5 Debt Statistics You Should Avoid
Whelp folks, 2021 numbers are in and not to anyone’s surprise, things didn’t go great for us financially. The good news is that you have the power to change your life! The tricky part is that only you can do the work to change your life.
But don’t fret, I am all about giving you the tools and empowering you to change the financial path you’re on. Below are a few 2021 financial statistics, provided by SpendMeNot.com along with some free advice to help you ditch debt and live rich.
The average credit card debt in America is $6,270.
SpendMeNot claims that “credit card debt is one of the biggest financial problems that households face in the modern world. According to estimates, 45.4% of families carry some sort of credit card debt.”
When we carry over a credit card balance, not only are we paying high interest, but we are proving to ourselves that we can’t afford the lifestyle that we are living. This doesn’t necessarily have to mean that you are living extravagantly, but that you are spending more than you make.
When creating a debt payment plan, paying off credit cards is often top priority as the interest rates are unaffordable. Getting personal loans or transferring the balance to another card is always an option to reduce this debt, but should be consulted first with a professional. Whichever debt payoff strategy you choose, eliminating this high-interest debt should be top of mind.
Just 39% of Americans have enough cash to cover a $1,000 emergency.
When we think about the emergencies that happen in our life, it’s often a car needing repairs, a water heater going out or an unforeseen medical expense. It’s important to have money set aside for these obligations as they often find their way to credit cards, resulting in paying high amounts in interest.
A simple plan to increase your savings will ensure you don’t have to put unforeseen expenses on a credit card. Even if that means putting a pause on other financial obligations, it will be worth it in the end. If you don’t have additional income to build up your savings, you may want to look at temporarily cutting unnecessary expenses or increasing your income.
70% of Americans say their financial planning needs work.
If you feel like you don’t have enough tools in your toolbox to make the financial decisions in your life, you’re not alone. Enlisting the help of a financial planner or coach can help you ensure you reach the goals you have outlined for your life. No goal is too big or too small and the time to start saving is today!
I offer a free initial call to those seeking out expert advice in budgeting and managing debt, you can schedule here.
16% of Americans say they have more debt than before the pandemic.
The pandemic created a financial mess in our lives, lost jobs, reduced hours, business closures and so much more. The key takeaway is that we don’t have complete control over our lives but we should always be doing our best to prepare and move on from financial hits we take.
If you have increased debt, create a plan to pay off your debt and increase your savings to reduce the amount of debt you might have to take on in the future.
It’s also smart to think about diversifying your income. If you were to lose your job today, how else would you make money? When we have multiple income streams we are adding a layer of protection in case our employment changes.
Only 24% of Millennials demonstrate basic financial literacy.
While this stat is scary for millennials, I am not sure it’s any better for Gen X or Gen Z. A basic understanding of expenses, income, assets, liabilities, tracking spending and creating a budget is crucial to your financial success.
The ball is in your court to improve your financial literacy. By gaining basic knowledge in managing your income, debt and assets you’ll be able to set yourself up to build real wealth to reach your future retirement goals.
A key takeaway from these statistics is that no matter how bad you think your finances are, you’re not alone and hiding from the problem will never make it go away.
5 Things I Spent Money on While Getting Out of Debt
Deciding to pay off your debt is a personal decision with a path that is as unique as you are. There are no formulas that will get you the same results within the same timeframe as any one else and that’s ok.
If you have chosen to pay off your debt you may decide to be gazelle intense as some personalities might suggest, or you may choose a lifestyle that will allow you to stick to a long-term plan.
Whichever route you take, here are five things I still did while paying off debt and looking back, I don’t regret any of it!
Life Milestones
There comes a time in our lives when it seems that everyone we know is either getting married or having a baby. Watching close friends and family tackle these new phases of their life was something I wouldn’t have missed for the world.
Participating in bridal showers, bachelorette parties, wedding showers, weddings, baby showers, sprinkles, etc. is something that took considerable financial resources. If avoided, I could have been debt free months earlier than my actual debt free date, but for what?
At what expense was I willing to become debt free while missing out on these large life milestones? This was not one of them.
Travel
While excessive traveling wasn’t in question, it was a no-brainer for Derek and I to participate in trips that we both considered important. This often looked like visiting friends for big birthday celebrations, weddings that were out of state or long weekends up north to enjoy the woods.
Whatever the event, we made it happen within a budget that was predetermined while weighing all of our options to ensure the trip was affordable, while allowing us to stay on track to pay off our debt.
Happy Hour
One of my favorite pre-pandemic rituals was happy hour at the local watering hole with co-workers or close friends to unwind from the day.
To keep costs low, I was always willing to pick the location to ensure a good happy hour menu with plenty of snacks and beverages at a discount.
I think back fondly on those days as a moment in time I got to connect with friends on a micro level, which can never be replaced by virtual happy hours.
Good Groceries
Good food has always been important to me and as a pescatarian, eating grilled chicken with veggies isn’t an option for my weekly meal prep as some influencers might suggest. A healthy diet including a lot of fresh fruits, vegetables, nuts and seafood ensures I care for my body as much as I want to care for my checking account.
Our co-op membership was also supported while we were becoming debt free and something we valued as a couple.
Weekend Fun
Whether there is a local art fair, music at the park or a new beer release at a brewery, it was always important we had money each weekend to get out and enjoy time off of work.
Sometimes the lines blurred as we were spending weekends traveling, chasing the latest food craze or meeting up for Sunday Funday but that’s where we were flexible. As long as we were making our monthly extra debt payment we were able to choose how we spent our time and the money that was left after our fixed expenses.
The more we spent the more shifts I’d usually pick up waitressing but it truly was a work hard play hard time in my life. And I don’t regret a single moment of it.
Don’t feel guilty for spending while you are paying off debt. Society might try to tell you you’re cheap or stingy but only you get to say what stays and what goes. Afterall, personal finance is just that, personal.
5 Ways to Tackle Debt While Federal Student Loans Are Deferred
Federal student loans have been deferred since March 2020. That is two full years of your loans not accumulating interest. If you haven’t been tackling your debt head on, now is the time. As jobs are restored and payments continue to be deferred, you’ll be able to make the dent in your debt that could change your life. Here are 5 ways you can reduce your debt.
Continue Making Payments
Payments on federal student loans were initially paused as we were facing the pandemic head on and millions of Americans lost their jobs (or were seeing a reduction in hours). Now that employment is up, you should really look at your finances to determine if you can afford to start making your monthly payments again, even if they aren’t required.
By making payments, you are putting more of your money at work since your loan isn’t accruing interest each month. Your entire payment will be going towards the balance, making it easier than ever to pay off that loan.
If you can’t afford to make the entire payment, assess how much you can afford. It’s easier to start adjusting to what life looks like with that new expense before it’s actually required to allow yourself some room as you are testing your payment affordability options.
