Barring any accidents, medical emergencies, or calls from my "lenders" (aka mom & dad), I will be debt free in 2.5 months!
So from the day of graduation and start of repayment, it will be 2 years and 1 month or 1 year and 7 months, respectively.
Let's do a recap for any high school graduates, new students, or new to the working world:
1. Freshmen year: Scholarship scholarship scholarships! Apply! I know applications and writing about yourself are annoying, but free money is ALWAYS worth it. Here's a motivator - take your potential scholarship amount, divide it by the current minimum wage (likely what you're being paid at this stage in life) and that will give you the number of hours you'd have to work for the same amount of money. Compare that to the amount of hours it will take you to write an essay (2-4?). Win.
Only take out as much money as you need - for me, this meant saving all summer before freshmen year for the "fixed expenses" (i.e. dorm, meal plan) and taking only enough to cover the rest of those expenses and books. During the year I worked, so thats where my "fun" money came in.
Get an internship that summer if you can - it will build your resume & start to pay for that study abroad you'll do next year.
Any money left over from your first year "budget"? Lock it into an online savings account that has a 3-5 day transaction time. This will give you time to think hard before you spend any extra.
2. Sophomore year: I was allowed to look at apartments! I never went lavish - it was college after all. By living on a little less then, it wasn't be so scary when I got to the big city in 4 years and rents have doubled. Shop around, compared the total of the full lease to the total of student living, and make your decision from there. At UGA, apartments were cheaper than dorms.
Go back to last year's internship or try for a new one! If all else fails, get a part time job.
Thanks to your summer job, scholarships, and a good budget - you get to go to Spain! Yes - you can take out loans for a summer semester, but remember you still have 2-3 more years to pay for and a 6 week study abroad will cost almost a full-semester's worth of expenses.
3. Junior year: I was now in my major and classes were harder. I needed to up the amount of student loans I took out, because I would be working less in order to study more.
The internship to end all internships - this is what you are looking for! Now that you have skills from your major classes, the pay will likely go up (and they'll be looking to bring you on full-time when you graduate next year!). Save save save, spend a little, and save some more. Trust me, your 1st car will last one more year - no need to blow every paycheck or get into a car loan just yet.
4. Senior year: This is (potentially) your last year - enjoy it! Your most recent internship will hopefully take you a long way through the year, but again focus on taking out the minimum you need to get to graduation and maybe build in a little cushion for 1st month's rent in "the big city" you plan to start at.
Your first paycheck at your first job won't come for at least 2 weeks, so you need to bake that into your plan for the year.
Now you have 2 routes - full-time job or graduate school. Full-time job will mean you have 6 months from the day you graduate before you have to start paying loans. This is time for you to get "settled in", or if that was easy, start paying early! Interest is always accruing, and the sooner you make a dent in the principal the lest you will waste on this cost of time.
5. Grad School: If grad school is for your - congratulations - you are about to be overwhelmed with expenses. Back to the freshmen year idea - apply, apply, apply to be a TA. You often get reduced tuition and monthly paycheck for the work you'll be doing. This will greatly reduce the amount of money graduate school will cost you.
But remember, graduate school is a lifetime investment and well worth it. When I looked, I wanted to be sure the amount I paid out of pocket or in loans is reasonable considering my expected salary.
Hopefully leaving grad school will land you a killer job. Even if it doesn't, start your "real world" budget early. I geared mine towards paying of student loans as aggressively as possible (~half my monthly take home pay goes into student loans), so that I could have an expected pay off date before a first promotion.
Be Aggressive! Be-be agressive!
Taking a route this aggressive is tough. I had to say no to certain things my friends jumped right into. People love to think "new job? new everything!"i.e. wardrobe, furniture, or car.
First of all, status is earned, not bought, so hold onto that hand-me down furniture or car and keep the clothes you have looking as nice as possible or shop consignment. Second of all, you are a newbie and not a big deal - people will notice if you don't show up on time because your car broke down, but they are not going to give a hoot what you drive to get there.
I hunt for bargains like I am a coupon queen. I plan to do nice dinners for birthdays or special occasions, but PLAN for it, and try to bring lunch and eat all my groceries rather than going out to eat all the time.
For me, this plan above made sense. I also grew up through student loans at a time when interest rates started out at a fixed, low rate of 6.8%. If you are reading that in 2013, you know how incredibly high that is compared to market. Now, 6 years from when I first signed onto these damn things, new students are getting a lovely 3.4% (and complaining about it), and I am stuck with a fixed rate.
