Forbes.com recently shared an article about how 4 sisters worked together and paid off $182,000 worth of debt in 2 years.
When I saw the title I had to give it a read.
While I know not all of us could live and share a bank account with our siblings, the general tools they used to do it is something you can adapt into your finances as an individual.
Housing
Most people’s largest expense is their rent. Consider what you are paying for in your apartment. Are you paying extra for amenities or space that you don’t need? I’m not suggesting leaving your nice, gated and safe community for a dangerous and cheap shoebox, but really look at all the factors. Could you go back to living with a roommate? Would you be happy living with your parent(s) and just contributing to their bills? (Don’t feel bad if the answer is no. I love my Mom and I wouldn’t want to live back home, partly because of location. If you have Lorelai Gilmore for a mom I’m sure it wouldn’t be that bad.) Could you give up the view that’s adding an extra $100 a month to your rent? I’m currently in the process of looking for an apartment and I am constantly weighing the difference between necessity and luxury.
Allowance
The sisters also gave themselves an allowance of $75.00 spending money every two weeks… that’s $37.50 a week or $5.36 a day (spending money, not the money used for bills, groceries, gas, etc. ).Can you imagine living on that? This is the money you would spend on that random lunch meeting at Panera Bread or that run into Starbucks, that impromptu session of hookah…. Fun things that individually don’t seem bad but add up over the month.
I’m in no way saying that I plan to live my life on $5.36 a day until my car, loans and credit cards are paid off, but try giving yourself an allowance. For example, if you get paid every 2 weeks give yourself $75.00 to spend a week ($10.71 a day), after you get used to that try to reduce that allowance to $50 a week. Be strict with yourself. I personally like using my debit card because I earn rewards and cashback, but if you don’t try using the envelope method. Only carry the amount of cash you are allowed to spend and don’t use debit card or credit cards for everyday non-essential products.
Hit one thing at a time
They paid credit cards first. I think one of the main reasons people get so frustrated with saving and trying to pay down debt is that they feel like they aren’t getting anywhere. Try tackling one item at a time. For instance if you have 2 credit cards, pay down the one with the highest interest rate first. I also pay more than the minimum on my cards, but perhaps try to do 150% of the minimum on one card, and then pay a larger amount on the card you choose to pay off first.
For example, if you have $300 available to pay on your 2 credit cards this month, and the card with the lower interest rate has a minimum of 30.00 while the card with the highest interest rate has a minimum of $35.00, pay $45 ($30.00 X 1.5) or the first card and the remaining $255 on the second card. That way you are accruing less interest and paying one card off faster.
Check out the full article to discover the other ways the sisters saved.
EDITED BY M.L. Scarbrough