How to make spending cuts to get out of debt

Debt... it's just plain stressful. And that stress can dictate everything from how we feel physically and mentally to how we perform at work.

It can prevent you from truly enjoying life and being able to have fun and travel without worry. So either you skip a friend's destination wedding in Mexico or worse, you really feel like you should go so you charge the tickets.

The higher the credit card balance, the harder it becomes to make it payday to payday. There's no quick and easy answer when this happens, but if you're willing to make an effort you really CAN take back control of your finances. And the sooner you start, the fewer sacrifices you'll need to make long-term.

Start by creating your budget or list of expenses. Be realistic and include everything you pay on a regular basis — from housing/utilities to food to travel... and everything in between. Next, look at these three categories to make cuts in first:

• Entertainment: Cut back on evenings out and other things you do for fun that cost money. Look for alternatives for cheap date nights or family days. You don't have to completely give up on hanging out with friends though. Take turns at each other's houses and do theme dinners or game nights. It's still fun, but you don't have to break the bank.
• Cable: Cancel cable and use cheaper alternatives. Switching to a streaming service like Hulu, Roku, or Netflix could save many people $75-100 or more per month.
• Dining out: This is likely where a lot of us spend too much anyway. Plan meals and grocery shop so you can bring lunch to work/school and eat dinner at home. Don't forget about snacks at the gas station or candy machine. Buy them in bulk and bring with you to avoid those more expensive convenience items. Also, skip the coffee shop and bring your coffee or tea with you from home. If you go there a few times per week, that could be a potential savings of about $60/month.

Once you make these changes, use the money that you normally would have spent to pay extra toward your highest interest credit card or the one with the lowest balance. This is called the power pay method. (Paying toward the highest interest will save you more money in the long run while paying the lowest balance will allow you to pay off a lower balance card faster.) Once you pay off a card, put that payment amount toward another card and so on until they're all paid off. It's also a good idea to check if a Debt Management Plan is right for you. People on DMPs pay off their credit card debt faster and with less interest. This in combination with power pay can help get you out of debt even more quickly. Get started with an online counseling session or call 888.577.2227 to schedule a phone or in-person session. 

Remember: the short-term sacrifices will help you become debt-free so you can create a financial safety net, do more of what you want to do, and really enjoy life again. 

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.