Make Big Changes for Big Results: Rule 5

This is Rule 5 in my 10 Rules to Eliminate Your Debt and Change Your Life

Now that we have gotten into the hard part of our work, paying off our debts, it’s time to focus on meeting our monthly debt payoff targets, and seeing if we can find ways to free up more money to put towards debt.

If you are deep in consumer debt, nickeling and diming your debt with little frugality tips is probably not going to make a big difference.

That’s because frugality is a lifestyle, NOT a means to a lifestyle.

What I’m trying to say is, frugality is a way to live, but not a way to get there. Frugality is a great way to maintain your quality of life once you get where you want to be.

How to Get More Money to Pay Off Debt

When you are looking for extra money, there are basically only two ways to get it: increase your income of reduce your spending. A third way is simply a combination of the two of these ideas.

This article is going to focus on the second aspect, finding ways to reduce your spending. If you are willing and able to take on a second or third job, you may not have to dedicate a lot of thought to every possible way to save a buck or two. But if you are like most people – overworked and underpaid – the thought of delivering pizzas at night may be a nonstarter.

The good news is that there are ways to make big savings in your monthly budget without having to get another job, the type of savings that will allow you to get aggressive in paying down your debt.

The bad news is that these big changes may not be easy.

That’s because I’m not talking about switching from Starbucks to Dunkin Donuts. I’m talking about things like changing the way you grocery shop, selling a new car you just bought, or having a mega garage sale and parting ways with some of those adult toys you can’t afford.

Food Is a Major Expense

Food is the most important thing in our lives, and it is natural that this would be the best place to look to save big money.

If you’ve been on the 10 Rules program, you’ve already spent some time analyzing and tracking your spending, and hopefully you have a good idea on what you are spending each month on food. To save big, let’s take that number and create a savings goal. For example, if you have a family of four and you are now spending $250 per week on groceries, commit to getting it down to $200 per week.

By doing this, you will be able to put an extra $200 per month directly towards your debt payoff. I don’t recommend going crazy with big changes in your first month, because I’d rather you have a modest victory than a demoralizing failure.

Even if you think you can get to $150 per week, don’t set your goal there at first. Take a few weeks to see if you can live at the middle number. If after a month or two you are confident that $175/week or even $150/week is doable, go ahead and get more aggressive and set a new monthly target.

Sunk Costs: Sell that New Car

In addition to radically overhauling your grocery budget, you may be able to get rid of some budget busters like that new car you bought a few months ago.

As I said earlier, this can be really tough to do, but if you are able to accomplish it, not only have you made a big financial win, you have overcome a psychological barrier that you may have heard about in financial circles: sunk costs.

Sunk costs are simply costs that you have incurred in the past, as opposed to prospective costs, which are costs you will incur in the future. Good investors and good entrepreneurs are able to focus only on prospective costs as they make decisions about moving forward. That means they know when to “get out” of a bad investment, and not throw good money after bad.

For you, this means you should really think hard about selling that new car, even if doing so creates a short term loss. If we have done our homework and crunched the numbers, we would see that in the long run you will be better off by trading that $25,000 car for a $10,000 one. Not only will it free up money with a smaller payment, or no payment it all, it reduces the total amount of your debt owed and shaves years of your debt payoff timeline.

Sunk costs are all about emotion. If you are able to objectively look at your situation and remove emotion, like feelings of guilt or simple consumer lust for a nice toy, then you have made a great step forward with your finances.

This goes for boats, motorcycles, ATVs, iPad 3, new skis, etc – any of those tantalizing toys that put so many people in the poorhouse.

The Strength to Win

Whether you succeed with your debt payoff or end up in bankruptcy court depends on how able you are to make personal sacrifice. Everyone will know that you need money once you start selling cars and boats. But I think we can turn the negative stigma of debt into the positive experience of debt payoff.

When people make negative comments about your efforts, it may be because they are jealous and feel they should be doing the same thing. They may resent you for finding the strength to win.

So be proud of yourself and proud of what you are trying to accomplish.

Let the negative people rant about the federal debt while they owe six figures to Capital One.

Stay focused on your debt payoff timeline and make big changes for big results.


