My intention is not to turn this into a money blog so please stick with me while I get myself back in the habit of writing weekly. Hopefully along the way you will learn something new or find one of these tips useful. And if there is something you would like me to write about (money or otherwise) leave a comment and let me know!
Money Tip #2: Track your spending. I use Mint which is a free online service (they suggest financial products and earn commissions if/when you decide to use suggested products). I also recently signed up for Personal Capital which I believe is similar though I haven’t spent much time in my account yet. Of course there is always an Excel spreadsheet that can be customized as basic or as fancy as you want. Here is a quick tutorial.
When you track your spending for the first time:
1. You’ll probably discover you spend a LOT on food…or clothes…or some other category. That’s good to know for the next point.
2. It allows you to make changes. You can’t decrease the amount you spend on wrist watches if you don’t realize you’re spending $500/month on them.
So give it a go. Sign up for a free account or open up a spreadsheet and start tracking. Then do me a huge favor and come back and comment about what surprised you the most about this exercise. If you already track your spending leave a comment and share what your experience was like early on.
There are few things in life I get really excited about. Money is one of them. I’m always on the lookout for a good financial podcast or new money blog. My husband (and probably many of you) think these are boring and dry, but I can’t get enough. Since I have historically not been great at posting on a regular basis I am going to start posting a money tip once a week in an effort to get myself back in the habit. I find myself watching entirely too many many shows online these days and since we recently added Netflix back into our budget I need something like writing to keep my mind engaged between episodes of Parenthood and Property Brothers.
Money Tip #1: Enroll in your workplace 401K. TODAY. Log into your Human Resources account from home if you can or set an alarm on your phone for your next scheduled shift and get the paperwork needed to start it. Most companies make the process really easy. If you already contribute to a 401K my stretch goal for you is to look into additionally contributing to an IRA.
Co-workers made fun of me at my first job out of college because I was always logging into my retirement account to check the balance. DO NOT listen to the people who tell you you’re too young to worry about retirement. Those people are probably poor and you should always be skeptical of financial advice given by poor people.
If you don’t have a 401K available at your job there are other options. Any of the big investment firms (Vanguard, Fidelity, T. Rowe Price, etc) have a whole team of people who can help you choose the right account for you. Saving for you future is important and you should start today. No excuses.
Don’t know what a 401K is? Need additional help? Feel free to ask questions in the comments section or send me an email and I’d be happy to point you in the right direction.
If you missed last weeks post you can find it here. Today I’ll give you the specifics for each step in our journey.
1.)We made the decision to stop borrowing money.
This first step is self explanatory, although this is the step people get tripped up on. For me it was extremely helpful to have a spouse who was supportive and on board. If you’re not in a committed relationship, try to find a close friend who you can work with and use as an accountability partner.
2.) We formulated a plan.
Once you really commit, then you can formulate a plan. We used Dave Ramsey’s Baby Steps as a guideline, although we adapted it for our needs. You can find his plan here.
How we adapted Dave’s plan to fit our needs
–We still put money into my 401K. I understand why Dave recommends stopping contributions (focused intensity), but I just couldn’t bring myself to break this good habit. Plus I may not always have the option of a 401K (if I stay at home with kids) and I wanted to start something that would be growing for the rest of my life.
–We still went on vacation. Sort of. While we didn’t take any exotic cruises or tour Europe, we did visit out of state family a LOT while we were getting out of debt. Both Adam and I understand deeply how precious the moments with our family are and we were not willing to risk missing those moments to get out of debt sooner. If anything I wish we would have taken more trips to visit family, especially those who lived multiple states away.
–We ate out occasionally. You’ll often hear Dave Ramsey say that while getting out of debt “you won’t see the inside of a restaurant unless you’re working there.” While we didn’t eat out all that often, we still ate out for entertainment or to enjoy a night with friends. If you choose to still eat out while you’re getting out of debt you MUST decide in advance how much you are going to spend. If you don’t track your spending or have a budget then you probably don’t realize how much you spend eating out. I encourage you to look through your account for last month and add up the numbers- you may be surprised. Then sit down and decide how much you want to spend this month and stick to it.
