19 Ways To Reduce Debt, Control Spending, And Save So You Can Take Control Of Your Financial Future

personal finance

Are you in control of your money or is it in control of you?

Do you want to learn how to effortlessly make wise decisions with your money?

Do you want to get out of debt?   Is debt holding you back from achieving what you want?

Would you like to have enough money so that you don’t have to worry about it all the time?

How To Succeed Financially

Surprisingly, if you want to succeed financially it doesn’t really matter where you start.

Most people start out being either poor or middle class with little to no savings.  They typically start working as teenagers at an entry-level position making minimum wage.

Amazingly, even starting out with a minimum-wage job, the average person will have just about $1 million pass through their bank account throughout their working lives!  That’s a lot of money that flows through people’s lives.

Keeping it, however, is the major problem for most people…

According to USA Today, 36% of Americans have less than $1,000 in the bank today.

And according to a recent CNN article, 76% of Americans are living paycheck to paycheck, with little to no savings.

So, the big question is this: If most people start out in the same place, how do some people get ahead and stay ahead financially, while most people flounder and end up broke?

The answer is not found in how much money people make in their jobs.  Making more money doesn’t necessarily create financial success.

Three Paths To Financial Success

Before we talk about how those who become wealthy do so, we must first cover the three paths you can take in order to improve your financial situation.

The first two paths are what most people focus on throughout their financial lives.

  • Make more money by working more hours
  • Make more money by being paid more for each hour

Most people focus on these first two paths.  While both paths will result in more money, these paths are not the real path to wealth.

Path #3

The path that most people overlook is this: it’s not how much money you make, but how much of it you are able to keep. 

It’s focusing on and directing the money you make in specific wealth-building ways.

Path number three is:

  • Save money by controlling your spending by:
  1. Eliminating expenses that don’t add real value to your life
  2. Reducing debt
  3. Reducing taxes

Focus on improving these things and you will automatically start to keep more of that $1 million or more that flows to you throughout your life.  That leads to wealth.

The more committed to your future financial success, the more you will work on travelling down all three paths:

  • If you want to be poor – just ignore the above and do nothing. Your financial picture will remain the same.
  • If you want to be middle class – you’ll focus on #1 and/or #2
  • If you want to become rich – you’ll wholeheartedly embrace all 3 steps, especially #3.

It’s your choice….

Bill Gates put it like this: “If you are born poor it’s not your fault, if you stay poor it is.”

Path #1 has its limits.  Unless you are working part-time, most people can’t work too many more hours.  Working 50-70 hours a week for an extended period of time will bring in more money but will ultimately lower your productivity, burn you out, and affect your health.

Path #2 is the traditional path of seeking out more education or training to produce more marketable skills.  Everyone should go down this path, no matter where they are in their lives.

Better skills = more value in the marketplace = more money

Path #3 is the one that most people have the most problem with.  But it is also the easiest to put into action, and for most people they can achieve measurable results in a short amount of time.

Mastering path #3 helps you make the most of your journey down paths #1 and #2, for it helps you to keep more of the money you make by giving you control over your spending.

So, the rest of this article is going to focus on path #3 and the two most important elements that will improve your personal finances:

  • Your mindset around money.
  • Creating a money plan

The Financial Success Mindset

Having the right mindset moves you from being a consumer – someone who is driven by spending and who is in debt to others – to being an owner, someone who is in charge of their financial destiny.

Which side do you want to be on?

Without the correct mindset and without a plan, it is very difficult to succeed financially.

That’s why most people end up in a place they don’t want to be in.

So, following are 19 different steps you can take to put the odds of becoming financial successful on your side, along with the mindset needed to make changes in your current actions.

Step #1: Take Responsibility For Your Previous Financial Actions And Determine How To Fix Them

One of the biggest challenges people face is taking responsibility for their actions.

It is your responsibility to learn how to make money, how to invest it, and how to protect it.

Most people would much rather blame the economy, their poor health, their expensive divorce, that accident that wasn’t their fault, etc. as the reasons they are in financial dire straits.

While all of those things may be contributing factors, ultimately it is each person’s own actions that determine their fate.

While they may not have caused some of these things directly, they likely didn’t take necessary steps to protect themselves from devastating life events that unfortunately do happen to everyone.

