Reduce Monthly Expenses – Part II

We started this conversation with Reduce Monthly Expenses, Part I

With regards to paying off credit card debt, one school of thought is that credit cards with higher interest rates should be paid off first while the other school of thought suggests paying off those with the lowest balances first – sometimes referred to as the snowball method – is the way to go.  From a purely financial perspective, the former is the better approach.  However, there is value in the latter approach as there is a psychological lift – a real sense of progress – from paying off one card and then committing the money that was being paid on the first to the next card in line, continuing this progression until the last card is paid off.  This was the approach I took and it worked well for me.

Whichever method you use, the key is to stop using the credit cards and stay committed to reducing the balances to zero while you start working your savings and investment plan.

Debt Debt

That last point brings us to another case of differing schools of thought.  One philosophy suggests that credit card debt should be paid off completely prior to committing money to investing.  My belief is that while credit card debt should be under control and be on a steady decline, it does not necessarily need to be paid off completely before you develop a savings and investment plan and begin committing money to your retirement accounts.  The rationale is that the sooner you establish your savings and investment accounts, get in the habit of funding them, and get in the habit of managing them the better off you will be; the sooner you can make your money start working for you through the power of compound interest.

Additional options for reducing monthly expenses include eating out less, taking advantage of coupons, utilizing a grocery store savings card, canceling magazine subscriptions, modifying telephone service, and reducing entertainment costs (e.g. rent/stream videos vice going to a movie theater).  These are only some of the ways in which you can reduce your expenses.  You are only limited by your imagination.

How about you SavvyReader.  How did you – or how are you planning to – reduce your monthly expenses?

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.


  1. It’s an amazing post in support of all the internet users; they will get advantage from it I am sure.

  2. When it comes to paying off debt, I believe I have a similar feeling as you which is that there can be more than one viable choice. While there often may be one correct theoretical choice ( in the case of credit cards to pay off the debt with the highest interest rate first) I would never “split hairs” like this with someone who is making an effort to get out of debt. It’s best to do what works best for you so that you can make progress.

    As far as reducing expenses, we have made some nice progress with this in recent months. I now cut my husband’s and son’s hair at home and I recently switched my phone service to Ooma which only costs $4 a month as opposed to $50.

    • Thanks for the feedback, Kay. The best way to get a fiscal house in order is to pay off debt – via whichever method works for the household – and reduce expenses in as many ways as possible. The ways you note are just a couple of the numerous ways that can be done. My experience has been that once people do that, they realize that they do in fact have enough money to save/invest and really start the process of securing their financial freedom.

  3. The two schools of thought regarding which debts to pay off first often presents a dilemma for consumers in debt. It is best to begin paying off debt with the highest interest rates. The sooner you pay off whatever outstanding debt you have the sooner you will be able to build up your savings and investments. Dining out less, cancelling magazine subscriptions and decreasing entertainment costs are great ways to trim unnecessary expenses.

    • I agree that tackling debt with the highest interest rate first makes the most sense when strictly considering the math. However, I do not agree that it is necessarily the “best” way to go about it for everyone. I believe it is a mistake to dismiss or underestimate the psychological impact of getting rid of some debt and getting on the right track. Ultimately, the most important thing to do is to adopt a method and stay focused on eliminating the debt. It doesn’t matter which method someone chooses if they do not engage for the long-term.

      While I speak from a personal perspective – in my book and on this blog – with regards to what has worked for me, I do recognize that there are often more ways than one to accomplish a goal. Thanks for taking the time to join the conversation and offer your perspective, Leslie.

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