My Money Story Part 1
In April 2017, I made it my goal to be debt free, with the exception of my mortgage (I rent out my property so it pays for itself). While preparing my taxes that year, I recall looking at my W-2 and thinking, “I made all of this money last year. What in the world did I do with it?” I was sick! I had also been working tirelessly at a job that was physically making me ill and yet I did not have much to show for all of my blood, sweat, and tears. It was at that moment I decided to use money as a tool to create a life of purpose, abundance, and peace.
I challenged myself to pay off my debt within two years. I did not believe this was a realistic goal, however, I aggressively attacked my debt and paid off $40,000 in 18 months. I paid my credit cards within two months and I finished paying off my student loans within a year. Next and last on my list is my vehicle and I plan to own it free and clear by February 2019. Sacrificing for the past two years has changed the course of my life forever and has put me on the path to financial freedom.
At times it was difficult to remain disciplined but it was well worth the sacrifice. Now I can sleep at night and all of the money that I was spending on debt payments now goes towards investing and things that I enjoy (i.e. personal trainer, golf, life coach, professional help with building my business). Below are the first three steps that I took to eliminate my debt.
1. Developed a budget and tracked my expenses- This will be your most important tool in achieving financial freedom. Do not underestimate the power of budgeting. I was shocked to see how much money I saved when I created a budget and frequently tracked my expenses. Initially I tracked my spending daily but that got overwhelming, therefore, I now do it every two days. In the beginning you MUST do it daily so that you obtain discipline and so that you have a general idea of how quickly your spending adds up.
There were online tools that I tried to use for budgeting purposes but none of them met my needs, so I created my own in Excel. Your budget, does not have to be anything fancy just make sure that it works for your specific circumstances. Pen and paper work just fine as well.
Once I started budgeting, I was shocked at how much money I had left over at the end of each pay period. I then put this extra money toward my debt.
2. Reduced spending- I cut back on everything except for my hair care expenses. I was in management at a Fortune 100 company where I was constantly interacting with leadership and clients. I felt that I had to maintain a certain appearance (smh), so I continued to spend a large amount of money in this area.
I knew that I spent a significant amount of money on travel and eating out. Therefore, I banned myself from going on a vacation (unless it was a close friend’s wedding) until I paid off my debt. I even went so far as to only eat lunch from the cafeteria after 2:30 pm because that is when they would discount the food for the day. For certain items such as clothes and furniture, I would first check at my local Goodwill or Salvation Army to see if they had the items I needed before going to a higher priced store. I would often find great deals! For instance, during one of my shopping trips I purchased two never worn Ann Taylor blazers, a pair of Jessica Simpson shoes, four skirts to wear to work, dishes for my kitchen, a vase, and a shredder for under 50 bucks! To make it more enjoyable, I would get together with one of my friends and we would hit Goodwill first thing on Friday mornings during their 50% off sales.
Eventually, you will get accustomed to spending less and you will become aware of many free activities and events that you can attend. It will force you to get a little creative but will be well worth it. And when you are tempted to purchase something that you do not need, ask yourself if that item is worth you not achieving your goal of going back to school, paying off your student loans, saving for that business you want to start, or whatever your goals may be.
3. Generated additional revenue- For me and most people, our largest expense is our living expenses (rent, mortgage, utilities). I decided to get a roommate in order to lower these costs. Many people are very resistant to getting a roommate but if you do a good job screening candidates, this one simple move, will be a game changer as far as reaching your financial goals. At the time, I was paying $1980 on my mortgage and condo association fees and I made the decision to have a roommate occupy my second bedroom and I charged $1100. This covered over half of my living expenses!
Now I will be completely honest with you, there were times when I was frustrated with having a roommate but the benefits of having one by far outweighed the benefits of not. Also, I did a great job of screening my roommates so I did not have any terrible experiences, however, there were a few instances where I would naturally get slightly annoyed by minor things. In addition to screening tenants, creating short lease terms or month to month terms can be very beneficial to both parties. This way if the living arrangement is not working out, the tenant and home owner are not stuck in a long-term undesirable situation.
I also maximized windfall spending. Windfall spending is sudden, unexpected profit or gain (e.g. tax refunds, performance bonuses, signing bonuses). I received a performance bonus, tax refund, signing bonus from a new job, and a PTO payout from my former job. I would take the majority of these funds and throw it at my debt. However, I always allocated a portion towards giving and fun! I think that it is important to splurge on yourself a little, otherwise you will eventually give up and stray from your path to financial freedom. Although windfall spending was a huge benefit, keep in mind that I paid off my credit cards and federal student loans prior to receiving any windfalls.
Up Next….
Continue reading Part 2 of My Money Journey to learn how I eliminated $40,000 in debt and how you can do the same.