If you told me a year ago that I’d be the budgeting queen, I would have laughed in your face. I was never one for crunching numbers. Like anyone who spends a lot of time working, when I was home, my free time was precious, and I didn’t want to waste it pouring over my finances.
I preferred the buy now and figure it out later method, but eventually my shopping habits caught up with me. I found all my extra cash was going into my credit cards’ minimum payments, so I didn’t really have any money to spend on the things that really mattered. Sure, I always had the latest iPhone and the hottest Louboutins, but I never had enough money for bigger investments or a fun vacation. I realized I wasn’t putting away any money for my future.
And with my money tied up the way it was? Well, sometimes unexpected household responsibilities threw me for a loop. I even had to take out a personal loan to cover the repairs I needed on my leaky fridge. Though I have that cash advance to thank for helping me cover this repair quickly and painlessly, it symbolized a turning point in my life — the fact that I needed help paying a bill less than $300 was an eye-opener.
I decided I needed to make a change. Spending without a budget buried me under a mountain of bills, so the only logical way to get me out of it was creating a budget and sticking to it!
I won’t lie to you, it wasn’t easy. I shed a few tears as I struggled to create a budget that worked, and a few more trying to follow it like it was The Law. But through trial and error I found something that worked. I’m debt free and finally building a little nest egg for my future. And today I want to share with you the 3 most important things I learned along the way, so I can save you some tears of your own.
- Be very specific and realistic
When you’re struggling under a ton of debt, your only thought is that you need to get out of it. I know mine was! But that’s not enough. When you set goals this vague, it’s easy to lose your sense of purpose and feel useless when you aren’t achieving such a huge accomplishment as paying off all your debt all at once.
You need measurable goals you can track with realistic deadlines. Think baby steps! I was ready to be out of debt right then and there, but I needed several months of careful budgeting to tackle just my first few bills. I realized once I could focus on these small accomplishments, the task of eliminating my debt wasn’t so daunting.
- Be honest with yourself
I know I was guilty of convincing myself that my regular trip to the hairdresser or my weekly Amazon order was absolutely necessary, but this was a flat-out lie. In reality, the only money I needed to spend was on my mortgage and car payments, utility bills, groceries, and debt payments.
Be honest with yourself and identify unnecessary purchases for what they are. You can cut your own hair or skip the online shopping cart. That monthly gym membership you pay for but never use? Cancel it. Weekly take-out? Start cooking at home.
- Tackle highest interest first
Since I had so much debt, I didn’t know where to start. After doing a little research, I prioritized those loans with the highest interest rates rather than the largest debt.
My credit cards and the payday loans from MoneyKey I used in emergencies had higher interest rates than my student loans, which I had locked in at a very low rate while I was a student. While compound interest was going to add to what I had to repay on my student loans, it wouldn’t accrue as quickly as the interest on these other debts. So I used the extra money I found after I cut out unnecessary purchases and used it to pay off these high interest loans as quickly as possible.
Since they were smaller than other debts, I found it easier to pay them off once I really committed to my budget. In no time at all, I was clearing bills. I had actual proof that what I was doing worked, and it gave me the motivation to continue limiting my spending and sticking with my budget.
That’s the feeling I want to share with you through these tips. Now, I’m not going to spend my money on the new iPhone X because I know that I don’t have the money for it. (Really, who does at this point?) But that’s okay. I’m also debt free thanks to my frugal ways, so I count that as a win for me!