Pay More Than Your Minimum
Really ask yourself, can I afford more than the minimum payment or do I just not want to? If you are barely scraping by, without excessive spending in areas like restaurants, clothing or vacations, then maybe the minimum payment is all you can do right now. Be ok with that! As you have time, start to look at how you can increase your income.
If you can afford to pay extra, how much extra are you able to pay each month? This will be determined by your existing income and expenses but a budget can help you answer that question. I like to use this Debt Reduction Calculator spreadsheet from Vertex 42 to see when you can be debt free, allowing you to play with different monthly payment scenarios. This might be the exact tool you need to get motivated to pay extra on your debt.
Focus on High Interest Debt
If you have debt with higher interest rates than your current federal student loans, you may want to think about tackling that debt first, utilizing the avalanche method. Use the calculator above to assess your options. Using money earmarked for your student loan payment to pay extra on another debt will allow you to reduce the principal on the high interest debt, allowing you to pay less interest over time.
This will only be your strategy during the deferment period but if history repeats itself, extensions of this grace period will continue to happen.
Adjust Your Budget
Whether you are struggling to make a payment or trying to calculate how much you can afford to pay towards your debt, a budget can be a helpful tool to answer all your questions. The 90-Day Expense Tracker in this free Ditch Debt Bundle will help you to figure out where the heck your money has been going. From there, you can decide if you need to tighten the belt in areas of excessive spending or eliminate spending in areas of habit or convenience.
Remember, following a plan to pay off debt can be as aggressive as you want and it doesn’t last forever. I followed an intentional semi-aggressive plan to become debt free and while 20 months seemed to last forever, it still included vacations, happy hours, weekend festivals and home repairs. Paying off debt can happen in tandem to enjoying life.
Increase Your Income
At the end of the day, sometimes we just have to increase our income. Take a look at your free time and decide if a side job is necessary to tackle debt. This doesn’t mean working every weekend at a job that pays barely above minimum wage. Get creative and truly work smarter, not harder. Utilize your hobbies, skills, certifications, previous experience and network to find work that will pay you what you’re worth.
Once you have additional income coming in, don’t waste it. Make a plan to use that money to pay off debt, save for a large expense or increase your emergency fund.
While working with clients to become debt free, the problem I often see isn’t that they don’t make enough money. It’s that they don’t have a plan for their money and they don’t give every dollar a job.
5 Questions to Ask Yourself Before Making Big Personal Finance Decisions
Spending money is something we all do basically everyday. Oftentimes we don’t even think twice about it. We are trained to swipe a card and make the monthly payment, we have become numb and disconnected from our money.
In order to reach our goals, we need to be sure we aren’t setting ourselves back. Big decisions often take time and it’s important to weigh your options to help you make less-bad choices with your money.
To help in making important personal finance decisions, here are five questions to ask yourself before making those big decisions.
Do I understand what I’m signing up for?
There are things we do on a daily basis that have a major impact on our finances, and we don’t even take time to think about the downstream effects. Whether we are taking on new debt, refinancing a loan, deferring a payment or carrying over a credit card balance, our monthly cash flow is affected.
Luckily, it’s not always affected negatively but it’s important to understand what each of these items mean to your bottom line. Before you sign up for anything, research which questions you should ask and what you should know before going into the deal to ensure you are prepared and not caught off guard if something comes up.
Why does this have to happen now?
We often find ourselves in a pickle financially because we made a quick decision in the moment that we thought would be a great idea (The Hangover anyone?). Well I hate to break it to you but your future self is usually less that impressed with these spur of the moment choices.
If you’re buying a new car, is it because your old one literally needs a new engine or is Tesla’s new model blowing your mind? Are you house hunting because you are now sharing a bedroom with your kids or because you got a raise at work and could use the extra space?
Understanding why this is happening right now will help you decide if it has to happen right now or if it can wait. If it can wait, this allows you to save a bit of money to prepare and take less of a hit to your checking account.
What would I do with this money if I didn’t spend it here?
Let’s go back to that car loan example. If I were to venmo you $246 each month, would you spend it on a car loan or would it be going towards something else? If you immediately start thinking about that beach vacation, a new patio set, hockey equipment or anything else besides the car, you might not need the car.
Start thinking about debt and expenses as opportunities to spend money on something that makes you happier or your life easier. This will allow you to stress less about, “can I afford this payment?” and dream about “what could I be doing instead”?
Am I trying to make someone else happy?
Your life should consist of only the things that bring you the greatest joy, and nothing else! I often like to purge things in my house as I feel the clutter building up. I then start to wonder, why did I even buy this in the first place? The answer is usually because I found the thing at a thrift shop and it was too cheap to pass up or I was at a friend's house and saw the thing and had to have it myself.
When we are alone with our thoughts we are truly able to imagine our dream life without the influence and clutter of other people’s opinions. What are you buying to look a certain way? Are you spending your time on things that are based on loneliness, missing out, the latest trend or what you “should” be doing? If so, it’s time to let that go!
Does this align with my larger goals?
At the end of the day, we only have so much money to work with. The only goal for that money is to allow us to live a happy and healthy life, with those we love most and in a place that speaks to our soul. That’s it.
When we waste money on things that don’t bring joy or we spend it chasing something that we no longer want, we are throwing away precious resources that could help us live that best life.
It’s important to know what your version of “best life” looks like and map out how to get there. Focus your savings and align your spending on reaching those goals, you’ll be happier because of it.
4 Ways to Heal From Financial Trauma to Begin to Pay Off Debt
The journey to pay off debt, or simply stop living paycheck to paycheck, can be a long one. We are flooded with emotions of failure, overwhelm and stress topped off with an overarching feeling of “what the heck am I even doing?”
I’m here to tell you, it doesn’t have to be that way. I avoided my debt for eight years because I thought it would eventually settle itself and I’m here to tell you, that just doesn’t happen.
The best way to fix our problems with money is to tackle it head on! Sit with the emotions that money stir up, work everyday while giving ourselves grace and just try to improve one thing at a time.
To help you get started, here are four ways you can begin to heal your relationship with money and actually make progress on paying off your debt!
Dig Into Your Current Beliefs
I used to say things like “must be nice to not have any student loan debt” and looking back now, I cringe. I had no idea what those people were dealing with in their lives! Did I wish that I didn’t have student loan debt? Absolutely! But I didn’t need to project that onto other people.
What are some of the things you tell yourself or think about money? Are you embarrassed by how much money you make? Do you think people with flashy things are greedy? Are you afraid to spend money because you have to save some for a rainy day?
Many of our beliefs are instilled in us at an early age and it’s often not a reflection of our true beliefs. Take some time to write down all the things you have heard about money. Reflect on whether or not those statements have to be true. If not, how can that change things in your life?