This high rate also meant there were not as viable options on the market - savings accounts earn less than 1%, sometimes less than .5%. Bonds might pay 2-3%. Stocks - well, the stock market is ridiculously volatile and not a risk I am willing to take. With as many companies going under, I have passed for the time being.
For me, it made sense to pay of this debt stuck at a high rate as quickly as possible - because I COULD DO NO BETTER ON THE MARKET! If, instead, I felt comfortable that I could earn more interest with the money I would otherwise overpay to my student loans, I would have gone the standard plan or longer. But to me, this was a no brainer: I pay it off now, I save myself $7500 in interest, and I am quickly debt free.
Because I was stuck with the debt and the fixed rate, I feel like the interest I saved by paying early was an instant "return" on my money. And assuming the market will get better going forward - I will be that much more free to start investing in the future.
Disclaimer: I am not a financial advisor and everything stated above is purely opinion based on my own experiences and observations.
Saturday, April 6, 2013
Wednesday, January 23, 2013
Getting closer to a Peace of Mind
The other night, TurboTax and I were having our long overdue discussion about how much money I would owe the government this year.
Turns out, I have already given them PLENTY for 2012, and I will be receiving a hefty refund. Man do I love exclusions from income (exlusion = never shows up in your wages on your tax return; deduction = potentially taken out from the wages you report on your tax return).
So, the age old question popped up of: what am I going to do with all this money??
For those of you who've been reading my posts for awhile, you know exactly what I am going to do: pay down my student loans!
I love putting a big fat amount towards student loans - I instantly see a reduction in the amount of interest charged every month, and I instantly see that big balance go from a certain number past the first comma go down.
Once I saw the impact of that student loan, I started schemeing. How can I get these paid down even faster? Let me tell you..
A few months ago I got nervous about my emergency fund being too small. Since I only have one income, if for some reason I had to stop working all cash flows in would stop. So I made a plan to aggressively build it up to about 4 months of expenses. Phew - so glad that was over!
At the same time, I got nervous about not putting enough into my 401(k) now while I am still working - what if some day down the future I have a family, comprised of myself, hungry mouths, and a husband with a small 401(k)? What would we do once we get to retirement - share what little he has? Certainly not. So I started adding to my 401(k) again.
Well, now between the refund check, the "additional" emergency fund (over $1,000 per Dave Ramsey), and a reduction to my 401(k), I have a plan to pay off these student loans by MAY!!!!!
Total payoff time: November 2011 to May 2013, or 1.5 years.
Last year I took a few liberties with my budget, so honestly I could have been paid off by now if not for those; however, I made memories with those liberties and I am still on track, so I will not regret them.
For the next 5 months, I am going to be very nervous - with just a little E-fund as back up, I have to pray that Ole Betsy doesn't break down, the economy doesn't kick me out of my job, and my health stays sharp.
However, I know the reward of sacrifcing a little now will pay off with a HUGE peace of mind come May. I am being this aggressive with my debt not just for me, but for my future family, whom I hope to teach these same values of maintaining a debt-free financial peace of mind.
Turns out, I have already given them PLENTY for 2012, and I will be receiving a hefty refund. Man do I love exclusions from income (exlusion = never shows up in your wages on your tax return; deduction = potentially taken out from the wages you report on your tax return).
So, the age old question popped up of: what am I going to do with all this money??
For those of you who've been reading my posts for awhile, you know exactly what I am going to do: pay down my student loans!
I love putting a big fat amount towards student loans - I instantly see a reduction in the amount of interest charged every month, and I instantly see that big balance go from a certain number past the first comma go down.
Once I saw the impact of that student loan, I started schemeing. How can I get these paid down even faster? Let me tell you..
A few months ago I got nervous about my emergency fund being too small. Since I only have one income, if for some reason I had to stop working all cash flows in would stop. So I made a plan to aggressively build it up to about 4 months of expenses. Phew - so glad that was over!
At the same time, I got nervous about not putting enough into my 401(k) now while I am still working - what if some day down the future I have a family, comprised of myself, hungry mouths, and a husband with a small 401(k)? What would we do once we get to retirement - share what little he has? Certainly not. So I started adding to my 401(k) again.
Well, now between the refund check, the "additional" emergency fund (over $1,000 per Dave Ramsey), and a reduction to my 401(k), I have a plan to pay off these student loans by MAY!!!!!
Total payoff time: November 2011 to May 2013, or 1.5 years.
Last year I took a few liberties with my budget, so honestly I could have been paid off by now if not for those; however, I made memories with those liberties and I am still on track, so I will not regret them.
