What to do with saved cash when you cut expenses?

When the Hubby and I decided to cancel our cable tv last week, we wanted to figure out how much we were saving on a monthly basis.  We also wanted to put a plan in place for how that money saved could be rediverted towards something else.

We were paying $85 a month for cable and internet.  We canceled the cable and locked in the internet for $40 a month for the next six months.  So after taxes or whatever fees, we should be paying about $45 a month.

What to do with an extra $40 a month?  Don't get me wrong here, there's plenty of areas where this $40 could go.  Between credit cards, student loans, a car payment and a mortgage, that $40 could find alotta places to run to.  And I'm fine with any of those options, I just don't want the extra $40 a month to be "lost" in with all of our usual monthly spending.

Since we had been comfortably affording the $85 cable and internet bill, I wanted to keep thinking like we still had an $85 bill, not a $45 one.  So each month when I pay the cable bill for $45, I want to immediately pay that extra $40 into something else.  So that way we're keeping our same budget, but making our money work harder for us.  It's the same $85 that we've been paying, but instead of paying cable and internet, it's paying for internet and reducing our debt!  Yes, it is all very exciting to me :)

So I narrowed it down to two areas where I could divert this extra cash each month and had to decide on one of them.  First was our credit card, which we owe about $3,600 on.  It's at 0% interest until November and we're steadily paying on it and will have it finished off before then, but obviously, the sooner the better to get rid of any debts.

The other option was our car payment.  We owe $3,600 on that as well.  And those payments go through November too.  But that one's at 4.9% interest.

So we decided to go ahead and put the extra $40 per month towards our car payments.  I had already started paying an extra $20 a month to that, so now we'll make it an extra $60.  And maybe we can add some bits of extra money from anything else to that as well.

The sooner we pay it off, the less in interest we'll pay.  And we'll also have more peace of mind.  Hubby's car is getting up there in age at 12 years old and we'll likely be replacing that soon enough.  I'm sure hoping that we can atleast get in a few months without having any car payments before we take on a new car loan.  We'll see!

Have you cut back on your expenses?  Cut out or reduced a bill?  Did you make a plan on how to spend that saved money?

Find more financial advice and money saving tips for Frugal Fridays at Life As Mom.


Abbi said...

Good for you for cutting the cable!

Kacie said...

This is fantastic! When you cut an expense, I think it is so key to be deliberate about where to put the money next.

It is SO easy to just lose that $40/month.

Way to work your debt snowball!