Change Negative Messages You’re Telling Yourself
Unfortunately we are often more harsh on ourselves than we are to other people, and that has to stop! The messages that we are telling ourselves are more powerful than we even know.
To quote Gandhi, and yes, I’m bringing Ghandi into this:
“Your beliefs become your thoughts, your thoughts become your words, your words become your actions, your actions become your habits, your habits become your values, your values become your destiny.”
So be nice to yourself and start to reframe negative self talk before you manifest a nightmare. Instead of telling yourself that “you’ll never have enough money” start saying “I am excited for the future because I have the power to change my life” or “I know I can build wealth and am worthy of nice things.”
Create a Roadmap to Reaching Your Goals
In order to reach our destination, we have to know where we are going. Once we start to believe that we have the power to change our lives and that we are worthy of wealth it becomes much easier to curate the life we’ve always dreamt of.
Write out your top goals you’d like to accomplish within the next six months, two years and five years. For each goal, write out what you’ll have to do to make them come true. How much money do you need? Do you need to start scheduling your time better? Will you need to surround yourself with a supportive community? Use all of this information to propel you to running that marathon, paying off that debt, moving abroad or whatever speaks to your soul.
Celebrate Your Progress
It takes a lot of guts, self-love, patience and perseverance to tackle our money problems and we often don’t see results overnight. Be sure to build in moments to celebrate your goals and take time to reflect just how far you’ve come.
I used to buy a fancy bottle of wine or have a date-night with my partner (restaurant my choice, of course) when I was paying off debt. I say this because even if you are throwing all your extra money towards a goal, you should still be spending money on the things that bring you joy, otherwise it won’t be something you stick with long term.
If debt is something you have been struggling with and need some support on, schedule a free consultation call and let’s see how I can help you reduce stress, pay off debt and build wealth!
4 Apps You Need to Get Out of Debt
There’s an app for that! There is seriously an app for almost anything, even an app called I am Bread where you are a slice of bread and your entire mission of the game is to become toast.
Even if you are feeling the stress of ‘I have too many apps’ there are always a few that should make the cut. These apps are designed to help keep your spending in alignment with what makes you happy, pay off debt and live your #bestlife.
Here are the four apps you need in your life to keep your bank account fat and happy!
App to Budget
It’s no secret that I am a huge fan of You Need A Budget (YNAB). I have personally used this app for a few years now and it’s my lifesaver as I try to stay on budget and reach my large savings goals. Be sure when you choose an app you pick something that doesn’t just track your spending, you want to be sure it aligns with your budget and the amount of money you assign to each category within your budget.
Pro tip, some apps don’t make you pull money from other categories when you overspend. If you have a budgeting app and use it regularly, this might be why you are still feeling broke and stressed with your money.
Check out other apps that you might want to check out.
App to Track Debt
When you are getting out of debt, it’s important you have one place to track all of your individual debt balances, interest rates, payment due dates and extra payments made. Apps like Debt Payoff Planner can help you achieve debt freedom quickly as you get organized, play around with payment options and stay motivated to achieve your goals.
Here’s a full list, be sure to check each app to be sure it includes features that are important to you.
App to Split Expenses
Picture this, you're going on vacation with a friend and you're sharing a room. You pick up the room charge but your friend promises to pay for the car rental. You take turns paying for dinner but who's really keeping track, right?
Hear me when I say, you are not cheap when you keep track of expenses while you are trying to get your finances organized. Never.
Apps like Splitwise can take the guesswork out of who pays for what and who owes who. Do you have that cheap friend that always gets out of paying? Even better!
Once I introduced this app to my friends on our first trip, it became a no-brainer and I’ve used it ever since.
App to Get Paid
You’ve done the work to get your budget in order, you’re making progress on your debt and you are finally going on a trip with friends, life is great!
This sounds obvious but, have an easy way for people that owe you money to pay you. Don’t let someone else mess up the system you worked hard to build. Don’t trust they will pay you when they get cash later or they will cover your next concert ticket, you don’t have time for that and your debt is charging you interest by the day.
I use Venmo or PayPal but use what your friends use and use something that doesn’t charge you a fee, here’s a full list of options.
Tips to Keep Our Kids Out of Debt
Let’s face it, a lot of us have learned about debt and managing our money the hard way. We found out about negative balances when our cards declined at checkout or we saw firsthand what 20% interest on a credit card balance actually adds up to.
While our kids have grown up with money in the digital age, there are still some lessons we can help them to learn while they are under the safety of our homes to allow them to start steps ahead of their peers.
Pre-Teen & Teenager Money Tips
Teach them the basic principles of personal finance such as income, take-home pay, expenses and savings.
Our teens will be more interested in budgeting when they know what they’ll get out of it (be sure to highlight how budgeting can get them what they want).
Help your teen create the budget categories that fit for their life (Clothing, Personal care, Car insurance, Cell phone coverage, Gas money, Entertainment or going out with friends, Food, School supplies or extracurricular activities that you don't pay for).
Assign percentages to each budget category to help them budget more easily (50/30/20 rule can help with this and make budgeting go more quickly - needs, wants and goals).
Highlight and help them curb their impulse spending on items that weren’t considered important when creating their budget.
Teach them about loans (especially student loans and car loans) and help them decide if it’s a smart choice for them or how to avoid crippling debt.
Money Tips For Any Age
Sit down with them on a regular basis to show that money isn’t a taboo topic and your home is a safe place to make mistakes and ask questions.
Show that money should be used for 1) expenses 2) giving (donating or supporting a friend’s fundraiser), 3) saved for later and 4) enjoyed!
Especially for our younger kids, use a clear jar to save to create the visual of money.
Talk about the importance of saving up for larger items and help them break down the math into monthly savings goals (saving for a game, large toy, car, first year of college, etc)
Show them that stuff costs money by removing money from their bank account or piggy bank to make a purchase, this visual will make it more real in the digital world we live in.
Apps & Games for Money Conversations
Learning about money and keeping track of it can be fun and it’s important to show your kids this side of personal finance. They won’t be interested in something boring so here are some tools to keep your kids engaged in money topics, help you track chores, give your child their allowance and ensure they are following the plan you created together.
5 Money Lessons I Learned While Getting Out Of Debt
When I was getting out of debt, I was learning all sorts of money lessons that I felt I should have been taught years ago. Things like loan terms, budgeting, minimum payments and interest rates have a real effect on our finances and if we don’t understand them, or use them to our advantage, we directly feel the pain of financial stress.
Here are 5 money lessons I learned while getting out of debt that you can use to get yourself out of debt and help your children stay out of debt!
