A fashion/beauty blogger talking about money?! Whaaat? It’s true! As much as I love clothing and makeup, I like having little/no debt much more. That is part of the reason I only post a LookBook once per season – I wear the same things often, mixing and matching so I don’t break the bank.
In my experience, slow and steady wins the race when it comes to getting out of debt! It is possible, you just need a plan that you stick to. I paid off my debt while paying tuition for school. It was tough, but worth it. There are many different strategies, so I would encourage you to do your own research to find what works best for you. My recommendations to becoming debt free:
Step 1: Get Organized!
Log into your online banking and get an idea of where your money is going! Make a list of all your bills/recurring expenses. I usually list them by due date (1st, 3rd, etc). Your list may look something like this:
Rent – 1st – $1000
Car Payment – 3rd – $300
Car Insurance – 4th – $150
Consumers Energy – 4th – $35
AT&T – 9th – $100
Verizon – 17th – $90
Gym – 31st – $40
I recommend this bill pay checklist that I absolutely love: I use it monthly to keep track of my automatic payments. If you haven’t already set up automatic payments for your recurring bills, do it today!
Also, go back as far as you can stand (at least 2-3 months) and calculate how much you spend each month on gas, groceries, eating out, and any other miscellaneous expenses. To do this, I utilize online banking. Next, add everything up! The number you end up with your total expenses for the month. You also want to calculate your monthly net take-home pay, which is how much money you have in each paycheck after taxes, money for retirement, and healthcare all come out. Hopefully you’ve got some money left once you’ve paid all your bills! If not, check back for Part 2 in my finance series about ways to find extra money in your budget.
Now that you’ve calculated how much money you are paying out each month, it is time to make a budget and stick to it! When I first started budgeting, I read Financial Peace by Dave Ramsey; I found it beyond beneficial. I also used his envelope system, more about that here. Many churches offer Financial Peace University, so if you’re interested you can search for it at local churches. Set your budget in each area of your spending, and keep with it.
Step 2: Start paying off debt!
Dave Ramsey talks about the debt snowball effect.
You list all your debt, in order from smallest to largest. For example:
1. Credit Card – $300
2. Lasik – $3400
3. Car – $10000
You pay off your lowest debt first while making minimum payments on the other debts. Once the lowest is paid off, you add what you were paying into that debt plus the payment for the next lowest debt, thus you start knocking off debt one by one. The exception to this would be if you have an account with a high interest rate – work on knocking that one out early. It is very satisfying to watch things fall off your credit report. I utilize Credit Karma to keep an eye on everything. It is also rewarding to watch your credit score increase!
Step 3: Work your budget to find extra money.
Start packing your lunch every day/stop eating out so often. Make coffee at home instead of stopping at Starbucks. You can find a Groupon for just about everything! Check out a more complete list in Part 3 of my finance series, coming in the next week.
Step 4: Don’t incur any more debt.
Once your do start paying things off, don’t add any more. I know, I know… easy to say, not so easy to do. Just stay tough. I only buy things if I have the cash to pay it off immediately. I’ve paid my car off and I’m doing everything I can to drive it for as long as possible. Be smart, continue to budget. Once you free some money up, start building your savings!
Hopefully this can help get you started. Do your own research, and find out what is best for you. Little money emergencies will undoubtedly pop up and knock you back, but don’t give up! Have you discovered any budgeting/saving tips? Leave a comment below!