone for $4 at a yard sale and stuck it on a shelf.  That’s my phone insurance.  Yes, I know I got lucky, but if your phone dies, couldn’t you hit Craigslist, eBay or some other site and buy a used phone?

How Long to Cut

The simple answer here is to cut expenses for as long as you need the extra money.  In my case, it has become a lifestyle choice to not have cable TV, drive an older, paid-for car, to use the library for most of my book wants/wishes, etc.  For you, the answer may be to cut things for just a short time while you focus on getting rid of some specific debts.  There is no hard and fast rule here, but I’d almost bet once you cut some everyday expenses, you’ll find many of them will be things you’ll never miss.


Even though it might sound obvious, cutting expenses is the very first step toward becoming debt free.  Debt reduction means paying more on your debts so they go away faster.  In other words, if you cut expenses, you can have more money to pay toward your debts.  Let’s not make this complicated!  We’ll get into step 2 in a few days: Maximizing Income.  We’ll discuss creative ways you can bring in some extra cash.

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  1. melissa alder

    I have a question on this section. What about life, medical insurance? Do you carry it on yourselves? I have to pay 247. a month for my husband and myself. I have tried to find something cheaper but the lower the monthly payment the higher the deductible. I went with an isurance that I pay into until the deductible is met. I don’t ever need to use it (THANK GOD) we are all healthy but if we ever do need it, it will be there. I also have life insurance on myself and my husband. I have remarried in 2010 and I carry insurance on us while his little bit of money he makes doing construction pays our house payment, cable bill, cell phones ( our cell phone were near 300 last month) but we have his son and my son on the plan too. They are old enough now to pay for their own phones so we are getting ready to cut them loose. Our cell phones will still be high because we both have smart phones. My husband also pays electric and trash. We would love to get off the grid but that is a dream down the road for us. For now we are stuck paying the man.

    1. Barry

      I very much believe in TERM life insurance as income replacement in the case of a tragic death when the income would be needed by those left behind and medical insurance (at least major medical) on everyone in the home. I wrote about this on my wife’s site as well (http://www.stacymakescents.com/life-insurance-for-a-stay-at-home-mom) and dedicated an entire chapter to this topic in my book (http://www.debtortobetter.com/the-book/). I think you’re on the right track by asking “can we cut this” about EVERY expense, but don’t go overboard. Remember your priorities. I counsel people who are hungry because they used the last of their cash to pay a credit card bill. That’s stupid. Keep your head on straight and minimize risk of financial disaster by keeping at least basic insurance coverages. What I was really getting at in the post was things like specialty insurance (cancer, heart attack, etc.). While they may serve a purpose, they are not necessities and general health insurance covers these items anyway.

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