In the Debt Section:
Under Tom's current budget he can only afford to send in the minimum monthly payments on each of his accounts. He has a total of $10,000 in credit card debt, spread over three cards.
- Bank A: 18% interest, $3,500 balance
- Bank B: 13% interest, $2,000 balance
- Bank C: 9% interest, $4,500 balance
By continuing to make only the minimum payments on these debts, Tom would repay $17,226. Let's take a look at how some simple changes can save Tom a significant amount of money.
Tom moves the balance from Bank A to the Bank C card to take advantage of the lower interest rate.
Tom has a good payment history on his Bank B account, so he contacts the bank and asks for an interest rate reduction. Tom's rate is reduced to 11% because he is a good customer.
By making these simple changes Tom would only repay $14,105, a savings of $3,121. Other changes within the budget can save him even more, and would allow Tom to send more than the minimum payment every month to his creditors, retiring his debt even faster.
In the Other Section:
Tom can make a number of minor changes in this section.
- First, he could stop going to restaurants, saving $140.
- Although he likes getting take-out food at least three times a month, Tom cuts back to once a month and saves $50.
- Tom buys a coffeemaker and begins bringing a thermos to work, resulting in a savings of $80.
- He cuts out the snacks. It's healthier, and he saves $25 in the process.
- Instead of dropping off his clothes at the drycleaner every week, Tom cuts back to two visits a month. On the off weeks Tom cleans his clothes in the dryer using dry cleaning sheets, saving $42.
- Tom joins a video rental club that allows unlimited rentals for $25 a month and eliminates his trips to the movies. The popcorn is fresher at home, and he saves $55.
- Tom joins a gym that has a lower membership fee, saving $40.
- He shops around for a better cell phone plan. He finds a good plan that saves him $20 every month.