Household debt in the U.S. is so big that it takes a telescope to grasp it.
Americans owed a record $17.69 trillion in the first quarter of 2024. If you broke that into $1 bills and laid them end to end, they would stretch 1,714,278,744 miles.
That would stretch from your house to Uranus.
The good news, sort of, is that the average American is only $104,215 in debt. That line of $1 bills wouldn’t make it near Uranus, but it is still astronomical.
So how do we bring this stack of debt back to earth?
The easiest way is to cut expenses and use the money to pay off debt. That’s also the hardest way.
“Many people are reluctant to cut expenses, as they simply believe it’s too hard,” said Anna Barker of LogicalDollar, a money management firm.
It can be hard, but it’s far from impossible. Here are some tips that could help you reduce expenses and put more of those $1 bills in your wallet.
1. Start Tracking Your Spending Habits
If you want to save money, you must know where your money is going.
That’s relatively easy for most expenses since they are as close as your phone or computer. If you like to use cash, it’s a bit more challenging since you’ll need to compile receipts to get a fix on your spending.
If you pay for things with a credit card, debit card or app Venmo, just click on the website. Many financial institutions have pie charts or other graphics that break down your spending habits.
Most of those expenses fall into two main categories – fixed and variable. What’s the difference, you ask?
Fixed Expenses
These are big-ticket items with payments etched in stone. Every month, you’re probably going to make a mortgage or rent payment, a car payment and insurance payments.
If you like to have a roof over your head and a car in the driveway, these bills are unavoidable. That doesn’t mean you can’t lessen the impact they have on your bank account.
A roommate or housemate can split the rent or mortgage. Cell phone services fight with each other over price cuts every month. If you really want to save a few bucks, ditch your car and use public transportation or ride a bike.
Variable Expenses
These are expenses that fluctuate, like groceries, clothing, gas and utility bills. There areplenty of waysto make them shrink.
Use coupons, buy stuff on sale, eat out less, buy food in bulk, shop around for better deals on phone and streaming services. Take home-brewed coffee to work instead of driving through Starbucks for a $6.95 latte.
The whole concept of cutting expenses can be harder to swallow than a cup of lukewarm 7-Eleven coffee, but it’s something you need to stomach.
“Carrying debt is seen as completely normal – which it absolutely shouldn’t be,” Barker said. “This is why any effort to cut expenses will also have to be accompanied by a shift in mindset.”
2. Get on a Budget
This is where the mind-shifting begins. Write down how much money you make and how much you spend every month.
The fixed expenses are easy to figure out. A little guesswork is required for variable expenses, but you can get a pretty good fix by averaging three or four months of payments.
What’s left over is your “discretionary spending.” Decide how much you can put in savings,use for paying off debtand an emergency fund for things like unexpected medical bills and car repair.
Once you’ve filled in all those blanks, your expenses will hopefully not exceed your income. If not, you’ll need to get serious about trimming some budgetary fat.
3. Cancel Unnecessary or Unused Subscriptions
About 99% of all U.S. households had at least one streaming service in January 2024, according to Forbes. The survey did not say what percentage has no idea how much it pays each month to be entertained.
TV aside, Americans also subscribe to cable TV, internet, weight-loss and a smorgasbord of other monthly services. Once they’re set up, it’s easy to forget they are quietly deducting money every month from your bank account.
You should list all your subscriptions and ask:
- How much do I use this?
- Do I really need this?
- Can I live without this?
Pro tip: If you subscribe to Netflix, Prime Video, Disney, Disney Plus, Max, YouTube TV, Paramount Plus, Hulu and Apple TV, you probably watch too much TV.
If you decide to cancel a service or two, be prepared to say “No thanks” when they inevitably offer you a better deal to stay. It won’t be long until that rate goes up and you forget you’re even paying it.
4. Reduce Electricity Use
This is a fixed expense in that it’s unavoidable (unless you want to live like it’s 1887), but it’s also variable in that you can partially control how much it costs.
Heating and cooling account for about half the averageelectricity bill. Next is your water heater, washer and dryer and dishwasher.
You will find surprisingly high savings by lowering (winter) or raising (summer) your thermostat; really lowering your water heater; and washing clothes or dishes only when you have a full load.
5. Prioritize Sustainability
We’ve only been given one planet, so we might as well try to keep it clean, even when we’re trying to clean up our financial problems.