Here are some things that you can take action on:

  • Make sure you have adequate insurance against catastrophic events.
  • Look to continually add to your work skills as protection against a job loss. Make yourself more valuable in the marketplace.
  • Obtain financial and investing education. This is important not only for understanding investing, but also to protect yourself from unscrupulous brokers or financial planners who may put their interests before yours.
  • Set up legal documents such as wills, living trusts, or postnuptial agreements that can help protect your assets or direct them according to your wishes.

It doesn’t matter if you are the victim of something that was out of your control; it is still your financial responsibility to protect yourself from potential problems.

That’s leads us to Step #2….

Step #2: Set Up An Emergency Fund

An emergency account with 5 to 6 months’ worth of expenses set aside is a must. You should create this account before you start to invest your money in anything.

It is only a question of when, not if, a life-changing problem will happen: a job loss, medical emergency, divorce, lawsuit, etc.

Having an emergency savings account is something that will help cushion any unexpected financial emergencies.

Step #3: Commit To Spending Less Than You Make

It’s pretty simple.  If you spend everything you make, you will never become wealthy.

End of story.

People’s spending habits are at the forefront of personal finance problems.  And improper use of credit and debt are usually major causes of financial problems.

Since debt is such a big issue, let’s talk a bit about what drives people’s spending decisions.

Too Much Debt Is Not A Financial Problem

Most people don’t understand their relationship to money, so they end up deep in debt.

Overspending and being in debt are not financial problems.

They are personal issues that are manifesting themselves through money.

This is why people who get out of debt usually find themselves back in debt within a few years, sometimes even much more in debt than ever before.

Just like lottery winners who win millions and end up broke a few years later, they didn’t learn the basic rules about money so suddenly having lots of it causes stress.  It’s their own personal issues with money that causes them to spend it all, and more.

They never resolved the personal money blocks or issues that caused the problem in the first place.  That’s why they ultimately fail to keep the money they make or the wealth they received.

If you are in lots of debt, don’t simply rush to a debt consolidator, or move your credit card to a new 0% card, or borrow money against your home to pay off debt.

That is just treating the symptoms; you need to find the real cause of your situation.

Again, this goes back to your financial habits.  Create new habits and create a new life!

Think back to when you started to go into debt or have financial problems.

  • Ask yourself what happened to start it.
  • Ask yourself what you could have done to prevent it.
  • Be honest with yourself; this is the only way to move forward and make changes for the future.

No matter if it was something out of your control, it is still your responsibility now to fix it and make sure it doesn’t happen again.

The Millionaire Next Door

One of the best ways to learn how to control debt and spending and to learn how to build wealth is by studying how millionaires approach money.

In their book The Millionaire Next Door, authors Thomas Stanley and William Danko studied many millionaires on how they approach money and what they did to become wealthy. I highly recommend reading it.

What these millionaires did was set their finances up so the odds were always on their side.  This meant that they used simple small steps that were easy to employ automatically, and these steps turned into habits.

First on the list of what those millionaires did was to live by this sentence:

Live Below Your Means

Everyone knows that they need to spend less, but why do many people know this but fail to act on it?

Of course, the first thing I always hear is, “How can I save any money?”  “Everything I make and more goes out with the bills each month.”

The real truth is that most people just don’t manage their money wisely.

I’ve had tenants who are constantly late with the rent and give reason after reason why they can’t pay on time.  I also have seen their giant big-screen TVs, latest model iPhones, new electronic gadgets, late model car, etc. they somehow are able to buy with the money they claim they don’t have.

People don’t sometimes realize it, but they usually upgrade their lifestyle a little with each raise in pay.  So their expenses rise as their income rises, putting them in the same position they were before they got a raise.

Money And Happiness

Money is complicated.   It creates a lot of emotions ranging from pure happiness when you have it to complete depression when you lose or don’t have it.

What does money mean for you?

How do you react to money coming in and out of your life?

Money Is Emotional 

People buy things because of what they think it will cause them to feel:

  • To feel connection
  • To escape boredom
  • For fun and entertainment
  • To feel significance
  • To feel loved

For example, someone may buy a fancy sports car because he wants to feel significant.  He wants others to see him as successful.  It makes him feel good.

