In the past week, we’ve been asked numerous times what our keys to success were in paying off over $127K in debt. In some ways, I’m a little mystified myself. However, I do know there some intentional steps we’ve taken to be debt free. I’m going to try to post some of those keys over the next week to give you some insight into our world for the last four years {especially if you’re a new reader}. You can also get plenty ideas from my series 31 Days to Reducing Your Debt {which really should be named 27 Days to Reducing Your Debt because I’m 4 days short} or Our Story, Debt Slayers, or Royal Ramblings posts which detail more of our debt slaying journey.
- Read The Total Money Makeover: A Proven Plan for Financial Fitness
by Dave Ramsey. The King of Free originally read the book at a bookstore and put it back on the shelf. Shhh, don’t tell Dave. Since then, we’ve purchased copies for ourselves and many others so we’re absolved. Seriously, it’s not your typical finance book. It’s filled with stories of people who have won with money and faced mounds of debt themselves. Ironically, we never ponied up to pay for Financial Peace University {we’d like to take it now that we’re debt free} but we have the curriculum and CDs now thanks to the fine folks at Dave Ramsey.
- Figure Out How Much You’re Spending. I had a good handle on our finances before we started. And it a lot of ways, it’s what held me back from wanting to begin our debt slaying journey. But I wasn’t really paying attention to what we could be saving and applying toward our debt. Instead, all of the money was coming and and going out before we even knew what was happening on a regular basis. I used Microsoft Money until our PC blew up and then switched to Quicken for managing our money. I also check our bank account daily to clear expenditures. You might use a pen and paper or an online system like Mint.com. But you have to figure out how much you make and what you spend.
- Set a Budget. A budget isn’t meant to be fingers around your neck choking the life and fun out of you. Instead it’s a safety net to give you wings to fly like a graceful butterfly. No more worrying at the checkout line if you actually have enough money to pay for what you’re purchasing. If you’ve never set a budget, collect your receipts for 30 days to see what you’re spending. Put them in a big envelope. Then go through them with your spouse {have them collect theirs, too}. NO JUDGING. Just see what you spend. And set your budget from that. One important caveat. Don’t live stringently for 30 days to prove that you’re “good.” Also don’t spend extravagantly so that you can set a stupid crazy budget. Spend normally. Typically, I budget 3 months at a time to catch quarterly expenses like car insurance. I begin by pre-entering all of our known income {we have sporadic income, too} into the register on the dates they’ll arrive. Then I take out the basics – mortgage, lights, heat, phone, water, trash, internet, insurance. After that, I budget for gas, groceries, piano lessons, and other known minor expenses. You must, must, must spend less than you make.
- Adjust Your Budget. Your budget needs to be fluid. Gas prices will rise. You’ll find that you haven’t budgeted enough for your phone bill. Seasons change and so do your expenses if you have a large yard. So don’t be afraid to flip the numbers around and adjust when life happens. This is not permission to go hog wild but there should be grace and balance in a budget.
Keep your eyes peeled for more Keys to Getting Out of Debt posts in the coming week!
