If you’re trying to pay off your debt quickly, the biggest piece of advice I can give you is to look at what you’re spending your money on. Most of us think we don’t have any money leftover at the end of the month, but if we peek into our bank statements, we can find some.
After you’ve looked at your expenses, it’s time to figure out where you can cut back. Can you find a cheaper apartment? Can you refinance your loans to get a better rate? Can you shop at Aldi instead of Whole Foods? Some of your expenses – like your utility bill – you can’t change that much. But others you have a lot of control over.
There’s so much you can do to save money, and decreasing your expenses is one of the only ways to pay off your debt early. So here’s my list for the five things you shouldn’t spend money on when you’re in debt.
A New Car
Earlier this year, my husband and I said goodbye to our precious 2001 Toyota Highlander. It was the first car I ever loved driving, and it died on the highway while we were heading to a ski trip. When we were looking for a replacement, I was amazed at how much cars cost. I’ve always had a used car, and the first two I owned were given to me by my parents (side note: I realize how lucky and privileged I was).
When I tell people how I paid off my student loans, I usually mention that I budgeted every dollar and tried to live as frugally as possible. What I forget to mention is that even after college, I drove my 1999 Toyota Avalon.
It was only a few years ago that I realized how for many people, a car payment is normal. I didn’t notice this until one day I parked at work and noticed that my car was one of the oldest in the lot.
I was earning about $30,000 at the time, as were many of my coworkers. I was surprised. How does everyone have a nicer car than me? Am I really that broke?
One day, I was talking to a friend about her budget and she mentioned that she had credit card debt and a car loan. “Oh,” I thought. “That’s how everyone has a nice car. They finance them.”
Car loans have been getting longer and longer. About a decade ago, the average loan was five years long, but now terms are closer to 6.5 years. You can even find ones with 7-year terms.
Here’s why I hate car loans. If you take out a six-year loan for a $19,000 car, you’ll be paying about $342 month with today’s interest rates. that’s $342 you can’t put toward your student loans, retirement savings or emergency fund. After total fees and interest, you’d pay $20,540 for a car.
In my eyes, a car takes you from point A to point B. Sure, it’s great if it has a built-in GPS or it’s in your favorite color. But if you’re saddled with student loans, you do not need to think about that when you’re buying a car.
My new (used) car isn’t fancy. There’s no Sirius XM radio, no camera that tells me when I’m about to hit another car, no Bluetooth capabilities. But it only had 100,000 miles and got a clean bill of health from the mechanic. I know it’ll be a while before it needs some maintenance, and for now, I have no car payment.
Note: I’ll be writing a post soon about how to buy a used car in cash without getting a lemon. Stay tuned!
Most personal finance experts cite eating out as a huge budget killer. I’m one of them. I cannot get over how often people eat out. Part of that comes from a family where eating out was not an option. Even now, I feel a little guilty when I eat out if I could’ve grabbed something at home.
But let’s do the math. The average person eats out between 4 and 5 times a week. At $10 a meal, that’s at least $40 a week. Times 4 weeks a month is $160 or $1,920 a year. Doesn’t sound like a life-changing number?
If you have $20,000 in student loans at 6.5% interest and a $300 monthly payment, an extra $160 a month could help you pay off that balance two years ahead of schedule. Even if you cut back to eating out once a week, you’ll still reduce your term by one year. Now do you see why I’m so insistent about eating at home instead of a restaurant?
I’m also including food delivery services like Blue Apron. Most of these cost about $9-$10 per meal and when you factor in time, it’s an even worse deal than eating out.
Solution: Making food at home is the best way to save money, but it can also lead to food waste if you’re not careful. Thankfully, the internet has TONS of resources on eating cheap and healthy. First, there’s the subreddit Eat Cheap and Healthy, where Redditors post their favorite cheap and healthy recipes.
One of the best resources is the $5 Meal Plan, developed by my friend Erin Chase. She has four kids and manages to create meals that cost about $2 a person. For $5 a month, Erin sends you meal plans, complete with shopping list. Gluten free or vegetarian? She has meal plans for those. If you find yourself avoiding grocery shopping because you don’t know what to buy or how to make your food last, I recommend giving those meal plans a try.
