For years, I operated under a simple principle: when I needed something, I bought it. When I ran out of money, I found creative ways to make more.
And, I thought at least, this was a viable and long-term solution, albeit stressful at times. Working in sales, I was able to live within my means the majority of the time and splurge when a nice commission check hit, occasionally throwing a few bucks to my 401k. Not brilliant.
However, life changed. Last May, I quit my tech sales job, moved from the US to SE Europe and became a full-time freelancer. Needless to say, my income changed, payment frequencies evolved and the need to be more frugal became slowly apparent.
How "slowly apparent", you might wonder? Slowly. While my freelance gigs picked up, my hourly rate doubled and I signed more regular clients to help offset some of the unpredictability, I was still stuck in the frame of mind of a typical US consumer: credit cards are great and if I just keep earning, I'll be fine. If everyone else is living it up, why can't I?
In November, my girlfriend and I flew to the US for the holidays. We took a short vacation to Florida, splurged on Christmas presents, charged the airline tickets and, in January, returned home with about $5k in consumer debt on a credit card with 19% APR. I felt ashamed, overwhelmed and embarrassed for being so irresponsible.
Fortunately, this was also around the time I'd devoured Millionaire Next Door and Rich Dad, Poor Dad. While I've ready plenty of criticism about each book, they reframed how I looked at money, debt and keeping up with the Joneses. I grew up in a "wealthy" suburb where people showed off their power and success with cars, houses and vacations—but I had never truly thought to consider most people were bluffing or sneaking by with leased BMWs and 50 year mortgages.
Shortly after returning to Europe, I spoke to a guy at a gas station who was filling up my car, remarking on a brand new Audi A8 that was pulling away. "Beautiful car," I said out loud, looking over at my very normal Hyundai. "It is," he said. "And most of the guys who drive these big cars only put 4 euros worth of gas in the tank at a time."
That registered.
Truthfully, it was ONLY this change of mindset that allowed me to start making changes. Like a debt addict, I had to want to change in order to change. If you're not willing, able or prepared to change your thoughts around money, spending and debt, I'd almost argue it doesn't make sense to even begin budgeting. Work through this obstacle first.
Of the two of us, my girlfriend is better with finances. She grew up during hyperinflation in ex-Yu and has considerably better self-control than I do. She came across Dave Ramsay's articles, brought up budgeting as a way to get more from our money and we decided to download Ramsay's EveryDollar app, promising to track every purchase for a month.
A major component of this budget was debt elimination. In January, 40% of our spend was toward credit card debt. We developed a plan to be debt free by April.
We set budgets, estimated what we'd spend and went through January.
It was eye opening to say the least. We couldn't believe what we spent on groceries, eating out and cringed when we did the math on how much we could've saved had we not had to put 40% of our income toward debt.
However, the first month we were successful. We did stay within budget, although we had to make some adjustments. It motivated me like crazy to hunt for new projects, upsell clients and I had my highest earnings in January, a trend that shows no sign of slowing down, because of the inertia I built months ago.
Now, about halfway through March, we’ve stuck with budgeting and have completely eliminated every penny of my credit card debt, something we now insist upon doing at the end of each month. We have our emergency fund fully funded and are well onto a fully funded 6 month savings fund. Our mortgage is paid on the 1st of the month, taxes are paid in full and, at this rate, we will be free of both house and car debt within two years.
One of the biggest barriers for me when we first talked about budgeting was that it felt like a punishment or rationing. It felt restrictive and punitive. In reality, we have not been the poster children of /r/frugal; we've gone on weekend vacations, we eat out and we've bought some upgrades for our apartment we just moved into, however, they were all budgeted for. I don't think we could've done this had we been on a rice and beans diet. I like small rewards and we both respond to some pampering and self-care to push us to work a little longer or harder.
The biggest surprise for me is that budgeting made spending more enjoyable. I used to spend, think about how I failed to save that money or use it wisely and a purchase felt like something I was doing wrong (in a sense, it's true!). Now, I can go drive racing karts for a few hours or splurge on lunch and, as long as I'm within budget, I don't feel guilty whatsoever.
Another strategy I’ve learned works well for me is that I don’t touch certain money. I’ve unlinked several accounts that I now have to go to the bank to withdraw from. I cut up one debit card to prevent ATM withdrawals. If you think the temptation is too great, just find barriers you’re too lazy to work around.
We spend about an hour of the last Sunday morning of each month making our monthly budget. It's our morning of good coffee, homemade pancakes and some relaxation. We've turned it into an event and a reward, balancing short-term rewards with long-term goals and gains.
By having the emergency fund and most of our six month fund, I’m shocked by how calm I feel. I used to dread the possibility of a car problem, a big bill or some unexpected cost I would have to scramble to cover. The peace of mind is absolutely motivating to continue down this path.
As I’m simply a casual reader of /r/personalfinance and, up until 3 months ago, thought credit card debt was just a fact of life, I’m sure some reading this will point to flaws in my theory, strategy or thinking. That’s fine, I’m always looking to learn!
However, I wanted to share this story because so often when I read /r/personalfinance or /r/frugal, it makes budgeting and being responsible sound incredibly dull and something only people with the best self-discipline and humongous incomes can manage.
Find a way to rethink money and debt, set short and long-term goals and really work on understanding what motivates you to save—and what has motivated you to spend completely unchecked.
Hope this helps!
Submitted March 13, 2018 at 09:43AM by neverenough22 http://ift.tt/2p7FRLU