For the next 5 months, I am going to be very nervous - with just a little E-fund as back up, I have to pray that Ole Betsy doesn't break down, the economy doesn't kick me out of my job, and my health stays sharp.
However, I know the reward of sacrifcing a little now will pay off with a HUGE peace of mind come May. I am being this aggressive with my debt not just for me, but for my future family, whom I hope to teach these same values of maintaining a debt-free financial peace of mind.
Friday, July 27, 2012
Just when I think I have got it figured out...
Prior to the last two weeks I was keeping one credit card on me "just in case of an emergency." Between June and early July, I put $1,000 onto that sucker. That does not include a $200 plane ticket for a planned vacation.
Needless to say after overspending that much, I had to make the bleeding stop. I have hung the card up to dry in some drawer at my parents house, where it can stay safe and sound and far far away from my budget.
During the last two weeks, I have not adjusted well to not spending at my leisure like I had been doing on the Amex. I blew my dining out / grocery budget by $50 already, and I still have 4 days to payday. Part of this is to blame on the longer days to spread the check over - we were paid the 13th, the next one still won't come until the 31st - so 17 days rather than 15, which happens to include an extra weekend.
But excuses are for addicts - I must get past the denial and accept the fact that I blew it. So I have started looking for a solution. One point of major bleeding I found is lunch & drinks. Almost all of my "dining out" was spent on one of these two. Overall, I spent an average of $15 a day on dining out, and $20 on food in general.
For this next week, I have a few challenges for myself to achieve an overall goal of $5/day average for dining out and $7/day for eating in: 1. Eat breakfast in, every day. 2. Only eat out for lunch 1 weekday and 1 weekend day. 3. Dinner - same rules as lunch.
Let the games begin!
Needless to say after overspending that much, I had to make the bleeding stop. I have hung the card up to dry in some drawer at my parents house, where it can stay safe and sound and far far away from my budget.
During the last two weeks, I have not adjusted well to not spending at my leisure like I had been doing on the Amex. I blew my dining out / grocery budget by $50 already, and I still have 4 days to payday. Part of this is to blame on the longer days to spread the check over - we were paid the 13th, the next one still won't come until the 31st - so 17 days rather than 15, which happens to include an extra weekend.
But excuses are for addicts - I must get past the denial and accept the fact that I blew it. So I have started looking for a solution. One point of major bleeding I found is lunch & drinks. Almost all of my "dining out" was spent on one of these two. Overall, I spent an average of $15 a day on dining out, and $20 on food in general.
For this next week, I have a few challenges for myself to achieve an overall goal of $5/day average for dining out and $7/day for eating in: 1. Eat breakfast in, every day. 2. Only eat out for lunch 1 weekday and 1 weekend day. 3. Dinner - same rules as lunch.
Let the games begin!
Sunday, May 13, 2012
The Finish Line
Many of the books I have read lately emphasize the important of VISUALIZATION in achieving a goal. You start with the furthest out goal (by a house) and work your way backwards to current day decisions that can be made to achieve that goal.
Example: One day I would like to own a house. (Overarching goal). Before I take out a mortgage, I should pay off my student loans (long-term). I can pay off more of my student loans once I get rid of credit-card debt (short-term).
Once you have your end result in mind (relaxing on the back deck off my kitchen with my morning paper and a cup of coffee, while I listen to the birds in my back yard), the day-to-day steps become more clear and more important to achieve.
Credit can help your or hurt you along the way. The less debt the better, but there are some basics of having a good credit score and affordable interest rates- pay any bills on time, always make your minimum payment, etc. Rather, if you don't do these things, your credit score will take a big hit down, and once your credit score goes down your interest rates go up and suddenly you owe a lot more than the $15 minimum payment you missed....
Keeping a good credit score is a good overarching goal to your financial decisions. The hardest part will be creating a lifestyle for yourself where you stay within your limits and create some cushion. Staying within your limits means spending less than you make each month. If you spend less than your monthly income, you won't need credit cards. If you don't need credit cards, you won't throw away money on interest payments. And the benefits just keep coming..
The second part, cushion, entails not just staying right within what you make every month, but actually being disciplined enough to set some aside. Start small - the emergency fund I talked about before (~$1,000) should be created as soon as possible and used only for true emergencies (and if used at all, built back ASAP).
Next, work towards saving 4 - 6 months worth of expenses - this way if you are injured, the economy crashed, or your new CEO does a lot of layoffs, you have enough backup to keep paying your bills, work on your recovery, and get to that next job and back on your feet.
