Your household expenses hold a lot of power over your finances – and even your debt consolidation plans. Most of your income is spent on the things you need around the house. If you are careless about your household budget, it can bring a lot of negative effects on your current financial position. For instance, it can keep you from meeting all your debt consolidation payments. Or, it can even lead you to more debt!
According to statistics, the average American adult spends $1,497 on nonessentials each month. If you add that up, that can easily reach $18,000 a year! Imagine the amount of money that is spent on things that you can live without.
If you really want to improve your financial situation, you need to take a look at your household expenses. It is very important to be smart with how you spend your money especially if you want to complete your debt consolidation plans.
In particular, you need to focus on your variable expenses. It is not like the fixed expenses that are easier to budget and anticipate because it consistently has the same amount as mortgage payments etc. You also have the flexible expenses that are also necessary and require regular payments like your utility bills and credit card statements. However, this does not have the same amount each month so it is a little challenging to budget.
While these two categories of expenses can affect your overall household expenses but there is really nothing you can do about these. But there is one category that you have full control over. That is your discretionary or variable expenses. These are also important expenses but you can control how much you will spend. These include food, clothing, entertainment expenses, etc.
How household expenses affect your debt consolidation plans
Understanding your household expenses is important because it helps you organize your finances. This is necessary if you want to meet all your financial obligations – specifically your debt payments. If not, you might give in to your overspending habits and make things worse for your financial situation. Being in the midst of a debt consolidation program means you are in a fragile financial position. You do not want to jeopardize that.
To understand how important your household expenses are in debt relief, here are three ways that it can affect your current situation.
This is the first thing that will be affected – especially if you fail to control your spending, are the payments. Obviously, if you overspend and use the budget for your household expenses, it will compromise the funds set aside for your debts. You do not want that to happen because it will lead to more problems. When you skip a payment or miss a due date, you will incur late payment penalties. This will unnecessarily make your debt grow. If you are already struggling to cover all your financial obligations, you do not want to add this to your concerns. So keep an eye on your household expenses so it will not compromise your debt payments.
When you are not careful with the expenses you make inside the house, you will not just compromise your debt payments. There is also a possibility of running out of money before the next paycheck. If your budget falls short, you will be forced to use your credit cards to survive until you get your income. This means more debt for you. This gets worse if you are suddenly faced with an emergency situation. If someone needs to go to the doctor, get medication, or if something in the house needs to get fixed – what can you do? There is no choice but to use debt so you can get past it.
Finally, your household expenses can also lead to debt stress. If your debt grows because you were irresponsible with your spending behavior, that will eventually make you feel stressed. According to one report, debt does have a negative effect on the negative well-being of a person. It is bad enough that there is a stigma surrounding debt. It gets worse when you struggle to find the means to pay it off on top of everything else that you have to pay for. Thinking about making ends meet is enough to cause you to feel frustration and anxiety. It can make you lose sleep. If you do not do something about it, you will end up compromising your health too.
Tips to be smart with your household expenses
If you really want to improve your financial situation to get out of debt, you need to learn how to be smart with your household expenses. Since this eats most of your income, you need to be cautious with how you spend on it. Here are tips that will help you be smarter with the financial needs within your household.
Use a budget plan
Always have a budget plan. Regardless of your financial situation, it is important for you to have a budget that will monitor everything that you spend on. There is a budgeting strategy that fits your specific financial situation – especially when you are in debt. Use this to keep your expenses organized. Your budget will also help you make smart decisions about your finances. Just one look at it will give you an idea of how much you can afford for an unexpected expense. Not only that, but it will also give you insight on what expenses you can let go to make way for the emergency that you have to meet.
Learn to do things yourself
To make sure that your household expenses will not compromise your debt consolidation plans, it is important for you to learn how to do things yourself. This will help lower your monthly expenses. For instance, you can learn to tend to your garden yourself. That will help you save money so you have the extra funds to use on more important expenses – like your debt payments. Another thing you can do is cooking your meals from scratch. It will be healthier and cheaper compared to buying take-outs.
Buy in bulk or pay in bundles
When you shop in the grocery, try to buy things in bulk. Instead of buying every week, you might want to buy groceries once a month. Usually, the cost per piece is smaller if you buy a lot at the same time. Just make sure that when you do this, you will really use up what you bought. Do not buy in bulk if you are not sure that you will use them all up before they expire.
The same is true for subscriptions. Try to bundle them to save more. Among the things you can bundle includes your Internet connection, phone, and cable. Or maybe you can do away without one. Consider the cheapest option that will help you get what you need without spending a lot of money.
Be energy efficient
Finally, you need to find a way to lower your energy bills by being more energy-efficient. If you need to change one of your appliances, look for an energy-efficient one. Start with the ones that consume a lot of energy like your AC unit, refrigerator, washing machine, etc. Kitchen appliances also use heavy electrical loads even if you do not use it all the time. These will help you save on utility bills and can also be good for the environment.