It’s Important to Understand Things Like Loan Terms and Interest Rates
Before I got serious about paying off my debt I consolidated some of my student loans to get a better interest rate. Sounds smart, right? No! I didn’t understand loan terms and while that sounds simple, it’s a trap we can all fall victim to. The possibility of a much, much lower monthly payment gets a certain part of our brains excited and we don’t even realize how much more we’ll end up paying in interest. My advice, do the math and don’t sign up for longer terms unless it’s absolutely necessary, extending your debt doesn’t help.
Minimum Payments Won’t Make Your Debt Go Away
The amount of your minimum payment doesn’t really matter. For example, I used to think that just because I paid over $500 a month on my student loans I was being responsible because that’s a lot of money! In reality, it was that high because I had a lot of debt. Consider your minimum payments just that, the bare minimum.
Do yourself a favor and use a calculator to see how much you can save if you were to pay just a little extra each month. Here’s a great calculator for credit cards and here’s a more general calculator for all loans. When you can see how much money you can save on interest by paying just a little bit more each month, it might be all the motivation you need to pay off your debt. Your hard earned money should be used to live life, not pay interest on debt.
Looking at Statements Is Important
I am a sucker for setting up auto payments. Having to remember to login on a certain day to make a payment does not bring me joy. But, the entire reason I am here today is because I decided to login to my accounts one day and see how much I had remaining - spoiler alert, it was a lot! I wasted years of interest payments because I assumed I was close to paying off my loans.
When we force ourselves to login, see how much we are paying in interest a month and look at how many more payments we have left, we are more likely to change the situation. I’m not saying you aren’t allowed to auto pay each month, but it’s wise to login and be involved with your debt on a regular basis.
It’s Critical to Have Goal Around a “Debt Free” Date
The quickest way to get to the finish line is to know where the finish line is. Committing to yourself to become debt free isn’t easy but it’s a game-changer when we feel the stress and anxiety debt can cause. By setting a goal to become debt free you can keep your head down to do the work while knowing this isn’t forever. Here's a great calculator to help you set a goal to pay off your debt. You’ll be amazed how quickly you change your life when you become intentional with your spending and your goals.
I had a goal of $400 a month that I needed to earn waitressing as a side hustle. If I broke that down, it was only $100 a shift, once a week. By setting a realistic goal of additional income, I wasn’t stressed by the feeling of always needing to make more money. I also committed that $400 to pay extra on my debt, no matter what. If I made more than $400 in a given month it was up to me to decide what to do with it, no added pressure. As my debt total began to dwindle it was amazing how motivated I became to pay even more than the $400.
Every Penny Matters and a Budget Helps
When you commit to your new monthly payment (beyond the minimum payment) it’s important to stick to that number. That monthly payment directly affects the date you’ll become debt free and every time you pay just a little bit less, you are extending your debt free date.
If you are having trouble sticking to the payment try to make that payment at the beginning of the month so you don’t have a chance to spend it as ‘something came up.’ If you are not happy with your debt free date, look at your current spending and see how you can increase that monthly payment, you’ll be amazed how much money we spend on convenience items (like going out to eat because we don’t have groceries). Here’s my free 90-Day Expense Tracker if you need to sort out where your money is currently being spent on.
8 Money Routines From People Who Are Great At Building Wealth
Someone once told me “rich people follow a budget” and I still think about that phrase today. We often think that we have to manage our money when things are going bad or when we have to get back on our feet, but that’s simply not the case. Here are eight routines that rich people follow to continue to build wealth (and that you can use to get out of debt).
Follow A Personalized Budget
Personal finances are just that, personal! Don’t download a budget template or trust that you can use the one your friend had success with. A family of four spends more on groceries than a single person. Rent in the city costs more than living in BFE. Your bar tab in your twenties is very different than in your forties. You get my point, create a budget that fits your lifestyle and allows you to reach your goals while taking into account your income.
Live Below Your Means
Debt is simply spending more money than you make and we want to avoid that at all costs! Be sure to know what your monthly and annual take-home pay is and live within that number. If you can’t afford to #liveyourbestlife then either increase your income or decrease spending in areas that don’t truly make you happy.
Create a Savings Plan Around Retirement Goals
Don’t just sign up for the 5% savings rate with your 401k administrator. Use calculators to figure out how much money you will need at retirement and work backwards to determine how much that translates to in monthly contributions today. Our retirement goals look different, you may be on a FI/RE plan or you may want enough to travel the world in a jet. Whatever your plan, know how much that life will cost you.
Pay Off All High-Interest Debt
Not all debt is bad, but all high interest debt is! Any easy rule of thumb is to look at debt with interest rates above 5% and pay it off as quickly as possible. Be sure to use the debt snowball or debt avalanche method to make progress and stay on track.
Utilize Apps and Software
There’s an app for that! Make managing your money easy. Try apps like Debt Payoff Planner to keep track of your debt, You Need A Budget (YNAB) to track your net worth and follow a budget or Splitwise to track group vacation expenses. You’ll immediately notice your stress going down as you gain clarity around your money.
Pay Credit Card Balances In Full Each Month
Never carry a balance on your credit card, that’s when interest charges kick in and you’ll be paying money just to swipe your card. If you already have a balance it probably qualifies as high-interest debt should be paid off as soon as possible. Otherwise, if you swipe and pay in full each month, you’re one of the few gaining the rewards without paying a penny!
Learn How To Be Frugal (Not Cheap)
When you see store-brand groceries in my cabinets, it’s not because I’m cheap, it’s because I know it’s the exact same as those more expensive brands. The same goes for my jeans that aren’t $100 a pair, it’s because I’d rather sip on fancy old fashioned bevvys than to spend my money on clothing. Since we all care about different things, learn where you can spend less without sacrificing what you care about most.
Make More Money
Can I get an amen! When we make more money we have more choices and life becomes a little bit easier. We still have to manage that money and we still need to keep an eye on our spending but if you can continue to ask yourself, how can I make more money, more things will start to fall into place. If you don’t have time for a side-hustle you can seek a promotion at work or change employers all together.
Ready to Ditch Debt? Three Steps to Pay Debt Off Quickly
Having debt is no fun. Not only is it another bill siphoning money out of your paycheck, but you have to pay extra on top in the form of interest. Sometimes debt is unavoidable, emergencies do happen, or maybe you have debt but are ready to pay it off! Here are three steps to ensure your debt gets paid off quickly so you can spend that money on something a little more fun than a payment.
Know Your Numbers
In order to make a plan to tackle your debt, you’ll want to know your numbers. What are these ‘numbers’ I speak of? You’ll want to know four things; the interest rate, minimum monthly payment, debt balance and any promotional offers such as zero interest for the first year.
When we know these numbers, we can use a debt calculator to see how long until we are debt free using scarios with various monthly payment options. You can see how long you have left if you continue to make minimum payments, pay an extra $50 a month or pay an extra $300 a month. Testing various monthly payment amounts might be the motivation you need to pay off your debt for good!
