The accumulation of debt is commonplace for the average American adult. Consumers turn to loans, lines of credit, and credit cards to acquire houses, cars, college educations, big-ticket purchases, and everyday items. It’s not until an unexpected bill, the mismanagement of funds, poor decision-making, or a life-changing event takes place that borrowing money gets out of hand.
Unnecessary Debt: Four Overlooked Expenses That Drain Your Budget
Before you know it, the balance and associated fees become too much for you to afford. Your credit gets ruined, you start receiving collection calls, and your finances are thrown off track. The only solution is to find a way to save money and get your debt to a manageable amount again. One of the first places to start is with your current expenses.
Pinpointing Unnecessary Expenses
Reducing or eliminating your debts means finding money in your budget to apply towards your outstanding balances. While it may seem as if this is impossible, a lot of times, there are unnecessary spending habits you can remove to free up some cash. Most people consider solutions like eating out less, trimming down entertainment expenses, or switching to a more affordable service provider, but that’s not all.
Believe it or not, there are several unnecessary expenses you may not have considered. Continue reading to learn more.
When you need cash, ATMs are the fastest solution. Be that as it may, some of them come with a fee. If you use out-of-network ATMs, you could pay anywhere from $2-5 to access cash. Your bank may also charge another fee of $2-5. It may not seem like much, but if you visit the ATM five times in a month, that’s $20-50 you could be giving away. Ultimately, it’s best to visit an ATM at your bank or through your card’s network to avoid paying fees.
You’re charged an interest rate whenever you take out a loan, line of credit, or credit card. This is the amount of interest you’re expected to pay for borrowing money. Depending on the lender, service provider, your credit rating, and other vital factors, this rate can be high. Consequently, you’re paying more money to borrow money. Not to mention, the longer you borrow the money, the more you pay in interest.
If you want to save money on loan or credit card interest rates, you need to shop around for the best deal. If you already have high credit card interest rates, there’s also the option to consolidate your accounts for a more affordable rate to save you money and pay down your debts faster.
Late fees are another unnecessary expense that’s draining your budget. When you have a bill due, you must pay it on time to avoid additional fees. When you’re late on a loan or credit card payment, the late fee gets added to your total balance due, and interest is applied monthly. Whether it’s $5 or $50, that’s money down the drain that you could use for other purposes.
If the bill due date doesn’t work with your budget or pay schedule, contact your service provider to negotiate a different date. If you simply have difficulty remembering due dates or managing multiple accounts, set up an automatic payment plan to make things easier.
Another common yet overlooked way you’re accumulating unnecessary debt is through overdraft fees. When you spend more money than you have in your checking or savings account, your bank issues a fee of $25 or more. If this happens with more than one transaction, you could be looking at a serious bill to get your bank account back to a zero balance.
If your bank offers overdraft protection, you should sign up to avoid paying this fee. Similarly, linking your savings account to your checking account enables the bank to take the balance from your savings if you don’t have enough in checking. Lastly, use your bank ledger or bill management tools to track when bills are due and your account balance.
When debt gets out of control, you want to find the quickest solution to get it back to a manageable amount. As you evaluate your budget and spending habits, don’t forget to consider the areas listed above. If you’re paying ATM fees, high-interest rates, or overdraft fees, making a few small changes can save you money and help you stretch your budget further.