There is nothing wrong with this – it’s human nature after all.

The problem comes when the spending becomes habitual.  This is when people are trying to compensate for other things in their life that they are lacking.  Unfortunately, it doesn’t work, because spending only treats the symptoms, not the cure.

Ultimately, shopping and buying may temporarily fill the emotional need, but it won’t provide lasting fulfillment.

Take a close look at the things you‘ve bought in the last 2 weeks.  Did you really need all those clothes, or did you just want them?  All those drinks and dinners with friends?  The new watch? The expensive gym membership?  That last-minute weekend trip to the beach?

What were wants and what were needs?  More often than not, wants outnumber needs.

Wants can easily send you to bankruptcy court.  You have to decide what things you truly want and what would be just nice to have.  It’s finding a balance between short-term wants and doing what is good for you long term, like saving and investing.

If you’d like to go deeper into how money plays a powerful emotional role in your life, please check out this article.

Step #4: Find Out Where You Currently Are

You have to know where you currently are if you’re going to get where you want to go.

To make the most of the money you are making, you need to know how much you are making, how much you are saving, how much you are spending, and learn exactly where you are spending it, and on what.

The only way to do that is to fill out a personal finance worksheet. It will help you see exactly where the money you make is going.

Here is one that you can download.

Financial Report Card

Do This Exercise

Now, before you fill it out, write down how much you think you spend each month in each category.  Then fill in the form.  You will likely be shocked at how off your estimate was from reality, especially for things like coffee, entertainment, meals out, etc.

Step #5: Create A Spending Plan

Millionaires set financial goals and create a spending plan.

By creating a spending plan you can work out how much you can save and invest for tomorrow while still living today.

This plan will also let you schedule those “I want” purchases so they fit into your total spending plan, not destroy it!

Step #6: Automate Your Savings Plan

Millionaires set up an automatic savings and investing account.

The rich know that the only sure way to play the money game is to have money taken out automatically from their paycheck or business income and sent to an investing account each month.

This removes the temptation to spend extra on things not in the spending plan.  It also virtually guarantees they will increase their wealth slowly but surely.

See if you can start putting away 10% of your income, ideally into a tax-deferred account. If you feel you can’t manage that, then start with 5% or even 3%.

The most important thing is to just start, and make it automatic!

Step #7: Reduce Your Fixed Monthly Expenses

Now that you know where you money is going, the following steps will help you to cut expenses and reduce taxes, allowing you to keep more of what you make.

A mortgage or rent payment, utilities, auto insurance, health insurance, and gasoline form most people’s fixed expenses.  However, with a little work most people can save substantially on these expenses.

Here are some ideas to look into to reduce these expenses.

  • Can you raise your deductible on your auto insurance?
  • Can you eliminate the comprehensive on an older car?
  • Can you move and rent or buy a less expensive home?
  • Can you eliminate PMI (private mortgage insurance) on your mortgage?
  • Can you save somewhere on utilities?
  • Can you bundle your internet into a better plan?
  • Can you cut the cord and do without cable by moving your entertainment to Netflix, Hulu, or Amazon Prime?
  • Can you reduce your cell phone bill with a different plan?
  • Can you carpool?

Step #8: Reduce Your Variable Expenses

Take a close look at how much money you are spending for things that are not fixed such as:

  • Drinks and meals out
  • Entertainment- books, movies, music, concerts
  • Travel
  • Gym memberships
  • Personal care – haircuts, manicures, massages, etc.
  • Home services such as gardening, pool service, maid service

See if you can find ways to get the same services at a reduced price, or do them yourself if possible.

Step #9: Reduce Impulse Buys

A good way to curb impulse buys is to give yourself a 24-hour waiting period before you buy anything that is not a necessity.  This will help stop purchases that are done for quick emotional “want” reasons.

Step #10: Buy Used, Don’t Lease A Car

Buying a 2 to 3 year old car rather than a brand new car will save you thousands of dollars.  A new car will depreciate 15%-20% as soon as it leaves the showroom.  Put that money in your pocket by buying a used car.

Many cars come with warranties for 5 years or 50,000 miles.  You can also negotiate to extend the warranty for a longer period when you buy.