Once you have an emergency fund, start thinking big! What would I like to have for myself one day? A beach getaway? A different car? Your own house? A cozy retirement? If you dream it, visualize it, and plan the steps to get there, you can achieve just about anything. Seriously.
What do you want your finish line to look like?
Example: One day I would like to own a house. (Overarching goal). Before I take out a mortgage, I should pay off my student loans (long-term). I can pay off more of my student loans once I get rid of credit-card debt (short-term).
Once you have your end result in mind (relaxing on the back deck off my kitchen with my morning paper and a cup of coffee, while I listen to the birds in my back yard), the day-to-day steps become more clear and more important to achieve.
Credit can help your or hurt you along the way. The less debt the better, but there are some basics of having a good credit score and affordable interest rates- pay any bills on time, always make your minimum payment, etc. Rather, if you don't do these things, your credit score will take a big hit down, and once your credit score goes down your interest rates go up and suddenly you owe a lot more than the $15 minimum payment you missed....
Keeping a good credit score is a good overarching goal to your financial decisions. The hardest part will be creating a lifestyle for yourself where you stay within your limits and create some cushion. Staying within your limits means spending less than you make each month. If you spend less than your monthly income, you won't need credit cards. If you don't need credit cards, you won't throw away money on interest payments. And the benefits just keep coming..
The second part, cushion, entails not just staying right within what you make every month, but actually being disciplined enough to set some aside. Start small - the emergency fund I talked about before (~$1,000) should be created as soon as possible and used only for true emergencies (and if used at all, built back ASAP).
Next, work towards saving 4 - 6 months worth of expenses - this way if you are injured, the economy crashed, or your new CEO does a lot of layoffs, you have enough backup to keep paying your bills, work on your recovery, and get to that next job and back on your feet.
Once you have an emergency fund, start thinking big! What would I like to have for myself one day? A beach getaway? A different car? Your own house? A cozy retirement? If you dream it, visualize it, and plan the steps to get there, you can achieve just about anything. Seriously.
What do you want your finish line to look like?
Monday, April 23, 2012
What's the problem with credit, anyhow?
I'd like to start this session with a little personal story. Two months ago the sit up sheets went around for girl scout cookies. Being the awesome friend and daughter that I am, I decided to order two more than usual to give to my friend and my mom. So arrival day came and here I sat, with FOUR boxes of cookies. Quick outside lesson about myself 1. I'm not big on sweets in the sense they are not a daily or even weekly purchase for me. 2. I work a job with unpredictably long nights. Just so happens the day of the arrival of the deliciousness, work turned into one of those late nights. Guess how many of that first box survived the night? Less than half.
Now, knowing what you know about my lack of sweet tooth, what do you suppose was the cause of my cookie binge? Aside from stress (not uncommon and manageable by alternating dubstep and classical music) I had an endless supply of cookies. Why did I eat them rather than order salad with everyone else? Simple: because they were there!
Similar to the grass is greener on the other side syndrome, the minute your credit card tells you that you have $3000 to spend, you feel you have $3000-cash. Deep down, when you are debating between debit or credit you think "credit. I have more"
MEEEH!! Wrong sucker! You just offered to pay a company more than you're worth in repayment and interest for sh** you probably don't need in the first place. My net worth currently sits at negative few thousand (which has come down tremendously thanks to savings and paying down my student loans).
The fact I owe more than I am worth is something I am not fond nor proud of, but I at least happy to say I got an education worth more than I owe for it, so I'm not too worried about future.
Today amidst various political BS I heard the statement "Americans now owe more in student loans than credit card debt." And you idiots think that's a BAD thing? So I spent more on my education than my wardrobe or the car I might wreck after charging the nonfat latte I managed to spill in my lap - at least knowledge and social skills friendships business connections might get me a better job one day. Visa, Amex, MasterCard, and Discove will not.
If you have it ($3000 credit line) you will spend it, or more than you otherwise would. You'll think "that Chamanda is crazy, this isn't do bad!" and more cards you shall get..
A glass of milk goes nicely with cookies, but eventually the box and your friend's box and your mom's box will be gone, and the girl scouts have stopped selling and you are left with spoiled milk and no cookies.
Same to your wallet and your credit. Don't let your credit score become a half empty glass of spoiled milk. It smells bad, and it's hard to be friends with smelly people...