10 Rules to Eliminate Your Debt and Change Your Life

1. Combine Incomes, Finances and Efforts 

2. Spend Less than You Earn

3. Make a Monthly Debt Budget and Live by It 

4. Pay Off Debts Smallest to Largest, Regardless of Interest Rates

5. Make Big Changes for Big Results 

6. If You Don’t Need It, Sell It 

7. Save Monthly for Large, Anticipated Expenses

8. Set Aside Some Money for Fun

9. Pay Off Debts Before Investing 

10. The Goal of Work is Retirement 

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27 thoughts on “Make Big Changes for Big Results: Rule 5

  1. At one point I got rid of the car and walked for 18 months. You know how much a month you save by not having a car? In my case it was roughly $500. And as a side bonus my weight went back down to the same level as when I was a young stud 🙂
    Money Infant recently posted..Frugal Food SundayMy Profile

  2. I just bought a car, which added a ton to my debt. I’m ok with that though – it’s a low interest rate and I need a means of transportation.

    I should probably buckle down and start caring about my car loan more than making the minimum payments. I am never sure how to balance my savings with my debt payment.
    Daisy recently posted..The Young and the Responsibility-lessMy Profile

    • It’s definitely hard to try and be in two different mindsets at once: saving and debt repayment. I’ve ignored saving. I’m close to being able to switch gears. Thanks for reading!

  3. Great point with starting out small. I use to try and make big changes. They always ended up backfiring, which led me to spending more than I would have normally. Although I have made a few changes to free up my cash, which were actually extremely easy (aside from one).

    Anyways great article and can’t wait to read the rest of the series.
    MyCanadianFinances recently posted..How Did I Manage To Free Up Cash?My Profile

  4. In the past, I wish I wouldn’t have bought my car, but now it’s paid off so I’m not too worried about that costs. It’s reliable. It is nice having an extra $400 a month, no more car loans for this girl!

    • I’m in the same boat. Sometimes I worry about saving for the next car, but then the image of a $1000 rustbucket comes to mind and I relax a bit. Thanks for reading!

  5. Personally I don’t think I’d be able to see off a brand new car, especially after only a few months. Considering how much a car depreciates when you drive it off the lot, I have a hard time accepting that as the right move. If you’ve sunk money into something, you might as well enjoy it and focus more on better financial habits going forward. Of course some big purchases would be easier to recoup most of the costs and would be more worthwhile to resell.
    Jeremy @ Modest Money recently posted..The Psychological Benefits of Living ModestlyMy Profile

  6. Thanks for stopping by my blog! And here’s hoping I don’t get my laundry room makeover the same way you guys did. 😉

    I really, really love this: “Frugality is a lifestyle, NOT a means to a lifestyle.” It’s kind of similar to the idea that going on a diet as a temporary measure doesn’t work, that you need to make permanent changes to what you eat in order to maintain weight loss and/or better overall health. Otherwise, once you reach your goal, you just go back to your old ways and gain that weight back and then some (or in the case of money, accumulate even more debt than you started with!).

    • That’s a great comparison. If you are looking for easy tips instead of wholesale changes, chances are your success will only be fleeting. Getting to where you need to be is hard. Staying there can be easy if we change our mindsets.

      Thanks for stopping by and good luck with that laundry room!

  7. Food Budget is definitely the hardest to control! We don’t cook so we eat out a lot. We finish school in May, and we plan to start cooking more at home once we don’t have crazy schedules. Haven’t bought a car yet. I actually wrote a post today about how much not having a car during college has probably saved me. We were on the same wavelength!
    SavvyFinancialLatina recently posted..Save Money: Skip the CarMy Profile

    • One of my good friends hasn’t had a car for years and it has definitely saved him a ton of money. I’d hold off as long as you can.

      Thanks for stopping by!

    • Thanks. I guess it comes down to what is easier to each individual. There’s always an alternative on the flipside. It all comes down to the least painful choice.

      Congrats on the new podcast. I’m going to check it out tomorrow at work.

  8. Even though I have paid off my debt I still look for ways to cut expenses. I think it’s great you mention food expenses. This is a continuing experiment for me. I like food, a lot, but what I eat is largely a matter of habit. I’ve tried limiting the amount of meat I eat as it is expensive and really I don’t need the amount of protein I thought I did to benefit from my workouts. Now I’m playing with the idea of restricting food. Do I need to eat three times a day? Why? Questions I’m attempting to answer…

    The Stoic recently posted..Changing Your Life By Working Abroad: The Financial BenefitsMy Profile

    • I’ve noticed when I’m on a special assignment and working 3 months without a day off that my spending drops to minuscule amounts. Maybe has something to do with the depression of working so much.

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