As the warm weather begins to cool off, and the Summer of Weddings comes to an end, I’m starting to get ready for what comes next – in my financial life, that is. Even though I’ve been debt-free since May 21st, I haven’t had a chance to save much of the extra money that used to go towards debt repayment – yet – but that’s going to change in September. First, however, I need to start mapping out some new financial goals and the steps I’m going to take to make them happen.
I’ve been writing out a list of possible new goals, starting to research investing strategies, etc. but it’s felt impossible to pick just one goal to start with and know where to begin. First of all, I’ve barely gotten used to the idea that my monthly budgets no longer include debt repayments. Second, this car accident is a bump in the road that has changed my spending (big time). And I honestly still don’t know what’s next for me. So, I finally posed this question on the new Blonde on a Budget Facebook page:
I’m working on a couple posts explaining what life after debt is like. Are there any specific questions you’d like me to answer about how I budget now? Or where the extra money goes? Or what I plan to do next?
I’d like to know what your turning point was & how you got started on your journey & the tools you used & tips you have being on the other side.
Well, Simonne – this post is for you!
I’ve decided to start this whole “life after debt” series with some background information on how I got started with my first goal, which was to reach debt zero. I’m going to skip the part about “being on the other side” for now and just start from the beginning. I know I’ve explained it in bits and pieces, and have written a guest post or two about it, but I don’t know that I’ve ever fully explained on my own blog: 1) the way I taught myself how to budget and 2) which resources ultimately helped me get out of debt. While I would love if this posted helped at least one other person start their own journey, I’m also using it as a motivational kick in the pants to get started on whatever is next for me.
The Turning Point
I’ve written before that in June 2011 I found myself completely maxed out. What I don’t think I’ve mentioned is the fact that I knew my finances were in bad shape for about 8-9 months before I finally reached that point. In fact, I actually started Blonde on a Budget in October 2010, when I had about $24K of consumer debt. I knew back then that I wasn’t happy with my financial situation but, unfortunately, I still wasn’t ready to get serious about repaying my debt. In March 2011, I deleted the first version of the blog (and the email address, which is why I’m now stuck with “blondebudget” at gmail).
Between March and May is when I let my credit card balance creep closer and closer to its limit. During those few months, I would literally only peel back the top corner of the envelopes holding my credit card statements so I could see nothing but the minimum payment. Talk about denial. In my gut, I knew I was being stupid, but it wasn’t until I was within $100 of my limit that I realized I had to stop and do something about it. I had $100 left in my chequing account and another $100 of wiggle room on my credit card and all of that had to last me for 6 weeks. I was at my absolute limit. At that point, there was no other option but to start repaying my debt – all $28+K of it.
How I Got Started
The first thing I did was borrow a copy of Gail Vaz-Oxlade’s Debt-Free Forever from Krystal and read it from cover-to-cover. My biggest takeaway from the book was that I needed to start tracking my spending – immediately. Everyday, I wrote down all of the transactions I made – from the paycheques I received, to the debt repayments I made and the $2.91 I repeatedly spent at Starbucks. It only took a few weeks for me to see that I could categorize my purchases into what you see in my budgets today (i.e. groceries, gas, restaurants, gifts, etc.). I did this for three months straight.
At the end of the 3 months, I took the totals from each category, added them up and divided the sum by 3. For example, let’s say I spent $200 on groceries in Month 1, $225 on groceries in Month 2 and $250 on groceries in Month 3. In this example, I would have added up the monthly totals ($200 + $225 + $250) and then divided the sum ($675) by the number of months I tracked my spending (3) to come up with the average amount I spent each month ($225). I repeated that process for all of the categories and, with those averages, finally wrote my first realistic* budget.
The Tools I Used
Obviously, Debt-Free Forever changed the way I thought about money – so that book is the first tool I used. After that, I tracked my spending for 3 full months – by hand, using nothing but a pen and an old notebook that I was happy to scribble in. At the end of the 3 months, I took the averages and wrote my first monthly budget in Excel – making that the third tool I used. At the same time, I became obsessed with Gail’s interactive worksheet Build a Budget That Works. I literally moved numbers around in that thing for hours, until I was satisfied with the results.
I tried a couple other things throughout my journey, like switching to a cash diet and budgeting bi-weekly instead of monthly, but nothing worked for me the way a pen, paper and Excel did. To this day, I still track my spending by hand. And I just finished writing a September budget that I am so excited to share with you all! (Yes, I get excited about my budgets!)
Now, I’m dying to know. How did you know it was time to make a change in your financial life? What was your turning point? And what is one resource or tool that helped you?
*Please note the importance of writing a realistic budget. If you can write a realistic budget that is based off numbers you may actually be able to stick to, the chances of you coming under budget are huge. If you’re like me, going over budget leaves you feeling discouraged. But it’s an incredible feeling when you can finish a month and feel like you stayed on track with the goals you made for yourself. So, always be realistic!