Real talk! When reevaluating your personal finances, some of you (like me!) might be busting your ass, trying to pay off your debt, like yesterday. Becoming a debt free household is so important to myself and my husband – we have a goal to be 100% debt free by 30, and it is going to happen!
In our hunt for resources, tips and best practices, I’ve realized a few things.
The first is that everyone is different, therefore your best practice might be completely different than mine, and that’s okay! It’s important to accept this and make adjustments as necessary to meet your needs as a family. The second is that sometimes people do some serious stuff, like selling their second car for example, to knock off a large sum at once. Awesome method, if you can make it work, but it’s just not in the bag for us. At first I was jealous of this, like WOW – knocking off $20,000 + of debt in one day, how liberating would that feel? But on the other hand, we do need two cars and it would be miserable without them (we did it this summer for a few months while we saved to pay in cash for our second car – it was brutal!).
Setting realistic goals is essential.
Disappointment from not reaching a goal can be discouraging. You must plan for savings, bills and just LIFE. We have scaled back a lot on our budget this year, including in our groceries, eating out and shopping categories, but we still have made a point to budget some money each month for the ‘little things’. In the book, Rich Bitch: A Simple 12-Step Plan for Getting Your Financial Life Together … Finally by Nicole Lapin, she talks about this extensively.
At some point, if you continue to restrict yourself of the little things that you love, such as maybe getting a coffee out with a friend once a month, or a girls night every now and then, it will not only be more tempting to get off track later down the road, but it’s just no way to life.
Now, when it comes time to saving and planning to become debt free, there are three things you should consider when making an action plan.
- Are you living within your means? If your household expenses take up over half your paycheck each month, it might be time to reconsider! Housing should be roughly 35% of your budget, and not much more. If you can cut from other areas, then it might work for you personally, but keep in mind that you should be living within your means when working on become debt free, not above them.
- Know where your money is going! When we first started looking really closely at our money, I was SHOCKED at how much I was spending on groceries each month. We don’t waste (much food, though we are working on buying ONLY what we need and nothing more), but boy for a family of two, we sure spend a lot. Websites like Mint, keep track of your spending (not cash, you have to add that manually), which cuts budgeting time in half or more. It’s free to use too (PS I am not an affiliate I just like it a lot and it works for us).
- Put any extra money towards your debt! This one is kind of a no-brainer, but it’s tempting to move your extra cash into your vacation budget or to buy new shoes. When you can pay more than the minimum, DO IT! Put more towards your debt with the highest interest first, it will save you more when you can get those out of the way, fast!
It’s not rocket science my friends. It boils down to creating a plan that works for you and sticking to it as well as understanding your financial goals and the reasons behind them. Sit down and take a good look in the mirror. Fooling yourself now might work for the moment, but in the future it will come back and kick you in the ass. If you’ve been waiting on the right time to get your financials in order, enough! Stop wasting time and get on track to kicking that debt for good!
What are your financial goals for the year?