We have officially survived the holidays! And even though my Christmas tree just came down two weeks ago and I swear I’m still tired from last year, I am officially ready to start improving my finances by getting rid of my debt.
First, let’s take a moment to thank last year for what it has taught us. All of the tears, the mistakes and the misfortunes were there to make you stronger. Thank them for their lessons and if you’re ready, let them go. Hold onto the memories of ‘I can’t breathe’ from laughing too hard, the times things just seemed to work out and any new doors that swung open for you. Thank last year for the new people in your life and the old ones who taught you what you needed and then continued on their way.
Now is as good a time as any, for us to talk about our goals and aspirations! I hope you have not already given up on your resolutions, and if you are feeling discouraged – keep trying, together we will get this right!
One of my many goals – yes I have a LIST, is to become more financially stable. I’ve been doing my research and would like to share a bit of my new found knowledge with you! First of all, take a second and forgive yourself for accumulating this debt. If it is school debt – acknowledge what you’ve accomplished. Unnecessary credit card debt? That’s okay too – now is a chance for you to put all of this behind you.
1. Knowledge is power
Go online and figure out : how much money you have, how much money you owe, and how much money you spend each month on bills + the extras. Write it all down. Seeing the numbers can help you to better understand your situation. Some institutions let you check your credit score for free without any penalties, try it and see where you stand.
The money expert Dave Ramsey suggests that the first thing you do is save 1000$ straight off the bat! This is what he calls a starter emergency fund. It can serve as a safety net if during this time something unexpected comes your way. Keep in mind this is only for EMERGENCIES. 911. Please send help now. Emergencies.
3. I am committed to getting rid of my debt.
Say it with me now! I’m committed to getting rid of my debt. So let’s start working on it, bit by bit. The absolutely best way to get rid of your debt?? Whichever method you will actually do, something that works for you!
Some people suggest that you tackle your debt with the highest interest rate, some people suggest that you tackle the smallest debt first and then move on to the next one until you’ve paid it all off. The point is – whichever method you choose, please make sure it’s a plan you’ll commit to. That’s what financial independence will take – your commitment to getting it done.
Whenever you use your credit card you are BORROWING money. Every. Single. Time. This was a hard pill for me to swallow. The truth is, you should only borrow money you ACTUALLY have. This means if you can’t pay off your entire credit card by the bill date, then you probably shouldn’t buy that item. Keep in mind, if you’re ever stuck you’ll have your safety net to save you.
4. The B word
So you’ve started your emergency fund and you’re on your way to paying off your debt. Great! Now it’s time to make your budget. Yes.. that dreaded B word. Go back to step one and add your debt repayment plan to your budget. Try Pinterest/Google/even Instagram – for examples you can use. Don’t forget to add gas money and groceries.
5. Time to start dieting
On top of everything else, I’m bringing a cash diet into your life. This is something to help you see how much money you’re spending in between your paychecks. So how does it work?
Take out your spending money in cash. This is the money you’re free to spend on a little fun/happiness while you’re paying off your debt. The key is it should be a reasonable amount after the important things have been taken care of AND something that will actually bring happiness into your life. If this means going to Starbucks once a week (hello chai latté) or getting your nails done (yes please) then go for it! Once you’ve spent it though, that’s it until your next paycheck, so try to spend it wisely. It can be hard to predict so I’m constantly changing the amount I withdraw depending on what I have going on for the week.
Last but not least.
- If you need to get rid of your credit card. Get rid of your credit card. For some people breaking up with their credit card is the only way for them to get rid of their debt.
- Be strict with your money. Try giving up Starbucks (sigh, how I love my chai tea latté) and invest in a cute travel mug you can use instead.
- Set up automatic withdrawals that will do the saving for you. It allows you to reach your goal without even thinking about it!
- Once you pay off your debt, build up that emergency fund. How many times do you finally take a huge chunk out of your debt, only to have to rack back up your credit card because you find yourself in a pickle. Try to prepare for those rainy days.
- Trick yourself into saving. My sister and I both have piggy banks and every year we go to the bank to empty them out. Most of the time it is only twoonies and quarters but it actually adds up. Cashing it at a certain point of the year (ours is New Years) is a nice little gift to yourself.
A friend of mine suggested buying groceries on sale! I use the Flipp app but there’s also the Reebee app which allows you to make shopping lists and even price match at your favourite grocery store. Please keep in mind that it has to be the exact same product and not everyone offers price matching.
Is getting out of debt or just being more financially responsible one of your goals? Hopefully some of these tips will help you get exactly where you need to be! Do you have any additional tips? Something that worked for you? Please share in the comments below so we can all learn together! All the best!