I have seen a lot of success stories on here, and while this one may seem less magnificent than some of the others, we all start somewhere. I started reading PF back in August and decided it was high time that I got my finances in order.
Since August 22nd, I have:
- Added a $1000 pad to my savings account for emergency uses
- Paid off +$11,300 USD in debt
- Properly used my Credit Card for expenses without paying any interest fees
- Become debt-free (I consider debt-free being the ability to pay off your credit cards every month without incurring an interest payment, more on this later)
The reason I am posting this is in the hopes that someone who may lurk in PF will finally start seriously utilizing the tools offered in this amazing subreddit and set themselves up for a more financially successful future.
My personal success is as follows:
First: I set a proper budget
I downloaded a budgeting spreadsheet from this wonderful list of options here on PF. I used "Budgeting 101: the simplest way to start budgeting your money" by /u/TheJMoore, which also links to his post about the simple way to break-down how you look at your money. After budgeting, I figured out how much extra I could have each month to throw towards savings or debt.
Second: I set goals.
I added a "My Plan" tab to my budgeting spreadsheet. In here I wrote down specific goals I wanted accomplished by specific dates based on my budgeting ability. It is absolutely crucial to set S.M.A.R.T. goals for yourself if you're looking to pay off debts, have more savings for the future, etc. For my debts, I used the Avalanche Method to pay off my CC debt first, then my car payment. All my goals read as follows:
- $1000 cushion in savings account by 8/23/2016
- All Credit Card debt paid off ($2020) by 9/16/2016
- All automatic expenses set to Credit Card by 9/20/2016 (using my Credit Card as the "Money for Expenses" to accrue points without paying interest)
- Pay off car in 4.5 months (~$2000/month) by 2/15/2017
Note that at first I expected to pay only about $1500/month on my car payment, but I realized I could push myself to budget smarter and throw closer to $2000/month at it. Small tip: I color-coded the goal dates as yellow boxes in excel so that when I successfully reached them I could turn them to green boxes; just a simple psychological trick to make it a more interactive experience. It's surprising how good it feels to change those colors from yellow to green; like how it feels to set a list and check them off one by one.
Third: I checked my finances every single day
One of the biggest mistakes I made previously in regards to my finances was taking a reactive approach to my finances. I had a ballpark idea of what I could spend, how much I needed to pay certain bills, and would check my accounts infrequently to make sure I didn't go below a $0.00 balance. That's right, my simple financial requirement was not to go in the negatives. That's setting the bar pretty low.
Having a proactive approach meant that I knew the dates of when my automatic payments would come through and when my credit card payment was due. This is crucial for my next point:
Fourth: I now use my Credit Cards properly
Again, referencing the Budgeting 101 post, I began to look at my money differently in regards to expenses, savings, and flex (everything else) money. I coupled this understanding of budgeting with the proper way to utilize credit cards so that I now get all the benefits without paying any interest on my credit cards. I haven't paid interest on my Credit Cards since they were all paid off in September of last year.
I decided to use my Credit Card as my "Money for Expenses" account and my Debit Card as my flex account, with all additional going towards my debt. My "Money for Savings" was given that $1000 pad for emergencies, and would have to wait to increase once all my debts were paid off. Obviously, now my goals will change for my budgeting now that all my debts are paid off.
Moving Forward: My Plans for the Future
One of the wisest things someone ever said: once you pay off a recurring loan, immediately put that into savings moving forward; after all, you've already learned how to live without it. Now that I have $2000 a month that I've learned to live without, I will be re-allocating my budget towards more savings and investment moving forward. To be honest, I am going to give myself a little treat with that extra money next month since I've reached all the goals I set back in August. However, I plan to use the great information in PersonalFinance to set my next goals which will be oriented towards Savings and Retirement.
And Finally, one of my most proudest moments is seeing this today.
Submitted February 22, 2017 at 01:59PM by ExbronentialGrowth http://ift.tt/2l0x3T7