Now, knowing what you know about my lack of sweet tooth, what do you suppose was the cause of my cookie binge? Aside from stress (not uncommon and manageable by alternating dubstep and classical music) I had an endless supply of cookies. Why did I eat them rather than order salad with everyone else? Simple: because they were there!
Similar to the grass is greener on the other side syndrome, the minute your credit card tells you that you have $3000 to spend, you feel you have $3000-cash. Deep down, when you are debating between debit or credit you think "credit. I have more"
MEEEH!! Wrong sucker! You just offered to pay a company more than you're worth in repayment and interest for sh** you probably don't need in the first place. My net worth currently sits at negative few thousand (which has come down tremendously thanks to savings and paying down my student loans).
The fact I owe more than I am worth is something I am not fond nor proud of, but I at least happy to say I got an education worth more than I owe for it, so I'm not too worried about future.
Today amidst various political BS I heard the statement "Americans now owe more in student loans than credit card debt." And you idiots think that's a BAD thing? So I spent more on my education than my wardrobe or the car I might wreck after charging the nonfat latte I managed to spill in my lap - at least knowledge and social skills friendships business connections might get me a better job one day. Visa, Amex, MasterCard, and Discove will not.
If you have it ($3000 credit line) you will spend it, or more than you otherwise would. You'll think "that Chamanda is crazy, this isn't do bad!" and more cards you shall get..
A glass of milk goes nicely with cookies, but eventually the box and your friend's box and your mom's box will be gone, and the girl scouts have stopped selling and you are left with spoiled milk and no cookies.
Same to your wallet and your credit. Don't let your credit score become a half empty glass of spoiled milk. It smells bad, and it's hard to be friends with smelly people...
Thursday, April 12, 2012
Budget Commandments
Lately I have been a little off... budget-wise, blog-wise, fitness-wise, you name it, it's off. But, lately I have been focusing on something a little bit different. Just recently I took a vacation and despite the word "vacation" and very much wanting to be happy and content, I noticed that not only was I neither happy nor content (despite giving myself an extra spending allowance to enjoy), but I was also brining down the entire mood around me. The Lorax inside me speaking for happiness everywhere struck out - something must be done.
Inspired, while perusing the book selection at the airport, a title struck out at me: The Happines Project @ http://www.happiness-project.com/. Gretchen has 12 Personal Commandenments inspired by various moments of her life and happiness project, which led me to think, why not have 12 Spending Commandments? A quick list of reminders is just what I need to get my budget back on track.
1. Pay debt first
2. Every penny counts
3. Debt, Save, Give, Needs, Fun
4. Flex and be flexed
5. Hard work pays off.
6. Plan the splurge.
7. Needs > wants.
8. Give more.
9. Have a little faith.
10. Fun is free.
11. Home cooked > dining out
12. Credit = debt = bad idea.
- "my" money is not mine until I give back what I borrowed.
-if I budget to $0 including-"miscellanous" not a penny is wasted.
- in order from most to least important
- wiggle room is good, like expecting the unexpected so Im always prepared
- grades, budget,career, family.. you name it, and this is true.
- if I plan the splurge I can get the most bang for my buck - outlet mall on a holiday wekeend anyone??
- are my .. bills paids, car running, body working?
- I have been blessed because others gave to me, time to return the favor
- If I spend wisely and plan ahead, I know my needs will be met
-going outside, talking with friends, using my imagination -so much fun for $0!
- less on my waist more in my wallet, what's not to love?
- the temptation to spend when the credit is in my wallet is far greater than the discount coupons I get. I need to lock them up and throw away the key, lest I make the unplanned splurge.
Inspired, while perusing the book selection at the airport, a title struck out at me: The Happines Project @ http://www.happiness-project.com/. Gretchen has 12 Personal Commandenments inspired by various moments of her life and happiness project, which led me to think, why not have 12 Spending Commandments? A quick list of reminders is just what I need to get my budget back on track.
1. Pay debt first
2. Every penny counts
3. Debt, Save, Give, Needs, Fun
4. Flex and be flexed
5. Hard work pays off.
6. Plan the splurge.
7. Needs > wants.
8. Give more.
9. Have a little faith.
10. Fun is free.
11. Home cooked > dining out
12. Credit = debt = bad idea.
- "my" money is not mine until I give back what I borrowed.
-if I budget to $0 including-"miscellanous" not a penny is wasted.
- in order from most to least important
- wiggle room is good, like expecting the unexpected so Im always prepared
- grades, budget,career, family.. you name it, and this is true.
- if I plan the splurge I can get the most bang for my buck - outlet mall on a holiday wekeend anyone??
