In this period together we are studying with a group of friends a course about personal and family finance from Crown Financial Ministries. It covers aspects from Bible as it is made by a Christian organization, but has some really strong ideas everyone can implement, regardless of the religious beliefs. The companion book for the course is Your Money Counts by Howard Dayton Jr.
One of the first ideas I liked and wanted to implement in my/our family life was reducing the amount of debt we have. It is incredible how easy it is to get into debt over and over again and then even if your monthly income is above average, at the end of the month you have no money left. Then you can say hello to stress in your life, you try to work more or make more money, it is awful.
So I decided to take concrete steps towards reducing my debt. I wanted to write about going debt-free BUT I realize that paying all my mortgage in full and fully owning the house we have is not feasible this year so we will still have some debt left.
Paying my credit cards in full and no longer using them
When I was younger, I applied for a credit card and a few months later for a second one. Of course, having a lot of money available was tempting so I used all my available balance, and then I wanted to pay monthly to go back at 0 balance.
But if you know something about credit cards you know that paying the minimum amount gets you nowhere near the finish line.
So the only way to get to 0 credit card debt is to pay the balance in full in advance.
This month I am happy to announce that I got to 0 debt for a credit card and started to do the same with the other one too.
Having a credit score is important sometimes, but for me in the current state of my life is no longer important mostly because I am self-employed and banks won’t even talk to me about new loans. This is an advantage for me because if I would be able to take credits, I would actually be tempted to take them. But being self-employed in my country is the same as not having an income, at least that is how the banks see it.
Reducing my bills
Bills are debt too and sometimes you can take a step and go through all of them and decide if a service is needed or not.
A quick example, I pay a few bucks a month for HBO on my cable subscription. Do I watch HBO? NEVER! So why do these bucks go into that subscription instead of using them for another purpose?
This year a mobile subscription is expiring and the next year another 2 ones. I’ve been a client for Orange Romania for 8 years and a half and almost every subscription was at least 15-20 euros per month. Then I have my wife’s bill which is around 10 euros and I have a business number I never used, I just wanted to see how dual sim in iPhone would work and made an 8e subscription for that.
Then I got some phones in monthly payments from the same provider, I no longer have a phone but I still pay a few RONs per month for that.
So clearly this is the next step I need to take in order to reduce debt: cut off my phone bills and pay in advance the remaining phone installments. It is much cheaper to use prepaid cards and even have more facilities than having a subscription. I think this will be the next step, switching from phone subscriptions to prepay. I can have roaming with prepay too at around 10 euros per month, far less than what I pay now.
Then I have the entertainment subscription I will need to go through: Netflix, Spotify, Amazon Prime, HBO Go, iCloud, Google Mail (yes, I pay for my emails), sites VPS hosting, Youtube Premium. All these pile up monthly so I will have to decide which ones to keep. I am thinking of canceling Amazon Prime and HBO Go, I rarely watch those, and not worth paying for. I was watching Seinfeld on Prime, but then they launched officially in Romania and they no longer offer Seinfeld.
Last month we tried calculating the food costs and groceries cost per month and we realized that if we would use a food subscription we would reduce the cost, so we made a subscription to a food delivery service, and each morning we get the meals for the whole day. This not only reduced the food costs but also reduced the amount of money we spend on groceries. For example, we previously went daily to Lidl or Kaufland to buy something and the amount we paid before having a food subscription was more than double for Lidl alone. After having the subscription to daily meals the amount spent at Lidl alone was cut in more than a half.
Maybe this is not for everyone, but we calculated the costs and we actually paid more for daily meals and food than we pay for the subscription so this was a no-brainer for us. We might not keep the subscription forever, but for now, we are happy with it. Also, you might spend much less than we did for food and the subscription would actually increase your costs, it just depends on every family’s needs.
Not buying with credit anymore
This year I wanted to invest in a new work setup besides the Macbook Pro laptop I have from the company I work for. I wanted to try building a super-powerful PC for my daily work. But having so much debt I could not be able to pay 2.000 euros for it with cash, so I bought it with credit, and my sister helped me with this (remember, banks don’t like me because I am self-employed). The good news is that in just 2 months I paid almost half of it, so by the end of the summer, the credit for the new PC will be paid in full. Usually, I pay 3 months’ worth of installment in a single month so the interest I pay is minimum and the amount I pay in advance besides the regular minimum payment is reducing the time considerably.
This was a lesson for me, I saw that if I am constrained to pay something I can actually do it. So instead of having the PC this spring, I could have had it at the end of the summer but paid with cash, not with credit.
You might be wondering why would I want to reduce all this debt (and if I spend more time thinking about it, I am sure there are other ways to reduce it too). Well, if I can’t increase my income that easily, what I can do is cut the debt and have more cash at the end of the month.
What do I want to do with the remaining cash? Invest more! This is the only way to have a worry-less life, having money aside that works for you. The amount we can invest right now monthly is small but still bigger than 0 which most people save monthly.
Especially in my age group and in my country, nobody taught us to save money and invest. We are used to going to 0 at the end of the month and waiting for the next salary like it’s the only thing that matters. This should not be considered ok and I personally hate the feeling of having to wait for the next salary and not having enough money until then. The worst feeling ever and this is where we get a lot of stress and worries.
We know we have a stash set aside, invested in crypto or stocks or other ways to invest, but then if you go to 0 you have to use part of that money, which is kinda ruining the whole point of investing. Investing should be done for the long term, not to help you make it through until your next salary.
Why do I share my plans publicly?
Well, one of the things that the course we go through right now taught me is that being open and sincere about your finance helps a lot. Recognizing you have a problem with debt and tackling it in public helps a lot and you have to be a lot more responsible with the choices you make so you can actually show the others you improved yourself, not went into debt further.
So part of the reasons for this post is to be open about a problem I want to tackle and keep me accountable in public so I can encourage myself to succeed in my plans.
What about you, do you have debt? Do you consider that you should have as little as possible (maybe even 0) debt? What are your plans to tackle this problem?
Or maybe.. do you have any advice for me on how I can reduce my debt further more?