Here is a tool by Vertex42 that I love to use (scroll down to download in Excel or Google Sheets) and I have a video here explaining how to use it.
Choose a Non-negotiable Payment Amount
Once you have decided on a payment amount that works for you, make that number non-negotiable in your brain and your budget.
When I was paying off my student loan I promised myself that before restaurants, clothing or vacation, I made my extra payment on my student loan. This was so that I could have them paid off by the date that the debt calculator gave me without things popping up and ruining the plan.
To help buffer the budget during this phase I waitressed a few nights a week on top of my day job. I say this because it allowed me to have more money for things like vacation and restaurants. Without that extra income I would have had to reduce spending on those areas quite a bit.
Whether or not you have to reduce spending in certain areas while you are paying off debt will depend on your income and your cost of living. Maybe you have a great income you just need to streamline a bit. Or maybe you don’t have a high income and taking on another job isn’t possible right now, that’s ok you’ll just have a ‘debt free’ date that is a bit further out.
Use the Snowball Method
If you have multiple debts that you are trying to pay down, you should use the debt snowball method to focus on one debt at a time. By focusing all of your extra dollars on one debt, you can make a larger dent in the balance and ultimately pay all your debts off more quickly.
For example, I had multiple student loans I was making payments on. By using the snowball method, I threw my entire ‘extra debt payment’ amount, that non-negotiable payment you have from above, at the debt with the smallest balance. This was on top of my minimum payment. Once I paid off that debt, I focused the minimum payment from the paid off debt along with my non-negotiable payment towards my next smallest loan. I continue the process until all debts are paid.
For the longest time I was trying to pay extra on all of my debts but I wasn’t seeing progress, I was losing motivation and I would quit. With the snowball method, my non-negotiable payment actually increased as time went on. Not because I was making more money, but because I was getting better at budgeting. As I saw my balance dwindling, I was becoming more motivated and started eliminating other expenses from my budget to focus every possible dollar towards my debt. This is how I was able to pay off more than $46,000 in 20 months.
How Paying Off Debt Allows Me to Say Yes More
Debt comes in all shapes and sizes and it’s so normal we don’t even see how it affects our daily lives. When we choose to look at debt as something that consumes our monthly incomes, we can start to see how we ended up as a paycheck to paycheck nation. By paying off debt I have more flexibility in my income to say yes to things that make me happier, and you can too!
We have to reframe our thinking around debt
We all know debt isn’t necessarily a good thing and we are taught to try to avoid it, but do we actually avoid it? Maybe you take out loans for college because you can’t foot the bill with cash (who can) or your car is about to take the turn for the worst and you need an upgrade. It’s so normal to have payments in this country, I often don’t think we understand what we are actually signing up for.
When we think about ‘avoiding debt’ I don’t want you to just think of keeping your credit card balance as low as possible. I want you to think about anything that will require a payment in the future, even if it is 0% interest.
Payments can be a means to getting something that we want or need, but do we understand how these payments really affect our everyday lives?
Debt payments hold your income hostage
A ‘no big deal’ $200/month payment might not seem like a lot when you are signing up for it but I want you to think about it this way. If someone offered to send you a $200 check every month for the next three years, would that make you happy? What would you do with that money? How would it change your life?
When we think about debt as ‘is this something I can afford right now’ we are missing out on asking ourselves ‘how would this extra money per month change my life?’
When asking clients this same question, I often hear they would travel more, take a lower paying job that they have a passion for or build up their savings for early retirement.
The opportunity cost of debt is not being able to go after the things that truly matter to you, because you frankly can’t afford to!
Having more income means you have more flexibility
My partner Derek was recently approached by his company to take a job in the Pacific Northwest and to be honest, if we would have had debt there is no way we would have been able to make it work.
We said heck yes! without knowing if I was going to be able to keep my job. We said yes knowing that I was going to lose all of my side hustles which added a lot of income to our house each year. But we said yes because we knew that if we had to we could live off one income for a period of time and still be ok.
Maybe making a move halfway across the country isn’t what you would do with flexibility in your income but would you keep your same job? Would you buy a larger house? Would you finally upgrade your car that has been on its last leg for three years now?
Staying on budget to maintain happiness
While not having debt made the decision to move that much easier, it also wouldn’t be possible without staying on some sort of a budget. I know I lose a lot of people here but hear me out. When we overspend we go into debt. When we go into debt we bring those monthly payments back into our lives. Sticking to a budget allows us to afford our monthly expenses, save for irregular or unplanned items and reach our long term goals.
So here’s some homework for you. Add up all of your monthly payments, and yes ‘good debt’ counts such as your car, that couch you just financed or your student loans (you can exclude your mortgage).
How much money are you sending to debt each month? How would your life change if you were able to keep that money? What would you say yes to if you got to keep more of your paycheck each month?
If you are up for an exercise that goes a little deeper into this work, I encourage you to download my free 90-Day Expense Tracker tool to see just where you’re sending your money each month. It’s really eye opening and helps you highlight areas you can reduce your spending as you are starting out.
Remember that one tiny change or step forward can lead to big things! Let me know how it goes and as always, email me with questions or when you want to celebrate your wins!
Is It Too Early to Bring Up Holiday Hangovers?
This week marks six months until Christmas! While we’re newly into a maskless Minnesota summer I wanted to bring it up because I am sure it’s the last thing on your mind. Now hear me out, saving for Christmas doesn’t have to be a daunting task and this is the one holiday related activity that you won’t be called out on for starting too soon (we see you Target with your decorations in September). I’m here to show you that you can actually enjoy the holidays without January credit card guilt and I’ve even included a free tool below if you appreciate a good spreadsheet!
Christmas Is Expensive
The holidays are an expensive time of year and if you don’t have any money set aside for it, I am sure you feel the stress of your paycheck being gone before you even get it. Holiday parties, gifts for friends, family and even co-workers, all that extra booze, it adds up! According to Deloitte, in 2019 American households spent an average of $1,496 on Christmas. Even more staggering, 22% of Americans believe their spending will cause them to go into debt.
Christmas happens the same day each year, yet we are constantly running in circles trying to start saving for Christmas in November while we are still stuck paying down holiday debt in March. By saving a little bit of money year round, we can avoid debt and ensure holidays are reserved for what truly makes us happy; spiked eggnog and holiday parties!
Calculating How Much You Need to Save Each Month
When trying to determine how much you should save for Christmas, let’s first figure out what you normally spend money on. Write out a list of all things Christmas related; wrapping paper, extra tape or bows, extra groceries, gifts for your immediate family, gifts for friends and extended family, home decorations, travel, etc.