An important part of having a plan is to budget. You don’t have to get sophisticated about this. And a budget isn’t constricting (as I thought it would be). A budget is just a specific outline of what you will make and how you want to spend it. That’s right- you get to decide how to spend your money! We used an excel spreadsheet for the main budget but also supplemented with mint.com. Remember, the first time you write down what you think you will spend it won’t be perfect. But also remember if you’re about to spend an extra $50 on groceries then you have to go back to the budget and take that $50 from somewhere else. When getting out of debt you don’t get to spend money you don’t have.
3.) We created a visual reminder.
I probably made 3 or 4 different charts before I finally had one that worked. It was a simple grid where each square represented $50. I had totals beside each line so we could see quickly see our total paid. At the bottom of the page we wrote out the reasons we wanted to be debt free. Most importantly, we posted this on our fridge as a constant reminder.
4.) We set goals.
When we first decided to get out of debt, we used this debt reduction calculator to figure out how long it would take. We got married in June 2010 and running the numbers we figured it would take until June 2013. The total amount was a combination of many small loans, so we set deadlines for paying off each of the small loans and focused on those goals, rather than the 3 years it would take for the entire amount. Each time we set a goal that represented a reasonable estimate, along with a stretch goal. On our very last loan our stretch goal was to pay it off by the end of February 2013, but we actually exceeded our stretch goal and made our final payment February 1!
5.) We rewarded ourselves for small milestones and constantly talked about the “why.”
After each small debt paid off we would treat ourselves to a restaurant meal, ice cream, or have some small celebration. It felt so good to see each debt get paid in full, but we needed a little boost after each one to keep us going. On a daily basis we talked about the plans we had for once we were out of debt, and now being on the other side it feels amazing to see some of those dreams becoming our reality.
I would have loved to have paid for college out of pocket and graduated with no student loans, but I am actually grateful for the student loans in a way. Adam and I have learned how to delay gratification and wait for the things we want while we save up and pay cash for them. We have learned how to make a plan and stick to it. We have learned to rely on each other and support each other and for that I am so grateful. I love life and I look forward to the debt free chapter of our lives. Good luck on your own journey! I know you can do it.
Do you have any questions about how we achieved this major milestone? Any advice? Leave a comment or email myhomemakingexperiment [at] gmail [dot] com.
*If you missed part one of this series you can read it here.
As promised you get to hear from my dear sweet husband today.
[Adam]: So Christy wants me to contribute something to her blog, give all you folks out there a sense of my financial background. Sounds easy enough.
Financially, my family has had it fairly rough, mostly due to medical issues. My sister’s heart problems in particular put serious strain on my parents’ income, almost more than they could handle. As such, they had to deal with debt, but for things they severely needed. Despite their own debt, my parents taught me to stay away from debt, and President Hinckley (an LDS prophet from my youth) advised members of the church to not go into debt. My brother also set a good example for me when he almost made it completely through college without debt.
In high school, I worked for my parents’ crafting business to help pay for school. The deal was that I would get a small hourly wage from it and they would help with college costs in exchange for my cutting wood door toppers in the basement. I hated it, but I did it. I was very happy when I got a job at Dominos at 18 and got out of the house. Then I went on a mission to Japan for two years, then had a year off for medical issues.
When I started school, I was very, very poor. I had a monthly income of about $600 to pay for rent, food, books, travel, entertainment and anything else I needed. My resources were slowly drained to the point that when I married Christy I was almost completely broke, but I had no debt.
Then finally, after graduating, I got my first full-time career job last June. It has been wonderful to actually have money and now that we are debt free we are enjoying our hard work. It feels good to be making more than $600 a month.
My philosophy with money? Debt is stupid. I hate debt so much, I don’t even want to buy a house until I can pay for it in cash. I wouldn’t feel like I owned it until I paid it off. I would just have all the responsibility and risk without really owning it. I love saving up, then paying for something in full. It feels great to know and feel that I purchased something huge and owning it without anyone else (except Christy) having a claim on it.
Join me next Monday for part 3. And if you have any questions for us leave a comment or email myhomemakingexperiment [at] gmail [dot] com. Thanks for following!
[in my loudest screaming voice pretending I’m not sick with a sore throat]
WE’RE DEBT FREEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEEE!!!!!!