There are plenty of ways to do both. For instance:
Install energy-efficient light bulbs, take public transportation, take shorter showers, fix leaky faucets, collect rainwater for plants, choose energy-efficient appliances, grow your own food.
Mother Earth will thank you. So will your wallet.
6. Reduce Your Housing Expenses
Financial advisors say you shouldn’t spend more than 30% of your income on housing. Only 23% of Americans who own homes exceed that limit, according to the U.S. Census Bureau.
But more than half (52%) of people renting go above 30%. A Harvard study in 2024 found that 12.1 million renter households spend more than half their income on housing.
You don’t have to be a Harvard grad to know that’s a problem. What can be done about it?
If You Rent a Home
- Get a roommate.
- Give up a paid parking space.
- Offer to do repairs yourself for a break in the rent.
- Move to a cheaper house or apartment.
If You Own Your Home
- Try to refinance to get a lower interest rate, though that’s difficult in these days of rising rates.
- Remove private mortgage insurance. If you bought your home with less than a 20% down payment, PMI was required. Once you’ve paid off 20% of your loan, the PMI is removed. Even if you haven’t paid down your mortgage that much, check home values in your area. If they’ve increased, so has the value of your house. If the value is high enough that you have 20% equity, ask your lender to cancel your PMI. They are legally required to do it.
- Sell your home and consider renting one. The advantages are lower up-front costs, like taxes and insurance. And you won’t be on the hook for any home repairs.
- Rent your home, or a portion of it, as short-term rental.
7. Consolidate Your Debt and Lower Interest Rates
The average credit card interest rate in mid-2024 was 24.7%. That makes for a gaping hole in a person’s bank account. You can’t totally plug it, but you can lessen the drain by consolidating the debt.
Debt consolidationmeans combining multiple debts into one monthly payment. The goal is to reduce what you pay in interest, which means you’ll pay the entire debt off sooner.
Benefits of debt consolidation are:
- One monthly payment. No more juggling bills. It’s one and done.
- Lower interest rate. The loan should have a considerably lower interest rate than the interest you pay on credit cards.
- Pay off debt faster. It can take 20 years to pay off credit card debt if you only make minimum payments. Debt consolidation can eliminate your debt in 3-5 years.
The two most commonways to consolidate debtare through a debt consolidation loan or a debt management plan.
Debt Consolidation Loan
One way toconsolidate debtis to take out a large loan from a bank or credit union to pay off smaller debts. This can be an effective strategy if you have a good credit score and get a low interest rate on the load.
But there are potential drawbacks.
If you have a less-than-stellar payment history and low credit score, you may not get approved for a loan. Even if you are approved, the interest rate could be sky-high, which would defeat the whole purpose. There also could be loan origination fees that increase the cost.
Debt Management Plan
Adebt management planfrom a nonprofit credit counseling agency may be a good weapon in your battle against debt. These plans don’t use credit scores for eligibility.
They are used by nonprofit credit counseling agencies, who have agreements with card companies to lower the interest rate and monthly payment to an affordable level. The goal is to pay off the debt in 3-5 years.
Counselors also help with that tough work of looking at your income and expenses to come up with a budget that works for you.
8. Reduce Your Insurance Premiums
Home and car insurance rates vary from company to company, so it can really pay to shop around. Check out companies that offer lower rates for a safe driving record, or for those who drive cheaper cars. Cars with enhanced safety features can also get lower rates.
With home insurance, see if your company offers reduced rates for home improvements. Installing smoke and carbon dioxide detectors. Burglar alarms can also knock a few bucks off your premium and so can upgrading heating and electrical systems.
Also, consider raising your deductible. You can save 25% on your premium if you go from $500 to $1,000.
Some companies also offer lower rates if you bundle homeowners and car insurance. The bottom line here is don’t just mindlessly pay premiums.
“Many of us simply pay it and forget about it until next year,” Barker said. “By doing this you’re losing the chance to find a better offer.”
9. Eat at Home
Preparing and eating food at home can save you a ton of dough. Planning is the key.
Figure out what you’ll eat for the week, then stick to it. The internet is full of recipes and tips for people who can barely spell “Chef,” much less cook like one.
If you don’t have time to prepare meat during the week, make something big on the weekend like a casserole or chili. Portion it in daily meal containers. After that, all you have to do is grab and go. Or grab and don’t go if you’re at home.
You can also freeze big meals for later use. It’s a lot cheaper than hitting a drive-through every night.
