How To Prioritize Expenses And Live Debt Free

Posted on January 28, 2021 in Debt

Every living individual creates expenses during their life. No matter how disciplined an individual may be with their debt and personal finances, they will still accumulate expenses in some form or another. When the expenses start to overwhelm the income is when debt begins to be created, and from there it could be a quick decline into financial ruin if one’s not careful. 

The following includes some tips to keep in mind in order to stay on top of monthly expenses and avoid debt as best as possible, or if necessary, repay debt without creating more of it.

Step 1: Make A List of Monthly Expenses

The first step is to identify exactly how much money is being spent every month and exactly where it is going. Making a list of the bills owed and paid every month can help immediately paint the picture of an individual’s finances. The order is not important, but try to include the amount paid each month where possible. Some of the more common monthly expenses include:


Whether the case is renting or paying on a mortgage, the cost of housing will take up an incredible percentage of expenses. The average household spends roughly $1,674 every month on housing, so this will certainly be one of the most pivotal items on the list.  

Electric Bill and Utilities

Every month, the heat, gas, water, electric, cable and internet bills come due, and life without any of them would be much harder to get though. These bills can add up quickly and the average will vary greatly depending on location, but the average spent each month should fall somewhere between $344 and $731.


This option will vary greatly based on the specific plan of the individual, if they even have a cell phone that is, but will generally fall between $35 and $140 per month.

Food and Drinks

The one thing on this list that is absolutely impossible to avoid is eating and drinking. Between monthly groceries and eating out at restaurants and bars, the average monthly expense per individual is roughly $660, making it around the third highest item per month. 


When adding in auto loans, maintenance, and fuel, transportation can be quite expensive, and is often the second highest monthly expense behind housing with an average of about $813 spent each month per household.


Health, life, home, and auto insurance can be absolutely crucial to maintaining stability in the event of tragedy or unfortunate circumstances, but it can be quite pricey when all rolled up together. Depending on job-related options, health insurance can be as low as $180 a month and high as $1,156 a month on average. Auto insurance is usually around $135 per month, while life insurance is usually $13 and home insurance is around $17 a month.

Credit Card Debt

This option can vary wildly depending on the individual, but the average credit card balance is around $5,331, so in a year’s worth of time with no additional spending and adding an average interest rate of 15%, the average monthly expense is around $481.

Student Loans

Anyone attending or who did attend an institution of higher learning almost certainly has remaining debt on their student loans that must be paid off monthly. With an average loan being around $29,800 and an interest rate of 6%, then for the next 5 years the cost would be $576 per month.

Childcare and School

Depending on how many children an individual has, this cost could end up being higher than housing depending on location and details. Daycare can get expensive quickly and can range from about $401 to $1,886 every month, and that can be just for one child. When school starts, the option of private school tuition is a possible addition along with whatever other needs the child may have on a monthly basis from lunch to school supplies.


On average it will cost between $40 and $60 a month to feed a medium-sized dog, but depending on the number of pets and their special circumstances or needs, this expense could be much higher.


Clothing is something that everyone needs just like food, and should be budgeted for as well. On average, a typical household will spend around $155 every month on new apparel.


While some people play sports or go for a run on local trails, gym memberships are another very common household expense, averaging at a cost of around $58 each month.


Every individual spends uniquely and has many different details in their expenses. Savings, emergency fund, retirement, large purchases, or anything else that would routinely have money put towards it should be included as well.

Step 2: Prioritize the Necessities and Eliminate Unnecessary Spending

Now that we have an itemized list of where every dollar goes every month, we can now begin to trim the fat and focus on the absolute necessities, and either lower or eliminate the unnecessary expenses. 

Items like housing and food should be the ones primarily focused on. These are necessary to live so they must take priority over anything else, however, that doesn’t mean there are no ways to lower these totals. 

Also depending on specific situations such as children, pets or other adults involved, the priorities may shift to accommodate them as well. 

These are just a few examples of the line of thinking needed in order to reduce the costs of a few particular monthly expenses.


Can a roommate be brought in to help with the rent or mortgage? Is refinancing an option? Is finding a cheaper and more affordable place to live possible? 


Cooking at home can save a lot of money, so how often are you going to bars and restaurants? Do you take lunch to work? Could you substitute brand name groceries for cheaper alternatives?

Utility Bills

How often is the air conditioning or running? Can you use a blanket instead of the heat or a fan instead of the air conditioning? Do you turn off unnecessary lights? If you have cable, can you cut the cord for a while until your finances are smoother?


Are there cheaper alternatives in plan or phone available? Does your service provider offer family plans or discounts and can you get other people involved with the bill?


Are there public transportation options available such as bus or subway? Is bicycling to work an option? 


Are there other adults such as family or friends that could help take care of the child? Does your job have an option for on-site day care or discounted child care programs? 

Step 3: Paying Off Debts

After prioritizing monthly expenses and then eliminating the unnecessary ones while trimming down the essentials, there will hopefully be some money left over each month. This money should be used to help stop living paycheck to paycheck and pay down whatever debt, if any, has been accumulated along the way. 

Now, these loans and debts should have been accounted for in the necessary monthly expenses, but only the minimum payments required. With additional money, an individual can focus said money on paying off the loans and debts and closing them once and for all. 

There are a few different methods available in order to figure out what method is best but they ultimately are divided into two different methods: debt avalanche and debt snowball.

Debt Avalanche: This method prioritizes the loans with the highest interest rate regardless of account balance. By paying off the debt with the highest interest rate first, the borrower can save money in the long run, but it can also take longer to finish off other accounts and end up debt-free.

Debt Snowball: This method prioritizes paying off the debt with the lowest balance regardless of interest rate. By closing accounts faster, this method can help a borrower pay off their debts quicker, but the higher interest rates of other accounts with high balances can make the costs higher in the long run.

The Takeaway: Prioritizing essential monthly expenses and eliminating unnecessary ones are crucial steps to ultimately live debt-free, on top of living within your means and focusing on paying off your current debt as soon as possible.

Every month ends with a long list of expenses, but figuring out which ones are necessary and which ones are not or could be reduced can go a long way toward financial stability. Once each month is figured up and budgeted, then paying down debt becomes easier and easier with every passing month until there is no more debt. It takes a lot of focus and determination, but sticking to the plan and a hard budget can have anyone financially stable before long!

Related blog posts

Need expert financial advice?

Let TurboFinance connect you with the best consulting services and resources to help you take control of your finances and find a path to build wealth.

Get A Free Consultation Today!