This is guest post by Jeff. Jeff is the writer at Sustainable Life Blog, a blog about going green and saving money.
When I was in college, I used to think just having a budget was enough. It didn’t matter if I kept to it or not (I frequently didn’t) but I could pat myself on the back and say that I had one, so I was ahead of the game. Unfortunately, for the longest time I ignored it and just assumed that if I kept doing the same things, and had a budget, that automagically, I’d start following it.
Following My Budget
It took me far longer than I’d like to admit that it doesn’t work that way. After far too long of telling myself I was trying, I looked at my financial situation and realized that it was actually time to start trying to follow my budget. Since I was in debt almost 2x my annual pre-tax salary, my budget was basically “don’t spend money on anything except food, gas and rent”.
I got serious in 2009, and I paid off all of my debt in 2014, almost 5 years to the day (I averaged paying off about $1,000 per month during those 5 years.
Becoming Debt Free
At first, it was nice just to be debt free (except the mortgage). I really did feel a weight being lifted off my shoulders. But what I didn’t expect was the freedom that I would get when I was debt free.
My monthly nut dipped to below $2,000 (if I didn’t have a wife and a baby, Im pretty convinced it’d be less than $1200).
Crystal’s side comment to Jeff’s wife and kid – But of course, he is very happy to have spent the extra $800 for you two, you are obviously more awesome than money. (Got you back covered, Jeff). 😉
I needed less money to live on, so that allowed me to save more money or do other things. Here are a few of the things that have been possible since my wife and I became debt free.
Embracing Debt Freedom
First (and probably most important) was that my wife didnt have to go back to work full time after our daughter was born. My wife is a teacher and our daughter was born 3 months early and my wife didn’t go back to school for the remainder of that school year.
Once this current school year started, she had to decide if she wanted to go back full time, part time or not at all. She and I talked about it, decided what we thought was best, and made a decision. Money did not come into the discussion at all (aside from running some very basic numbers). Since we have no debt, our hand wasn’t forced by choices we made in the past. We could simply do what we thought was best for us and our daughter.
Second, I was able to switch jobs. I used to work for the government, and while I didn’t mind it at all, I could feel my skills become stale and that I was soon going to be one of those people who were only going to be able to get jobs in government. I didn’t want that, so I started looking around for other jobs to freshen up my skills and do something a bit different.
When I did find something new, it was a position with great opportunity (employee owned, great benefits, etc) though the base pay was about $15,000 less per year than I was getting before. Some of this would be made up in benefits, but not all of it. Becoming a part owner was (and still is) something that appeals to me, so I was willing to give up a little bit of cash every 2 weeks for an opportunity like that. I ended up taking the job and once again, I was able to do that because I didn’t need the money from my old job.
How To Get Debt Free
Getting my budget straight helped me out a bit (though the payoff was a little long term), so how did I do it?
A big part of it was mental. I had to forgo current rewards for longer term ones that I didnt know would pay off (or when).
Another big part of it was the fact that I started using a tracking system. There have been huge advances since 2006 in budget tracking systems, with things like Mint, YNAB, and Personal Capital coming on the scene to help you manage your finances. Some, like mint and YNAB, are more budgeting focused and great for people looking to get a handle on their monthly cash flow. Others, like Personal Capital, tracks spending and income but doesn’t budget for you and is more focused on helping you manage your investments and asset allocation.
It’s up to you to decide what one will meet your needs better, but if you’re just starting out I’d suggest Mint or YNAB.
Getting your budget right is powerful, and if you’re having trouble, remember to focus on the long game. Where do you want to be in the future? How will being in debt hinder that dream?