10. Shop With a List
Don’t shop by memory. Write down what you need to buy. This simple habit can cut food expenses, help with meal planning and cut down on impulse buying.
It can be as simple or complicated as you want to make it. There are apps that can help you make lists and find bargains.
Some tips:
- Keep a running list during the week. Plan your meals and add items before you go shopping.
- Group items into categories (produce, deli, dairy, etc.), or even put them in order of where they’re located in the store. This will keep you from wandering down the candy or chips aisles, where impulse buying can really kick in.
- Comparison shop between brands and stores. Just don’t go overboard. It’s cheaper to shop at one or two stores than drive around looking for bargains at multiple stores.
- See if your grocery store has a rewards program, many of which offer discounts or coupons. Gone are the days of clipping coupons. Most rewards programs have an app that tracks your progress. Claiming rewards is as easy as looking at the app and punching in your phone number when you check out.
11. Order Groceries Online
Why push a cart through the grocery store when all you have to do is punch some keys on your computer? It saves time, and you’re less likely to impulsively buy that pack of chocolate chip cookies you just ran across.
Most grocery sites store your previous purchases, which makes it easier for you to reorder items and stick to buying items you really need.
12. Make Your Own Household Products
If you’re reluctant about concocting homemade cleaning products, relax. You’re making soap, not an atomic bomb.
It’s much simpler than most people suspect to make everything from laundry detergent to disinfectant spray to furniture polish. You need to buy basics like vinegar, baking soda, rubbing alcohol, Castille soap and lemons.
Get some decent spray bottles and containers.
Then go to YouTube or other social media sites. There you’ll find all kinds of guidance on how to turn those ingredients into a cleaning product worthy of a grocery store aisle.
The difference is a DIY cleaner usually costs less than $1. A store-bought will set you back $5-$15.
13. Check Eligibility for Food Assistance Programs
The federal Supplemental Nutrition Assistance Program (SNAP) – formerly known as “food stamps” – is the most popular way to lower grocery bills. Eligibility requirements vary from state to state, but in general a family’s gross income must be at or below 130% of the poverty line.
About 40 million Americans qualify for SNAP, but there are many other government and private relief programs available.
Many churches operate food pantries and offer non-perishable items for free. Some charities have grocery stores that offer deeply discounted items. The choices can be limited, but the savings are real.
14. Put a Freeze on Your Credit Cards
Giving up credit cards can be like giving up smoking. It’s tough. You might suffer withdrawals. But after you crawl out from under your sweat-soaked blanket, it’ll be worth it.
You don’t necessarily have to cut up your credit cards. Just put a temporary stop on them by going to your issuer’s website and freezing your account.
Do that, and your issuer won’t allow any new charges. Recurring payments you’ve set up will continue to be processed.
There’s usually no penalty for freezing a credit card, and you can thaw it out anytime.
15. Use Only Cash
This will literally keep you from spending money you don’t have. Put as many monthly bills as you can on automatic payment, then use what’s left for other expenses.
Such forced budgeting will also help get to the root of your financial problems.
“This will give you a chance to really keep an eye on how this money is being used and, ideally, adjust your spending habits going forward,” Barker said. “That way, even when you’re back to wielding a credit card, you’ll also be able to stick to your budget.”
16. Pay Off Your Outstanding Debts
The faster you get rid of debt, the more money you’ll have in your monthly budget.
Topay off debt, you must focus on credit cards. Unlike a mortgage or car payment, credit card debt grows if it’s not properly addressed.
Part of your budget should include paying more than the monthly minimum. Keep consolidation in mind, particularly credit counseling. Adding extra principal to your home or car loan will pay them off faster.
Start Cutting Your Expenses Today
When is the best time to start reducing expenses?
Now!
No more excuses. You don’t have to jump into the deep end of the savings pool. Taking it one step at time will lessen the shock to your system. You may be surprised how quickly you see results.
Talk with acredit counselor,who can help create a budget that reduces credit card bills. Consider adebt management program. Agencies have agreements with major credit card companies to reduce interest rates for clients. The counselor will explain the lower rates, and you can decide if it works for you.
You would make one monthly payment to the credit counseling agency, and the agency would distribute the money to each credit card company in agreed-upon amounts.
This comes with a small monthly fee, but the reduced interest rate should more than make up the difference and be a big step toward drastically reducing your expenses and bringing your debt back down to earth.