Step #11: Shop Sales, Outlet Stores, Costco, Overstock.com. etc.

Why pay full price when you can save 20% to 80% shopping sales and outlet stores.  There are great deals to be found in both brick and mortar stores and online.  They are the same quality products but at reduced prices.

TIP: Be sure to always type in the name of the store + “coupon code” in Google to find online discount coupons!

Step #12: Pay Off Your Mortgage Faster

Turn your 30-year mortgage into a 15-year one by prepaying the following month’s principal.

On a brand new 30-year $100,000 loan, the next month’s principal portion is a little over $120.00.  If you pay this in addition to your regular payment, you knock 1 month off of the payment schedule each time you make a payment.

Done consistently over time, your loan gets paid off in 15 years and results in around $50,000 in savings that stays in your pocket, and doesn’t go to your mortgage company.

Another variation is to make one additional full payment each year.  This will knock around 7 years off a 30-year mortgage.

IMPORTANT: Make sure you specify on your loan payment coupon that you wish the extra money to go towards principal, not towards the next month’s payment.

NOTE: This strategy should be done only after paying off high-interest credit cards (Step #15), building up your emergency savings (Step #2) and contributing to an investment account (Step #17).

Step #13: Reduce Your Debt

Millionaires are always careful with credit.

Too often non-millionaires look at credit cards as an extension of their income.  As long as their credit cards are accepted, they find no reason why not to max them out.  After all, the reasoning goes, it all gets paid off eventually (they hope).

They ignore the fact that with many credit cards having 20% to 30% interest, everything they buy costs a lot more.  And the minimums on credit cards are designed so you will virtually never pay off your balance.  That doesn’t make a lot of financial sense.

Needless to say, credit card companies love people who carry balances.  It makes a lot of financial sense to them!

As I talked about earlier, if you are in debt the first thing you must do is take responsibility for it.  It doesn’t matter if the reason is you had to pay for a medical emergency or other misfortune; it was still your responsibility.  Now it’s your responsibility to yourself to eliminate the debt as fast as possible, starting in this order:

  • Credit cards
  • Consumer consolidation loans
  • Student loans

Step #14: Call And Negotiate The Rate Down On Credit Cards

Organize your credit card debts by amount and by the interest rate you’re being charged.

Starting with the highest interest rate cards, call each company and ask to have your interest rate reduced.

You will probably only succeed if you have a blemish-free payment history.  Even one late payment can make them look at you as a credit risk.  If your interest rate is close to 30%, they already see you as a risk.

You may have to politely but firmly go up the ladder to talk to a supervisor to get a rate reduction.  Keep at it until you get a definitive yes or no.

Step #15: Pay Off Highest Interest Rate Cards First

Immediately start to pay off the highest interest rate balance first; this has you getting the most bang for your buck and saving the most amount of money.

TIP: See if you can sell anything you are not using to put towards paying off debt.


Step #16: Understand And Reduce Your Taxes

As I mentioned earlier, what matters most is not how much you make, but how much you get to keep.

Americans pay, on average, more than 50% of their income in taxes – personal income taxes, property taxes, sales taxes, gasoline taxes, and more.

It’s imperative to learn how to minimize the effect of taxes on your wealth.

There are four types of income you should be aware of.

  • Ordinary income
  • Short-Term Capital Gains
  • Long-Term Capital Gains
  • Tax-Free Income

Ordinary income

Income you earn from an employer, known as ordinary income – is the highest taxed form of income.  If you are a high-income earner, your tax may top 50% of the money you earn.

Short-Term Capital Gains

Short-term capital gains are gains on investments held less than one year.  Short-term capital gains are taxed at your ordinary income rate.

Long-Term Capital Gains

Long-term capital gains are gains on investments held more than one year.  They are taxed at more advantageous rates ranging from 0% for those in the 10% to 15% tax brackets, 15% for people in the 25% tax bracket, and 20% for upper-income earners making over $406,750 a year.

Tax-Free Income

Tax-free income is income that is exempt from federal taxes.

One of the best investments for tax-free income are municipal bonds.  Municipal bonds are exempt from federal taxes, and may be exempt from state and local taxes as well, making these truly tax-free investments.

