If you read this month’s plan, you know we’re going to be looking this week for a “Power Amount” that will help you with savings and also either debt payments or investments.
This Power Amount is the key to the entire plan!
- With this bit of money, you’ll start increasing savings and either making debt payments or making investments.
- Without it, you’ll just be treading water, or possibly getting worse and worse.
- Therefore, you should work hard to make this Power Amount as much as you can â€” if you’re in debt, you might even make as many changes as possible to get this amount higher and higher. If you’re doing well, just make it as large as is comfortable.
Please note that the Power Amount is above the amount you’re supposed to be paying for your minimum debt payments, so don’t include those minimum payments. However, if you’re already putting money towards savings, or already paying debts above your minimum, you can include that savings or extra debt payment amount in your Power Amount.
So it’s important, and we want to make it as large an amount as we can … but where do we find it? Will it magically appear out of thin air? No. We’ll have to work to find it.
Let’s start by assuming that the Power Amount is $0 at the moment. That’s obviously not going to do us any good.
Here’s where to look for more:
- Look through your monthly recurring payments in your credit card statements online, or your online banking statements â€” is there anything there that you don’t really need? Do you have any subscriptions you don’t use that much or can do without? Cancel that subscription or service, and add this amount to your Power Amount.
- Do you have something you splurge on daily or weekly that you can cut out? If you go to the coffee shop and get a frappe with extra whipped cream, can you make coffee at home or drink it at the office instead? You might be paying $5-10 on coffee drinks, and if you cut those out, that’s $150-300 a month right there. Do you go to the movies every week? You might cut out $15 a week, or $60 a month, if you stop that.
- Can you stop shopping for unnecessary things? If you look over your Amazon orders, or your shopping expenses on the credit card bill, you might find that you spend several hundred a month you don’t really need to spend.
- Can you cut down to a cheaper cable or cellphone plan? There might be $50 you can save there.
- Can you cut back on grocery shopping? Lots of times we buy expensive food when there are store-brand options, or prepared food (snacks, frozen foods) when we can cook a big batch of home-prepared food to eat during the week and save lots of money. Many people can easily cut $100 off their monthly grocery bill if they try.
- If you eat out a lot, can you eat in less? And maybe just go out for ice cream if you want to get out and socialize.
- Can you cut your gym membership and work out at home instead?
- Can you use the library for books and DVDs instead of buying them?
- Can you cut out getting a manicure, going to the spa, getting a massage, or using any other luxury services?
- There are longer-term changes that will yield even bigger amounts â€” moving to a smaller/cheaper home, downgrading your car, selling some of your stuff, getting a second job or freelancing on the side, getting a roommate to share rent or renting out a room in a house you own, giving music lessons.
This is just a start, but you get the idea. Take whatever money you can save (or make) from these and other sources, and add them to your Power Amount. So if you cut out the gym, and you’re paying $60 a month on that, your Power Amount is now $60. If you cut your cable subscription from $100 to $60, your Power Amount is now $100. If you start making $50 a week by giving music lessons, you now have a Power Amount of $300! And so on.
The bigger you can make your Power Amount, the faster you’ll increase your savings/investments and pay off debt, and the sooner you’ll get to Financial Awesomeness.
You don’t need to do this all today … get started, but work on it all week until you have an amount that seems decent to you. We’ll also be working on our savings/debt or savings/investment plan this week, but you can also be working on the Power Amount as we go through the week. Get started now!