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As an Account Services Manager at a bank, I have seen many people struggle to keep up with a simple bank statement. It amazed me how many people spent more than they earned, with large payments dominating their spending and making their debt-to-income ratio look terrible. Yet, it was a common tale. The environment made me keenly aware of my own finances.
While I did not have large debt, I did have large payments and some credit card debt. Housing and auto payments were the two largest of my monthly financial obligations. I managed to keep my head above water, but I sometimes felt a little burdened by the looming credit card debt. Fearful of becoming my own worst complaint at work, I went to work on a plan.
Decrease Living Expense
I found an apartment only three miles from work that was 25% cheaper than the place I was currently renting, so I moved the following month. I wanted to keep my bigger, trendier place, but wanted financial freedom more. In addition to the savings in rent, my smaller place allowed for smaller utilities as well as a decrease in fuel expense. I vowed to place every cent of the savings toward credit card debt.
Cut Petty Spending
I still had dinner with friends and bought new shoes every once in a while, but I was on a mission to be free. So I declined one third of the invites or offset the expense with an item I sold on Craigslist. I cut out coffee drinks, started packing my lunches and waited for movies to go to DVD. Before long, I had paid off my credit card debt and opened a "New Car" savings account. I even found myself eating healthier and exercising! It almost felt as though my financial situation had affected me physically.
Pay Your "Savings" Bill
I began to pay additional principal on my car note each month. I started with $50 extra dollars per month, but anytime I was able to do so I paid even more. In addition, I paid my savings account the money I was saving from my move, things I sold, overtime pay, bonuses, and gift cash. Before long, I was able to smile when I saw the balance in my account. I also paid off my car a year early, but continued to make my car payment to my savings account. Now my savings account was growing rapidly, my apartment was less cluttered, and I was happier and more physically fit than I had ever been.
Give
I once heard financial expert Suze Orman discuss giving. She said that when you open your hand to give, it is already open to receive. My convictions for giving had nothing to do with receiving in that sense, but there must be something to this principle. I didn't keep track, but I would approximate that 20% of my income went to charitable contributions.
Make Goals
I originally made a goal to get out of debt, buy a more reliable car with cash, and to discontinue the use of credit cards. You've heard the saying, "A cluttered desk is a cluttered mind." My life and my finances had become more cluttered than I had realized. I worked for almost two years to get there, but I obtained my goals and so much more. By the way, even though I do not have a car note, I still make that savings payment every month. My new goals include a solid retirement fund, a wedding and a trip to Hawaii... to name a few.
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