Cents and Sensibility: Kick Your Debt in Three Steps

Credit: Thinkstock

Are you focused on the big three?

I am not speaking of LeBron, Wade, and Bosh, but the three biggest expenses that the average American spends from their paycheck: Housing, Transportation, and Food. I am going to share tips on how to cut down on expenses in these areas.

HOUSING (including property taxes, assessments, and property insurance) should not be more than 34 percent of your income. If your rent or mortgage is more than that percentage, consider downsizing or searching for a cheaper place to live.

If you haven’t already refinanced your home (and are not upside down), now is the time to do it. Check your homeowners’ insurance. Get a comparison quote and ask your insurance company to give you a better deal. If your insurance company wants to keep your business, they will find a way to keep you happy by keeping money in your pocket.

TRANSPORTATION is probably your second biggest expense (nearly 17 percent of your expenses). Just like home insurance, check for better deals for your car insurance. Find comparable quotes online. A little effort could produce results that will better your finances.

Also, use public transportation, which could be cheaper than a car note, insurance, and not to mention the time spent in rush hour traffic. Students and seniors can take advantage of discounts as well. You may also want to consider carpooling to and from work whenever possible and combine errands.

Plan your route to cut down on excess driving and save money on gas. Maintain your car by getting oil changes, and check tire pressure. Properly inflated tires also help increase gas mileage. Routine maintenance will help prolong the life of your car’s engine and in the long run, helps you save money.

FOOD Do you spend money on food every day? On average, Americans spend 12 percent of their income eating. Breakfast, lunch, and dinner from takeout spots can become a huge burden on your finances. Take your lunch to work and eat leftovers (besides, it may be true that some leftovers taste better the following day).

Take time to plan your meals weekly and pick one day during the week for grocery shopping. Make sure you buy enough food to feed your family for the evening and enough to put in a bag for lunch. Wake up 20-30 minutes early to fix breakfast. These tips can save not only money, but also time.

The bottom line is- the biggest way to drastically cut debt is to focus on the three biggest areas that are consuming your income.

About Dr. Karen Ratliff

Dr. Ratliff is a certified life coach and professional educator, assisting many people in accomplishing financial, career, and educational goals.  She is also the author of “Tightening Your Bootstraps: 104 Tips to Kick Your Debt to the Curb Now.” Keep up with her budgetary advice via Twitter @drkarenratliff.