Set a spending amount for each category that is backed by some research. By that I mean look at old statements or look online to see how much items cost that you are including in your budget. For example, if you normally host a party, think of how much you might spend on food and alcohol to get an accurate estimate.
Once you get totals for each category in your mini Christmas budget, add up all the totals to get your grand total that you plan to spend on Christmas. To determine how much money you should start saving, divide that grand total number by six since we have six months until Christmas. This is the amount you should start saving each month to have Christmas fully funded without worrying about holiday debt.
Here’s a free tool, no email necessary, to get started on your holiday budget! Be sure to save a copy to your drive first to get started.
Make Sure Your Savings Aligns With Your Budget
After you do the hard work in determining how much you need to save per month to leave Christmas debt free, look at your current finances and ask yourself, can I afford to put this money aside each month?
If the answer is yes, great job, you did it, now you just have to automate the transfer to make it even easier! If the answer is no, go back and look at your mini Christmas budget. Are there some extra items in there that you can eliminate or reduce your spending on? If not, is there temporary work that you can pickup between now and then to give your income a boost?
By saving for Christmas before the holidays come around, you are allowing yourself to fully dive into boozy happy hours with coworkers and exploring the latest ice sculptures with friends and family without the holiday stress of “can we afford this?”
Every penny you save now is one less penny you are paying interest on later. Let’s bring back the most wonderful time of the year as a time that’s truly full of joy and peace.
How Jealousy Stopped Me From Building Wealth
How many times have you said to yourself, “once I make more money we can start paying off debt” or “I could pay off my student loans if I made as much money as (insert name).”
Unfortunately, I know that feeling all too well and it didn’t do me any good! I was constantly making excuses as to why I wasn’t making progress or why I wasn’t further ahead in life.
I would blame it on my income or the fact that I didn’t have parents that paid for my school. But in reality, it was because I didn’t use the money that I was making efficiently. I was still spending tons of money going to restaurants or out on the weekends. I was young and I deserved that, right?
Looking back, if I would have dedicated a portion of my income to debt, I would have been able to pay off my student loans so much quicker than I had and, this is the important part, I would have had so much less stress around money. I could have afforded to make less money because I wouldn’t have had student loan debt and I wouldn’t have had to miss out on trips because I had to work.
When I was comparing my situation to those around me, basically having an enormous pity party for myself, I wasn’t able to make progress in my life.
Once I decided that it was time for a change I immediately saw a shift in my stress and the clarity that I had around money. I wasn’t making any more money but I was seeing my debt total decrease so much more quickly than I ever had. All because I was actually using my income to change my life, versus wishing I had more income or less debt.
When we stop wishing for things to improve our lives, we are actually able to see what we can do to live happier lives. Stop worrying about the new car your neighbor bought or your friend that is looking at cabins up north. This is your life, use your resources to curate your version of happiness.
What You're Missing Out on if You Have One Job
The days are long gone that you get everything you want in life from working at one company. Not only might your needs and wants change but benefits aren’t like what they used to be, oh man I sound old. Pensions are rare and the days of a household having one working parent and one stay at home parent without financial stress are gone.
There are so many benefits to making a little bit of extra money outside of your day job, let’s dive into just seven of the reasons and then we’ll explore how you can make more money!
Protection for you and your family
If 2020 taught us anything, it’s that our jobs are not guaranteed. Losing your job can be out of your control and it can also be out of your company’s control. It doesn’t matter how great an employee you are. So let's protect ourselves and our families. If your hours are reduced at work or you don’t get that annual bonus, don’t let your lifestyle or your goals suffer.
Limitless income
When you start working for yourself, your income is tied to you, not the limits to your job title at work. If you are selling custom earrings for example, you can make more money as you make more products, share them online or attend artisan fairs. When you take the reins and start acting, not reacting, your options are endless. I don’t say that to sound cliché, I say that because it’s true.
Making money while you sleep
Selling without having to physically be in a specific space is magical. This is how you see so many people making money while on vacation or waking up to “you have a new sale” email. When you can streamline your side hustle to be online and available to consumers 24/7, your income ceiling is limitless. Go create a website or post your products on social media and start selling while you sleep.
Exploring a hobby
Have you ever wanted to start something but was afraid for some reason? Turning a potential hobby into a side hustle is a great way to test the waters. I didn’t start flipping furniture because it was a dream I had. I started because I loved buying vintage pieces but quickly had too much furniture for our tiny house (I was also spending more money than I wanted to). So I started selling furniture that I didn’t mind parting with as I bought new pieces. I sold my coffee table when I found one I liked better and I did the same with my dining room table. I quickly learned that I could make money at the same time that I was updating my house. Start small and start with an area you are already interested in, you don’t have to go all in right away.
Reaching your goals faster
When you have a side hustle and you are intentional with that extra income, you are able to reach your goals rather quickly. It doesn’t matter if you are trying to pay off debt, build an emergency fund, go on that family vacation or stop the paycheck to paycheck cycle. This was a big motivator when I was paying off my student loans. Since I was working extra I was able to still go out to eat and go on vacation because my extra income was all going towards debt.
Flexibility to work when you want
A huge perk of being an entrepreneur is that you get to work when you want. You get to decide if you are maxed out at your day job and need a break or have some free-time and want to dive in. Don’t create unnecessary stress by over committing yourself. Complete tasks you need to get done for your side hustle when you are up for it, and stop when you are over it. If you find that you are never really in the mood, choose a new side hustle, that might not be the one for you.
Potential to go full time
When I started Money Gal Coaching, I wanted to show people how I got out of debt and how anyone could do it. I never imagined this would be a career change for me. But since I started with a passion that I did in my spare time, I was able to find something that I loved that I can turn into a long-term full-time passion. When you can turn your hobby full-time, work becomes fun and less of a chore because you do what you love and you get to create the rules.
Ok so you have decided to go after your hobby or increase your income, but what should you be doing? There are so many options, here are just a few but take some time to think about what you love doing and how you can make money at it.
4 Reasons You Aren't Budgeting and Why It's Hurting You
One of the main things that stopped me from budgeting was that I thought it was just something that was supposed to tell me no all the time. I thought that it would be the end to life as I knew it and that it was going to take a lot of time to manage.
The only thing right about my assumptions was that life would be completely different. But little did I know, it was about to get so much better! If I would have known that I would have started much sooner and if you’re not already budgeting, I’m here to show you why you should start one today.
When we become intentional with our spending we ensure that we get to do more of what we love most! We actually save for the vacations that we have been dreaming about for years. We might even save for a down payment on a new home or invest in ourselves by going back to school. No matter your goals, a budget helps get you there so much more quickly while remaining out of debt!
Here are four things you might be telling yourself that has stopped you from creating a budget. But don’t worry, personal finance is something we aren’t taught about so no wonder why we aren’t always good at it.
