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Becoming Financially Fit

“my journey to becoming financially responsible”

September 23, 2011 The Long Haul

It all started with the in-mail offer.
0% interest for 10 months.

I had the best of intentions paying it off in full every month, but c’mon. We all know how that story goes. During my last year of college, I took on more than a full load of units, and didn’t have much time to work. I resorted to using my credit card to pay for photography essentials (my major), and of course, a little splurging went on during the weekends when I wanted to forget about my classes.

Over time, I came to dread the credit card statements I received in the mail. I knew it was bad, and after a while, I didn’t even open them. Making the minimum payment was getting me nowhere. I then fell into a very bad habit — spending money when money depressed me. The voice in my head was saying, “You’re already $3,000in debt, what’s an extra $20?” I was spending wayyy too much on food, and even more on shopping. All those little things that I had bought myself in an effort to cheer-up had done more bad then good, and by then, I didn’t even know what those things were. I didn’t have *anything* to show for all that debt. Definitely not a good feeling, but what are ya gonna do?

After a few failed attempts at paying the cards off, New Year’s 2011 was rolling in (by this time graduated, and employed full-time), and I had yet to pick a resolution. It didn’t take much soul-searching to decide that I not only wanted to get rid of my credit cards for good, I also wanted to become financially smart (understand the different between IRA’s and Roth IRA’s, and exactly how COBRA, HSA/FSA & 401k’s worked…mission accomplished!).

Step 1: Make a budget
I finally sat down to create a budget while watching ‘Confessions of a Shopaholic’ (ha!), and used Mint.com to help me. I entered my bank account information so it could track exactly what I was spending, and where I was spending it. I’ll be host here — I was $8,700+ in debt, and it was saddening to see the amount I had racked up on my cards all added together. Your budget should be looked at monthly, to see if any changes should be made.

Step 2: Set an Out-of-Debt date
I used Mint’s Goal tool to see how quickly I could eliminate my debt if I paid $X per month. Going by my resolution, I wanted to be done with it within a year. A year seemed like an awfully long time (especially considering that seemingly-long timeline was my obstacle in previous attempts to pay it off. “A year? But I want it gone NOW!” Cue more depression), but that was my goal. For real this time.

Step 3: Read, read, read!
I bought a couple books that I found most inspiring — “Young, Fabulous, and Broke” by Suze Orman, and “The Simple Dollar” by Trent Hamm. I love Suze Orman’s bluntness.. more or less, she said, “Stop feeling sorry for yourself and get to work.” I really needed that. Trent Hamm was a great inspiration for learning how to save money on things like food, and I went to work on trimming my food budget. Instead of buying lunch at the food court every day (I work in a mall), I made lunches and brought snacks, saving hundreds of dollars. I also learned that I don’t want what I can’t see, so I stopped window shopping on my lunch breaks and days off. If I needed a new outfit, I went into my closet and accessorized until my heart was content. (Chances are, you have more than enough already.. so re-mix your wardrobe and try the 30/30/30 challenge)

Step 4: Pick Your Self Back Up
Here’s where I’m ashamed. I opened a THIRD credit card. This one was, like the second, opened with the intent of transferring my high-interest balances (up to 28%) over to 0%. Why did I fall back into the debt pit? It didn’t have enough of a limit to transfer balances, so I kept it for “emergencies.” I used it for more than that, which I shouldn’t have, BUT have paid off the balance before the 0% turned into 19%.

All in all, I’ve paid off near $10,000 in a little over 9.5 months. (The 3rd credit card’s balance grew as I paid off the other 2 cards, so the graph doesn’t show $10k at the beginning. The graph also shows I still owe $500, but the payment is pending. I was just way too excited to post this than to wait!) A lot of how quickly I’ve paid this off had to do with living with my parents (saving on rent), making commission at work (more than half of my debt was cleared by commission alone), and a fair amount of it had to do with learning, and re-learning that Wants are not greater than Needs.

No, I don’t need to spend more than $2 on lunch. I can make it at home, saving at least $4 each time (~$80/month).
No, I don’t need to buy bottled water with my lunches. I bring my own from home and save $35 a month.
No, I don’t need to spend $25 on a mani/pedi monthly. I bought the tools and do it myself (saving ~$25/month).
No, date night doesn’t require going out to dinner. My boyfriend and I make our own dinners and save at least $20 per meal (~$80/month), and rent movies from the Blockbuster kiosk, saving $18 instead of going to the theater.
No, I don’t need new reading material. I borrow from friends’ or a family member’s library and put the cash towards my cards (at least $10 right there).
(If you weren’t keeping track, those things alone just saved about $230 a month.)

The key: identifying your money pits, and re-thinking your Needs. You might find that Wants are masquerading as Needs, and can cut them back.

Step 5: Keep It Up

Sure, it’s tough knowing that ou have X amount of months until you’re out of debt. And sure, it’s easy to fall off the wagon. But remember that saying, “If it were easy, then everybody would be doing it.” This is where you get to shine, and put any extra cash towards credit cards. $4 here, $18 there.. it adds up, and before you know it, you’ve paid off an extra $100 on top of the minimum payments. Congrats. Now enjoy watching those large numbers fall, and KEEP. IT. UP.

.s