- are my .. bills paids, car running, body working?
- I have been blessed because others gave to me, time to return the favor
- If I spend wisely and plan ahead, I know my needs will be met
-going outside, talking with friends, using my imagination -so much fun for $0!
- less on my waist more in my wallet, what's not to love?
- the temptation to spend when the credit is in my wallet is far greater than the discount coupons I get. I need to lock them up and throw away the key, lest I make the unplanned splurge.
Monday, March 12, 2012
How to Make the "Oh Sh!!" Purchase, without need to say "O.S!!"
As you may have noticed in my last blog, I recently had an O.S moment. Drove to work like usual, parked my car in the deck like usual, went on with my day like usual, left way later than I would like to like usual, and my car had a flat tire.
Old me: "O.S.!! I have a flat tire how am I going to pay to get a new one?"
Budget-savvy diva-self: "I have a flat tire, but damn I'm hungry.. what to do..what to do"
As you saw, I called AAA and had them put that beautiful donut in place of my decrepit pitiful looking tire.
The following week I went to my favorite Kauffman Tire and asked what they recommended, so 4-tires and an alignment later, Betsy (as I fondly call my 1999 Camry) and I rolled on out of there safe and happy - all for a whopping $425.
Ok, so I got a good deal on those 4 new tires and alignment - but $425 is practically rent. The man at the counter even said "well I am not sure if this is in your budget or not.."
I thought to myself, "Well no sir, I did not write in 'unexpected new tire purchase' when I made my February budget." But I did think - "Well, I have almost 4 months worth of expenses saved up - and I can start replenshing that bucket as soon as next paycheck, so I should go ahead and take this good deal and put that nasty donut back in the trunk where it belongs."
Here's the how:
Step 1 - Make a budget, include Step 2 as a major goal of your budget.
Step 2 - Save $1000 as quickly as possible - this is yours to keep, not spend.
Step 3 - If you have real emergencies along the way, use your part of your $1000, and pay back in until back to $1000.
Step 4 - Pay off credit card debt - this is money you spent that you did not have. The money you make is not truly yours until your debt is gone, period - be careful.
Step 5 - Take your main monthly expenses (utilities, food, enough for gas to get to work) and multiply by 3 if you are single no kids, 6 if you are married/have kids. This is your emergency fund goal.
For some, this may be a very quick process - tax refund anyone??
For others, this could take quite some time. But true me - it's worth it!!
You may feel trapped by your budget to start - eating out less, shopping less, etc. - but once that "Oh sh!!" purchase comes and you find yourself not worried about how to pay for it, you will get to breathe the most satisfying sigh of relief you have felt in a long time.
Old me: "O.S.!! I have a flat tire how am I going to pay to get a new one?"
Budget-savvy diva-self: "I have a flat tire, but damn I'm hungry.. what to do..what to do"
As you saw, I called AAA and had them put that beautiful donut in place of my decrepit pitiful looking tire.
The following week I went to my favorite Kauffman Tire and asked what they recommended, so 4-tires and an alignment later, Betsy (as I fondly call my 1999 Camry) and I rolled on out of there safe and happy - all for a whopping $425.
Ok, so I got a good deal on those 4 new tires and alignment - but $425 is practically rent. The man at the counter even said "well I am not sure if this is in your budget or not.."
I thought to myself, "Well no sir, I did not write in 'unexpected new tire purchase' when I made my February budget." But I did think - "Well, I have almost 4 months worth of expenses saved up - and I can start replenshing that bucket as soon as next paycheck, so I should go ahead and take this good deal and put that nasty donut back in the trunk where it belongs."
Here's the how:
Step 1 - Make a budget, include Step 2 as a major goal of your budget.
Step 2 - Save $1000 as quickly as possible - this is yours to keep, not spend.
Step 3 - If you have real emergencies along the way, use your part of your $1000, and pay back in until back to $1000.
Step 4 - Pay off credit card debt - this is money you spent that you did not have. The money you make is not truly yours until your debt is gone, period - be careful.
Step 5 - Take your main monthly expenses (utilities, food, enough for gas to get to work) and multiply by 3 if you are single no kids, 6 if you are married/have kids. This is your emergency fund goal.
For some, this may be a very quick process - tax refund anyone??
For others, this could take quite some time. But true me - it's worth it!!
You may feel trapped by your budget to start - eating out less, shopping less, etc. - but once that "Oh sh!!" purchase comes and you find yourself not worried about how to pay for it, you will get to breathe the most satisfying sigh of relief you have felt in a long time.
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