Budgeting just tells me want I can’t buy
A budget would only tell you no for a couple of reasons; 1) it’s not something that you said was important enough to start saving for it or 2) it costs more than you were planning to spend. When I help people create a budget, we are sure to include our goals, hobbies and things we love most in life. So you’re only telling yourself no to something that you once said wasn’t important. If things changed, let’s make room for it in the budget!
I am always overspending
When you overspend on your budget it might be because you didn’t estimate the correct amount for a certain category. Help yourself out by putting in a bit of effort to see how much money you need for each category, and the 90-Day Expense Tracker can help with this. You can also overspend if you aren’t checking in on your budget. Set five minutes aside a couple of times a week to see where you are at with your spending.
I don’t have enough money to budget
Believe or not, everyone no matter their income benefits from budgeting. It’s easy to think that you’ll start budgeting once you make “more money” but that day never seems to come. And in fact, we don’t magically become better with our finances because we make more money. No matter your income, get started with a zero-based budget to ensure every dollar you make is working to create your dream life.
I’m too afraid of what I’ll find
This is a real one and since it’s emotional it can take some time to overcome. One thing I would say is that nothing gets better as it is being ignored. We don’t just wake up with more in savings or less debt, we have to be intentional for these things to happen. So what do we do about it? We dig in, giving ourselves grace and we start working to improve our situation. It’s usually not as scary as we think it is and having the knowledge can help our situation change rather quickly!
So what can you do today to be just a little bit better? Maybe you look into your spending, clarify your goals or look into increasing your income. Whichever you choose, just choose one thing and get started. You won’t regret it!
Sign up for the weekly newsletter Budgeting. (yup, that’s Budgeting Period) to be the first to hear about all things around budgeting and your money.
7 Questions to Ask Yourself to Be Better With Money
Reaching goals can be hard and it just doesn't happen by accident, we have to actually put in the work. So whether it’s running a marathon, eating healthier or getting that next promotion at work, a plan is laid out so we know, how am I going to get from A to Z? The same works with reaching financial goals or simply getting rid of stress around money.
For example, if you want to increase our savings for an emergency fund, you have to determine, how much money am I going to need? From there, how much can I afford to set aside each month? Then you have to set that money aside and actively not spend it unless it’s an emergency.
Below are 7 questions to ask yourself so you can stay on track with your goals and crush it with your finances.
What can I do to increase my income?
I am sure you know by now but the side hustle game is real! It has never been more important to have diversified income because a job is not forever. There are so many options today so get creative, try selling something you enjoy making, teach or consult in your area of expertise or pick up some dog-walking clients.
Can I afford to pay more towards debt? What would my budget look like without debt?
If you are making your monthly payments on debt I would push you to see how much extra you can afford each month, especially on high-interest debt. By making only the minimum payments we are paying more in interest and increasing our chances of disaster if something were to happen with our income. Best bet is to pay it off as quickly as possible. And for a bit of extra inspiration, take a look at a life without those monthly debt payments, what else could you be spending that money on? Más vacaciones por favor!
Am I saving enough today to fund my vision for retirement in the future?
How much are you saving per month and are you on track for retirement? The answer is different for everyone, it depends on how much money you would like to have for retirement and how long until you want to retire. Use this calculator to see what your balance will be at retirement. If you haven’t bumped up your contributions lately you might want to look into that, 15% of your paycheck is a good goal if you don’t have high interest debt. Bonus credit if you want to reach financial independence at an earlier age, use this FIRE calculator (FIRE stands for Financial Independence Retire Early) to see when you can reach this goal!
Is my emergency fund all set or how much do I need to get it funded?
Having an emergency fund to fall back on will relieve a lot of stress in case a pandemic happens, an expensive car repair is needed or your furnace breaks in the middle of winter. A good rule of thumb is to have 3-6 months worth of expenses saved up and set aside in an account that you have easy access to. Don’t include unnecessary spending while calculating this number, it should only include what you would need to get by, we aren’t going on vacation during an emergency.
What are two of your big goals and do you have a plan to get there?
In order to truly enjoy life, we have to be sure we are doing the things that make us happiest. Sure we have to go to work and pay bills but outside of that, on the weekends or in your spare time, what do you enjoy doing most? Maybe you want to save up for a camper or you want to buy a cabin up north. Whatever it is, are you setting money aside? Do you know how much it will cost? Have you created a vision board on Pinterest to stay motivated? Ok, the Pinterest part isn’t necessary but it sure can be fun!
What system am I following to stay on track with my spending?
Just like we have to be intentional to reach our goals, we need a system in place to help us get there. Do you have a budgeting app to watch your spending? Do you use the cash-envelope system for categories you tend to overspend in? Do you log everything in Excel and update the pivot charts to see your savings progress? Whatever method speaks to you, put in some solid effort and you’ll be amazed how easy it will become.
Is there anything holding me back from taking action?
If you aren’t able to get started on the above items, why? Are you too stressed to even start? Do you not have a supportive partner? Does your debt seem too high to even begin to dream about retiring? Whatever it is, take one little step forward. Choose one thing that you can start to work on and begin there. You’ll be amazed that with a little support, it’s not as scary as you might have imagined!
My Why & How a Budget Changed Everything
After I finished college, I did what a lot of broke 20-somethings do. I moved to the city, got a full-time job making very little money and made up for my inflated lifestyle with a waitressing gig five nights a week.
I had around $60,000 in student loan debt, a number so big that I couldn’t even comprehend it as a 22 year old. Combine that scary number with a society that tells you “student loan debt is good debt” and “debt is a part of life”, I had accepted my fate.
So instead of more efficiently managing my finances, I worked to enjoy life and put my debt on auto payments. For around eight years it was out of sight and out of mind. I tell you this because I think a lot of us feel this way, especially before we drink the debt-free-lifestyle kool aid. We don’t believe we have options! We believe debt is a fact of life and we don’t have a choice in the matter.
It wasn’t until my late 20’s that my monthly debt payments were becoming an issue. How was I supposed to buy a house or save for a wedding with this much debt? Let’s be honest, I wasn’t close to either of those things but I wanted to be ready once I was at that point in life.
I started talking about my money struggles with peers and I learned of an entire community of people paying off large amounts of debt, in relatively small amounts of time. These people were living my dream and I couldn’t believe it took me this long to find them!
I quickly tallied up my debt and there it was, the number that I had been avoiding for a long time, the amount between me and my new debt free life, $46,514.91.
I created a “budget”, at the time it was more like a list of bills, and I committed to a number that I thought I could afford to pay extra towards my debt each month.
I had a target date that I was going to be debt free but once I started to see progress, I cut the time in half. Not because I was making a ton of money but because I quickly realized how much money I was actually wasting a month. Going out to eat, new clothes, alcohol. All the things!