Controlling taxes is one of the secrets of the wealthy.  They convert their earned income into more tax-advantaged income by investing it for capital gains, tax-deferred, or tax-free income.

You can learn more about how the wealthy become wealthy here:

How To Build Wealth So You Can Achieve Financial Freedom

Step #17:  If You Get A Tax Refund, Change Your W-4

If you receive a tax refund, all that means is that you overpaid your federal taxes the previous year.

Don’t give Uncle Sam an interest-free loan to use your money without getting anything in return.

The goal should be to have just enough taken out of your paycheck to not owe anything or get any money back at tax time in April.

Understanding Exemptions

Your employer withholds federal taxes based on the number of exemptions you claim on the W-4 form they require you to complete.

It is a common misunderstanding that people think each exemption must be a person and it represents themselves or their dependents.  So many single people claim 1 in the box for federal withholding allowance.

A good rule of thumb is to increase your W-4 exemptions according to these rules:

  • If you are in the 15% tax bracket, (your taxable income is under $37,450 if single, $74,900 if married), increase your exemption by 1 for every $570 you receive as a tax refund.
  • If you are in the 25% tax bracket, (your taxable income is under $90,750 if single, $151,200 if married), increase your exemption by 1 for every $950 you receive as a tax refund.

If this is confusing, then try this online calculator to calculate your W-4 exemptions for you:


Step #18: Send Money To A Tax-Deferred Investment Account

One of the few tax breaks left for most people, especially employees, is a tax-deferred account.

Depending on your situation, you should be able to put money away tax-deferred into one or both of these types of accounts:

  • An employer-sponsored tax-deferred account like a 401(k) or 403(b)
  • An individual retirement account, or IRA

If your employer matches a portion of your contributions, be sure to contribute enough to get the full match. That is free money to you!

Step #19: Get A Financial Education

Millionaires continually educate themselves financially so they become a master of money, not its slave.

Financial education is the starting point to building wealth.  You must develop financial and investing know-how if your goal is to build wealth and create financial security.

There’s really no shortcut.

Learn more about the benefits of financial education here.

Get Started Now!

If you are serious about achieving financial freedom, then now is the time to start! Procrastination will only end up killing your dreams.

So, right now I’d like you to think about and write down your answer to these questions:

  • How will I feel – in 1 year, 3 years, 5 years, or 10 years – if I’m in the same position financially as I am today?
  • What needs to change?

Write down what you will not have if you don’t take action.

Make it feel real – emotions are what drive people to take action.

The truth is really this: you are either actively planning your life to succeed financially, or you are not.  There’s really no in between.

You’ll likely need to make some changes in your life.  Maybe drastic changes.

Changes that require sacrifice today.

But if you focus on what you’ll be getting, not what you’ll be losing (in the short term) it makes the whole process much easier to start and stay on the path through the ups and downs.

So start now!  Each day you wait weakens the power of one of your main allies in wealth building – time.

And time is the one thing that you can’t replace – once it’s gone it’s gone forever.

So don’t delay – start working on these 19 steps and you will slowly but surely begin to move to a new financial level.  Take small but consistent steps each day until they are under your control.

The goal is to spend less than you make, and save the difference.

It is only then that you can invest your money and have it begin to make its own money.

Don’t fret if you slip up here and there.  The important thing if you get off track is to realize you did, and jump right back on.

Create A New Habit

It’s said that if you do something for 21 days, you then turn it into a new habit.

Commit to 21 days of changing your spending habits and you’ll find that what was once hard is easy.  Plus you’ll feel strong that you’re getting your finances under control.

The whole process, especially if you take the time to learn more about why you got into financial problems in the first place, is very rewarding.

You will ultimately be empowered with moving your life from being controlled by others (by owing lots of money to them) to being financially free.  It is then that you can move your life to a whole other level.  And that is a great feeling!

Ultimately, it is really education that will make a huge difference in your lifetime. Commit to learning everything you can about personal finance, money, wealth building, and investing.

I hope you continue to read through and watch the free resources on this site, as well as consider my premium investing courses or one-on-one coaching if you want to make changes rapidly.

Best of luck mastering the 19 steps!

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