20
Book I: Taking Charge of Your Finances
on the problem, you're in position to take control. With the right attitude,
eliminating unnecessary expenditures can be a little like a treasure hunt.
There's extra money out there -- you just have to find it!
Although we don't presume to tell you how much to spend on any particular
item -- that's your call -- here are a few things to zero in on:
Credit card payments: If a big chunk of your monthly income is going
to pay credit card bills (especially if you're paying minimum payments),
bankruptcy may be the best solution by far (see Book III, Chapter 5).
If this is the case, you're just spinning your wheels in the worst of all
worlds -- paying interest without significantly reducing the principal
amount of the debts. For example, say you've got a fairly modest credit
card debt of $3,000. At 17 percent interest -- and a lot of times the inter-
est rate is even higher -- you'll be indebted to the credit card company
for about 35 years if you just make minimum payments.
Daily dribbles: We all live our lives amid daily patterns that eventually
become habits. Many times, these habits include unnecessary spending
that provides no real benefit or enjoyment. What seems like small stuff
eventually adds up. Again, consider the latte on the way to work, the
buck you put in the soda machine, and the $2.50 you spend for an after-
noon snack -- all without even thinking about it, right? Over the course
of a year, you've blown $1,430. If you invested this money for 20 years at
10 percent interest, you'd end up with more than $80,000!
Extravagances: True, one person's luxury is another's necessity, but
you really need to think long and hard before plopping down $100 at a
restaurant or $60 for a pay-per-view prize fight on TV. It's sometimes
helpful -- though painful -- to figure out how much work you had to do
to pay for a particular treat. If a night on the town costs you a day and a
half of work, is it really a good return on your investment?
Impulse purchases: In the section "Cataloging What You Own," later in
this chapter, we ask you to list all your belongings; for now, just make
a trip to your attic, basement, and garage. If you're like most people --
and us -- you'll see tons of stuff you've bought but rarely, if ever, use.
Simplify. And go further: Sell.
Gifts: Studies show that many folks spend lavishly on gifts they would
never buy for themselves. Christmas, of course, is the granddaddy of
budget-busters. Scale back gifting.
Overwhelming mortgage payments: If you obtained your mortgage
recently, most of your monthly payment goes toward the interest. You
may not have much equity, and the home may not be worth keeping --
especially if it's a second mortgage.
Killer car payments: New cars are awfully pricey these days. If you're
struggling to maintain payments on a new car, you may want to consider
selling it and buying something more affordable. Plenty of reliable, mod-
erately priced used cars are on the market.