I was making progress and I was seeing first hand the impact of paying extra towards my debt! I also began playing around with a few debt-free calculators online and calculated the impact of every extra dollar that I paid. This became my motivation to bump up my payment to something bigger, while still manageable, and it allowed me to shed years off my debt free journey.
Each milestone was cause for celebration and motivated me to pay even more. Quickly my amount owed was $40,000, then $30,000 and eventually single digits and gone!
My budget evolved over time and became the source of my success, as cheesy as that sounds. I was able to prioritize the things I loved most, like going out to eat with friends or road trips with my partner and pup, while still paying down debt.
Some months I paid more and some less, but the goal was there and my mind was set that my future life was so much more important than this life I was living that was making me more broke.
Becoming debt free doesn’t happen by accident and it doesn’t happen overnight. I had to learn what a budget was and how to stick to one. If you can’t relate to the word budget, I was right there with you! I mostly wanted to know how much extra I could be sending towards my student loans and it just so happens a budget tells you that, who would have thought?
The Dangers of Store Credit Cards
I use my credit card as a way to earn easy perks. I am already spending the money, why not earn cash back, miles or rewards points.
I don’t think I need to be the one to say it but here I go, the perks of spending on a credit card is only good if you pay off your balance in full every month without interest or fees. Everything comes with a warning label right?
When working with clients, I only recommend using a credit card if they don’t have a past with credit card debt. It is not worth the perks if you might slip back into debt. Let me say that again, don’t even ponder a credit card if you won’t pay it in full every single month.
Store credit cards are a different beast and don’t provide the same benefits as traditional credit cards. Here a six reasons why you should stay clear of those store cards and stick to cash or a traditional credit card:
Encouraging extra spending - stores often reward you with discounts or extra money back as you spend a certain amount of money. These are traps to get you to spend more when you would have otherwise.
Higher than average interest rates - the average interest rate in 2020 on store credit cards was 23.91% while a traditional card was a mere 17.87%. Maybe it’s because shoppers are high-risk or they need to make up the revenue from smaller lending limits? Either way, you pay more each month and that’s all that matters.
Lowers your credit score - traditional cards can boost your credit score (yes you can still do this without paying interest) while store credit cards lower your credit score. The jury is still out on why exactly but it’s most likely that store cards tend to be open for a shorter periods of time and not all stores report this information to the three credit bureaus.
Not available for emergencies - we’ve heard it before, “I only use my credit cards for emergencies” said everyone who has had to defend their credit card spending. But what happens when an actual emergency happens? Like, you need $6k right now. Your store card won’t come to the rescue.
Limited options - everything aside, you have to use this card at this specific store. This can lead to purchasing more expensive products or a store no longer in your area if you move.
Overcomplicates things - the more cards you have the more likely you are to forget to pay a bill, miss fraudulent transactions or simply keep track of it all. Don’t overcomplicate things, one credit card and/or one check card is all you need.
Now that you know why you should immediately look into getting rid of those store cards, do you want to know one sort-of exception? My Target RedCard. I save 5% on everything and it comes directly out of my checking account, not accruing interest. But I caution you, don’t open too many of these cards because after all, we want to keep things simple.
Start Here if You Are Feeling Overwhelmed With Your Finances
I get it. Start budgeting! Pay off debt! Refinance your loans! Save for an emergency! Don’t forget about retirement!
We are constantly hearing messages on how we should be doing better and how to fix things. There are a ton of routes you can take while on your personal finance journey, so feeling overwhelmed is normal.
Instead of not starting because you feel paralyzed, let’s break a few of the important items down into manageable tasks.
Once you start to see progress, you will build up your confidence and motivation to continue on this journey.
I compare a financial journey a lot to our health and wellness journeys. You could start working out, eating better, drinking more water, or getting your steps in. They all are good things but you can’t do everything all the time, that is a recipe for burnout.
So, this is how you start. And remember, you take this one day at a time, if you are starting to feel overwhelmed, come back tomorrow. The key is to make small daily progress, tiny steps forward, that will add up to big improvements in your life.
Dream big. Get a clear mental picture of the reason you want to clean up your finances. Maybe it’s for your kids or so that you can go on a dream vacation without going into debt. Depending on your style, you can detail your dream out in a journal, Pinterest board or app on your phone.
Put a list together of all your accounts. Write out all your debts and assets. By seeing on paper how much debt you have, you will be able to get a better idea of how bad (or not so bad) your finances are.
Track your past spending. List out and categorize all your spending from the last 90-days to see where your money has been going. This will help you see if it’s going towards things that are important in your life.
Debt or savings. Decide what your main goal is so we can add it to the budget.
Create a budget. Use your past spending, and debt or savings goal, to create a budget that aligns your income with your spending. Don’t forget to include those larger annual expenses and break them up into monthly savings goals.
Follow the plan. Track your spending moving forward and try your best to stick to your budget. It won’t be perfect the first few months but you will get better each day, week and month.
Ready to dive in but want a bit of help? Schedule a free call today and let’s chat. This is an investment into your future, your future self will thank you.
If You Have Federal Student Loans, What's Your Plan?
May I extend my fullest congratulations to those with Federal student loans. You are granted, yet again, an extension to when your payments will resume.
Now let me put my overbearing mother-figure hat on and ask you, “what are you doing about it?” How are you improving your finances with this never-been-done-before miracle that has come out of a horrible time for our world?
These COVID relief measures mean much more than simply not having to make your payment. The bigger piece is that you are not accruing any more interest. Compound interest can be a wonderful thing when you are earning it, but it has the opposite effect when you owe it on a debt.
What happens if you continue to make your payments when they aren’t required? This breaks down to a $393 student loan payment (the national average) going directly to pay off the balance of the loan.
Normally a part of that $393 payment goes towards the principal balance and another part goes towards new interest that has accrued since your last payment. Your payment has less of an impact when you are also paying on interest, taking longer to pay off your loan.
Now I ask you again, what will you be doing with this newly awarded time? Are you paying off high interest debt? Are you using it to increase the amount saved in your emergency fund? Are you doing the work to get on a working budget while you have some wiggle room?
If you didn’t say yes to one of the above, I want to ask you ‘why not’? I am a true believer in ‘everything happens for a reason’ and if this wasn’t a huge wakeup call I don’t know what is.
We have been taking our health, relationships and finances for granted for decades now. I am not the first to write about what 2020 has taught us but I am here to reiterate it for those of you with federal loan debt.
How you focus your time and energy with your finances these coming months will have a major impact on the rest of your life, good or bad.
Are you going to continue to look the other way at your debt, knowing it will ‘get paid off eventually’. Or are you going to jump in the deep end, as hard as it might be, and create a plan to change your future for the better?
Get started with tracking your spending with this free tool to see where your money is currently going. We can’t change our futures unless we dig into our past.