Getting your finances in order
Updated: Mar 3, 2021
I've been paying on my student loans for over 10 years, so when I got the email last year that said "Congratulations, you have paid off 10% of your student loans." I was excited! Like yes, I'm making a dent in this loan. But in the grand scheme of things, I had literally only paid about $1000 a year on those loans because of interest. My interest rate is 5.25% which isn't bad but to pay all that money over 10 years and only pay off 10%, it was depressing. For years I talked about dumping an additional $1000 a month here and there but other things were important; travel, arts and crafts, houses, etc.
Paying off debt wasn't so much. As long as we had what needed and were making memories, I was cool with it. I would pay the credit cards all the way down and then use them again. It was a cycle that never ended. So when I saw The Budgetnista on Facebook say how she paid off her student loans on a teacher salary, I was intrigued. I was finally in the mindset of I'm really tired of paying these payments and well its time to really get serious. I watched a few of her videos and even bought the program that gave access to all of her resources. She has good stuff and I like her. But I didn't stop there, my research obsession moved to finding other folks that had paid off significant amounts of debt and to learn their process and find ways to make it work for me. Another great person to follow is The Budget Mom. She's a single mom, I'm not but the process is easy and works, that started posting videos of her debt payoff journey on IG and YouTube and then created a business. (Yes, they make a living off of helping people succeed financially. They were smart and I don't blame them!)
So since September, I made a very conscience effort to pay better attention to my relationship with money and some of the goals to be consumer debt free. And what I mean by this is credit cards, student loans, car notes. (Right now is the perfect time to get ahead of all of your debt as plenty of companies are allowing you to pay later, just be careful with that).
I was using USAA's budget tools to monitor my transactions and see where my husband and I were spending, but I needed a different way to visualize where my money was going AND to create a BUDGET!!!! A budget is a detailed accounting of your income and expenses each week, month or year. A lot of folks that I have talked with feel budgets are for poor people. Rich people don't need them, not realizing that budgets help everyone. Major corporations have budgets because they need to know what is coming in and what is going out. It just makes sense.
The method I like to use is the Budget by Paycheck method that I learned from The Budget Mom. I don't use all her methods but this one helped me visualize when bills were paid based on paycheck and how much I would spend on things like food and gas each paycheck. Once I actually wrote it out in a Google spreadsheet, it was mind blowing!!! Just seeing the calendar made me realize, I could actually pay my student loans down faster because now every dollar had a place in my budget.
The initial process that I used is below:
Set SMART Goals - What are you ultimately trying to achieve? Do you want to save for a house or get out of debt? Maybe you wanna save for a big family trip. Having a goal helps you stick to your budget and be successful.
Identify your income sources - What are all your sources of income? Main check, side hustle, alimony, etc.
Identify and categorize your expenses - Understanding all the bills you have, weekly, monthly, quarterly, annually, is important to understand how much money you have going out each month as it relates to income. This will also allow you to cut subscriptions that you don't need or use to help increase the cash you have available.
Use a calendar to see the big picture - This gives you the opportunity to see your monthly finances at a glance.
Create a REALISTIC budget - create a budget based on your actual income and actual expenses to include variable expense (food, gas, one off purchases).
Reduce or remove expenses - This is hard but removing unnecessary expenses will actually help you reach your goals faster
Monitor and stick to your budget - It does you no good to have a budget but not monitor to make sure you are staying on track. At first it seems hard, but once you get better at tracking and knowing where money is going you will start seeing results.
Join an accountability group - Having a group of accountability partners can help you stay on your path to better understanding your finances and achieve the goals you have.
I am not a money expert but finding a method that helped me visualize my cash flow has helped us get closer to our goals. And you too can do the same. It just take a little patience and understanding of yourself to get in the rhythm of things and move forward. It took me about 3 months to see results but during that time I was able to put an additional $4000 on my students loans because I was able to clearly see what funds were coming in and where they were going.
More posts on budgets to come and the process of building a healthy relationship with money. Until then happy trails!
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