Once we take that leap and decide, “ok, now is the time I am going to get my act together” we can be overwhelmed, excited, confused or stressed and often all at the same time.
Getting to the point of being ready to pay off debt is often the hardest part. But now that you’ve made that decision and have an actual plan, what do you do now?
Making your monthly debt payments is one part of a large system we know as personal finance. And if you’re like me, you weren’t taught anything to do with money besides balancing a checkbook, not entirely relevant in the world we live in today.
So how do we set ourselves up to be better with money? I’ve broken down six areas to work on to level-up your game and be awarded the official money nerd in your group.
Create Your Budget
We’re going to start with the blaring tool to get out of debt and build wealth, the budget. No matter what taste you get in your mouth when you hear the word, it’s a complete game-changer and I challenge you to create and follow a budget if you don’t. A budget simply aligns your income with your spending and once you commit to paying off debt, it’s critical not to create more debt, am I right?
Choose Your Budgeting Strategy
How detailed your budget is is up to you, heck you don’t even have to say the word budget if you don’t want to, but choosing a strategy to manage your money is key. I prefer an app that connects with my bank to seamlessly track my spending for me. Others like the cash-envelope system to curb overspending. If you’re not big on the details the 50/30/20 rule can keep things high level while being your most responsible self. Don’t feel pressured in deciding on the perfect strategy, you will likely change and adjust as you learn your style, picking something and getting started is the important part.
If a complete budget is just too much to tackle right now, then check this out instead: If You Don’t Like Budgeting, Try This!
Track Your Progress
Tracking progress during the debt free journey will help you stay motivated as you work towards reaching your monumental goals. The Debt Payoff Planner app is a great tool to organize your debts and keep an eye on those balances as they start to near $0! I like to also mix in humorous charts with these fun trackers. They also make great fridge art and ensure paying off debt is top of mind.
Watch Out for Traps
Let me set the scene. Your friends are going on a last minute trip to Vegas and got a deal on a hotel room! I am going to refer to the first item mentioned above, the budget. I am not telling you to say no to Vegas, I would never do that, but I am asking you if it’s something you want to afford. We all have a different debt free journey and if it’s a trip worth postponing your debt free date, go for it! Bonus points if you take on a side hustle or two to pay for things that pop up without affecting your debt payment strategy.
Schedule Money Routines
Creating healthy #adulting routines will help you keep control of your finances. Add little reminders in your phone or calendar to help you stay on track (we can’t remember everything). I like to use this cadence:
- Weekly – Track spending to ensure you are following a budget and move money around between accounts or categories as needed.
- Monthly – Evaluate what you have coming up that is different from your normal budget. Things like a change in income, an additional expense or life event will cause your budget to look different temporarily or permanently.
- Quarterly – Channel your inner nerd and update your net worth and review your debt tracker to see real growth from your debt payoff plan.
- Annually – Celebrate your past year’s victories and plan for next year. The more time you have to start saving the easier it will be (saving for Christmas in January is much easier than the month before).
Ok, so you didn’t stick to a budget the first time around or maybe the cash envelope system is creating massive stress and not worth the hassle. Refine as you go and don’t dwell on it. Our finances are like a living organism that needs to be cared for, it can’t thrive while living in the back of the closet. Whether it’s changing your budgeting style, needing an increase in income or having a heart to heart with yourself to reduce your expenses, it’s ok to change. The key is to stick with it and soon enough, you’ll be debt free!