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Early this year, I came across a friend’s Facebook post about her money makeover, and it was one of those posts that are so awe-inspiring that it makes you want to drop everything and research the heck out of it. I had never been good with money. I grew up getting anything and everything I ever wanted. I guess you could call me spoiled.
Naturally, I picked a career that would guarantee a decent salary after graduation. Unfortunately, that degree (Doctor of Pharmacy) came with a good amount of student debt. Thinking I would be making a good income after graduating, I didn’t think twice about borrowing. I basically took out every loan I could. This was a huge mistake because we are paying for it now. Making payment after payment and getting nowhere.
After reading this friend’s post, something just clicked. Maybe it was just the right thing at the right time, but I decided that I had to change NOW so that I could really live the life I wanted.
I had no idea where to start.
Fortunately, my husband lives and breathes this finance stuff. He suggested I start with Dave Ramsey’s Total Money Makeover. I was hooked. I wanted to change the family legacy. I wanted my kids to appreciate the value of the dollar, yet want for nothing. So, where do I start?
A budget.
Starting a budget allows you to see where your money is going. And knowing where it is going is the first step in really taking charge of you finances.
So my husband and I sat down and crunched some numbers. We wrote down all our monthly expenses (There were a lot!) and our monthly income (which was starting to look very weak next to our expenses). We wrote down how much student loan debt we owed. That hurt! We realized just how much we were living above our means. If we could cut back on a few things, we could knock this student debt out of the water and start saving to live the life we wanted!
Taking a good look at ourselves, we decided it was time for a lifestyle change.
You have to want to change in order for change to happen. No one can force it on you. Once you make that decision, however, wonderful things start to happen. So, my husband and I started deciding what was a need vs a want. We got rid of a bunch of wants because it wasn’t adding to the value of our life and was just adding to our stress.
To begin, we began cancelling services we didn’t really need.
Did we really need a Hulu account, Netflix account, Amazon Prime tv, AND cable? No. Was a monthly jewelry subscription necessary? Absolutely not. Would it be that terrible to live without those things? Of course not. In fact, since we have discontinued those services, I haven’t even noticed they’re gone.
Another recurrent monthly expense we had was a housekeeper coming out every two weeks. While we decided that we didn’t want to live without that, we decided instead of every two weeks, we would cut back to once a month, and all of a sudden, we had an extra $240 in our pocket. You don’t have to deprive yourself of things that you feel add value to your life, but you can adjust them to fit the kind of debt-free life you want to live. (Although, as soon as we are debt free, I absolutely plan on changing the schedule back to every 2 weeks!)
We started making a plan by following Dave Ramsey’s Baby Steps.
My husband and I saved up $1000 in an emergency fund. We listed the student loans, which were spread across a bunch of different companies from smallest to largest and started tackling them one by one. This method of The Debt Snowball is really effective because it is mind over matter. Seeing those numbers drop off one at a time really affirmed to me that this was working. All this hard work of budgeting and throwing money at this student debt was paying off. Instead of thousands of dollars in student debt, I could pay off several of the few hundred ones and be that much closer to our goal. It gave us a visual of tracking our debt.
We set a pay off goal and worked our budget around that.
Now that we were steamrolling, we really started looking at our budget. What was the minimum we could live with to make our pay-off goal? YNAB is a great tool for this because you can set a goal, and it will automatically tell you how much to budget each month to pay towards that debt in order to meet your goal. It is a paid monthly subscription, but you can click here to try it for free for one month.
I absolutely recommend setting a goal date to pay off your debt. It holds you accountable and helps you see the larger picture. If you don’t have a date set, it is so easy to fall back into your old habits and say that you “need” all those cups of Starbucks coffee in the mornings and it’s ok because it won’t hurt to take a little bit longer to pay off your debt. This can easily spiral out of control and you are no longer getting any closer to paying off your debt.
Gather cheerleaders and supporters around you.
Having people all around you cheering you on is really inspiring. Surround yourself with people who see your goal and support you. We are now in month two of our journey. It is still really early in the stages so I hope you follow us, cheer us on, maybe come along on this ride with us! I will be posting tips and strategies that we use as we work towards our goal!
Leave a comment below if you want to cheer us on! And, if you are on the same journey I would love to hear about it!
Creatively,
Alice