Leanne Brown has a cookbook, “Good and Cheap: Eat Well on $4 a Day” which details how even people living on SNAP benefits can eat well. It’s also available for free on PDF if you’re really looking to save money. Her book became famous because it’s one of the few resources available for people living below the poverty line who still want to eat healthy.
Another favorite is the blog, Budget Bytes. This was one of my favorite inspiration sites when I was paying off my student loans. One complaint is that she doesn’t use enough seasoning in her recipes, so keep that in mind.
I love reading. It’s one of my favorite hobbies. But I often struggle with getting through books before they’re due at the library (I try to borrow books instead of buying them). Then I’m left with the option of renewing the book, which isn’t possible if the title is in high demand, or buying it, which is expensive given my love of literature. Today, I thought, “Maybe I should sign up for an Audible subscription so I can finish more books.”
I looked up the cost for an Audible subscription. The cheapest plan is $14.95 a month for one audiobook and 30% off any other purchases. If you don’t purchase a book, your credit will roll over to the next month. But here’s where they get you: the credits do roll over, but they can also expire. And when they do, that’s $14.95 down the drain.
I know you might be thinking, “What’s the big deal if it’s only $14.95?”
These types of subscriptions add up. If you have a Netflix, Hulu, Spotify and Audible subscription, you could be paying more than $100 a month for your entertainment. That’s not including any movies, concert tickets or museum exhibits.
Solution: Make a list of the subscriptions you have and rank them by price and how much you use them. When I was paying off my student loans, I canceled my Hulu subscription because I realized I used Netflix more. I also found out I can check out audible books from my libary for free.
New Designer Purses
This is another thing that baffled me as an adult. Why was I dragging around a purse I bought from Target when every other girl had a Kate Spade, Coach or Michael Kors bag? Was I missing out on some sort of 80% off sample sale where you could buy a leather clutch for $30?
Nope, I realized. That’s just what women buy. If you buy one purse and wear it for 10 years, it’s probably a good deal. But I find it hard to imagine that spending $300 on a Marc Jacobs cross body bag is a good idea if you have student loans, especially if you get a new purse every year.
Solution: If you still want a designer purse, at least buy it used through a site like ThredUp or Poshmark where you can save more than 50%. I also bought a Longchamp bag through eBay once for $47 or 60% off.
When I was a kid, my parents took me to the fancy hair salon. Every few months, I went and got a $50 haircut. My parents were middle-class, and I didn’t realize until later that they splurged on haircuts while foregoing eating out and buying designer clothes.
When I started paying for my own haircuts, I realized how expensive they were. Getting a $50 haircut every three months equaled $200 a year (more like $240 once I factored in tips). My solution? Get my hair cut less frequently. I also only got highlights once a year, instead of having them refreshed every time I went in.
I also mostly avoid manicures and pedicures and prefer to buy nail polish and do it at home. This is huge. For $10, you can buy a bottle of OPI or Essie polish (my personal favorites) and do it yourself. Even a cheap manicure will run you $15-$20.
Solution: Now that I’m in the process of dying my hair red, I realize how much money I saved by keeping my hair low maintenance. I could’ve saved even more if I had gone to a beauty school or low-cost salon, but I didn’t want to deviate from my favorite hairdresser. Search for beauty schools in your area to see what you can find. The local Aveda salon only charges $15-$20 for a haircut and $40-$75 for color.
Again, you don’t have to completely cut out manicures or pedicures from your budget. But think about cutting back, from once a month to once every two or three months. If you dye your hair, space out your appointments more. These small changes can add up quickly and can really reduce how long you’re in debt.
Everything I’ve listed here is my opinion. I don’t care about the kind of car I drive, so I think it’s silly to spend a lot of money on one. But if you really value your vehicle, then try to find a balance between your financial responsibilities and that sweet ride. Same for eating out, Kate Spade bags and manicures.
As my good friend Paula Pant says, you can afford anything, but you can’t afford everything. Choose one or two priorities you have besides your student loans and ignore the rest.