Three years ago, I was nearly $60,000 in debt. I had a Bachelor’s degree that didn’t appear to be worth its weight in salt and a job that couldn’t cover a fraction of my monthly bills. I was terrified.
Today, I am closer to complete financial freedom than I ever dreamed possible. Last week, I paid off my last remaining credit card balance. This two-part post is a celebration of this incredible milestone in my journey.
In part one, I explained how I got to that terrible place. In part two, I will explain how I’m getting out of it (and how you can do it, too).
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1. Change the way you think about spending money. For most of my life, I believed that money was made to be spent. I believed that I *deserved* to spend every dollar that I earned on some material thing that would “make me happy.” I coveted material possessions—clothes, jewelry, electronics, cars. What I realize now is that money is not meant to be spent. You only need to earn enough money to survive. You should have enough money to buy only what you need. There is no need for excess.
“You’re not your job. You’re not how much money you have in the bank. You’re not the car you drive. You’re not the contents of your wallet. You’re not your fuc*ing khakis.” (Fight Club)
This shift in mindset is hard to adjust to at first. You may not like the reactions that you receive from people. Believe me, I’ve been called cheap a few times, but I pay no mind to it. I would choose cheap over poor any day.
2. Keep a budget. I highly recommend using Mint.com. I started using it in September and it has been one of the most transformational and useful tools throughout my journey to financial freedom. It allows you to sync up all of your accounts (loans, checking, savings, etc.) in one place. Then it keeps track of every transaction that you make and sorts/organizes all of the data for you. It allows you to track your spending over time and by category. It gives you incredible perspective and insight about where your money goes each month/year. It has been a truly eye-opening experience for me.
If you’re unwilling to try Mint, you can keep a budget on a spread sheet or even by hand. However, the important thing is to be completely conscious about where every dollar you spend is going.
3. Use a debit card. To reap the full Mint.com experience you should use a debit card for every purchase you make. Using the debit card will automatically flag each transaction you make into the appropriate category. So if you go to Shoprite, it will get marked as groceries. If you go to Home Depot it will get marked as home. If you stop at the gas station it will get marked as automobile, and so on.
I use my debit card (linked to my checking account) for almost every single transaction that I make. I also have all of my monthly bills (like my auto insurance, utilities, and gym membership) automatically debited from the same checking account each month. It makes keeping track of my spending that much easier. Plus, I do not like dealing with cash. The debit card is quick, easy, and is accepted almost everywhere now.
Whether or not you use Mint.com it is a good idea to use a debit card simply because you can review all of your purchases and purchase amounts on your monthly statement. Trying to keep track of receipts is a hassle that I don’t have time for.
4. Pay off credit cards and cut them up. Paying off my credit cards was my first priority. For awhile I tried “credit card surfing.” Let me just tell you from experience, it’s overrated and it really doesn’t work. The idea is that you surf from credit card to credit card by transferring balances. A lot of companies will give you 0% APR for 6 months if you transfer your balances over to them. After the 6 months, you “surf” to a new card with another promotional rate.
The problem with this tactic is that it gets messy quickly, it becomes difficult to keep up with, and if you lose track you will end up getting burned by high APRs, finance fees, cancellation fees, etc. Also, it probably doesn’t look great on your credit report if you’re opening up a new card every 6 months or so.
It is much safer and wiser to just stop using credit cards! My theory is simple and has taken me very far: If you can not afford to buy it, then you can not afford it. Period. It is simple logic.
5. Eat in. This is one of the easiest changes to make, but it also comes with an enormous, positive impact. When I started closely tracking my spending habits, I was shocked to see how much I was spending on eating out. A meal at a decent restaurant goes for about $25 per person. If you eat out twice a week, that is $3,120 a year. If you grab lunch out during the work week, it’s about $8 a day. That’s $2,080 a year. Put those together and you could be spending $5,200 a year or more on dining out! That is outrageous and completely unnecessary.
Since I started eating in and packing lunches, I’ve taken my monthly food spending from $500 down to $200 or less! Over time, that means enormous savings. Check out 5dollardinners.com for some awesome, inexpensive recipes. I love it! Also, investing in a crock pot was one of the wisest decisions I ever made—chili, sausage & peppers, and goulash will be your new (delicious, cheap) best friends. (Here are some more tips for eating healthy & mindfully.)
6. Direct deposit money into savings every month. This is my final—and perhaps most important—tip. When I began my journey to financial freedom, I opened a savings account with ING Direct. It is an easy-to-use online savings account and it gives you interest on the money that you save. It also allows you to set up easy direct deposits.
I started out small, depositing $50 a month into my savings. As I learned to keep my budget tighter and tighter, I increased the amount that I put into my savings each month. Currently, I am putting away $500+ per month and hope to get closer to $1,000 per month in the very near future.
When you direct deposit the funds, it comes out automatically. It is painless because you don’t have to do a thing. Because it’s automatic, after awhile you don’t even notice that it’s missing. (I remember reading that on another blog several months ago and thinking, “Are you out of your mind?! I’m not going to miss it? Yea right!”) But I can honestly say that after a few months, you adjust to the missing money. You truly do not miss it once it becomes normal for that amount to be deposited into savings automatically each month.
It has been one of the best decisions that I’ve made and because I’ve worked so hard to get to this place—I don’t touch that money! I am keeping it there for a rainy day or to pay off my student loans someday in one fell swoop.
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As I stated at the start of this post, three years ago I was almost $60,000 in debt; I was twenty-three years old; and I was scared to death. Today, I have my finances under control! I am on the road to financial freedom and you can get here, too. Truly, it is not as hard as it seems. With common sense and a bit of dedication, it will happen. Paying off my last credit card balance was like taking chains off of my wrists for the first time in seven years. The feeling was completely priceless. If I can do it, anybody can.
So, what are your financial goals? Have you ever been in financial prison? How did you free yourself? If you’re still there, what are you going to do to break free?
For me, divorce was the best and bravest decision I ever made. Even though at times it felt very selfish, which is probably why I put it off for so many years. In the end, I knew it was best for all involved. My children now see a happier more peaceful mother. Someday I hope I can show them what a healthy relationship looks like.
It is not easy…but you cannot stay ‘just for the kids’. My personal feeling was that I was teaching my children that it was acceptable to be treated the way I was…which, if it were my daughter, would NOT be acceptable.
Divorce can be just as much a loving act as anything else…It all depends on how it is handled.
@ Dawn – Thank you so very much for sharing your story! I can not tell you how much it means to me. I am so proud of you for your courage, love, and commitment to your family. I hoped that someone would make a comment like this one — to give Lisa the perspective from someone who has really been through it.
You are wonderful & your daughter is so lucky to have such a brave & loving mother. Thank you a million times! xo
I am a child of divorce, altough my parents did not get divorced until I was 31 years old. In my situation my parents stayed together for my sisters and I, but as children we had to grow up in an environment that was hostile. We endured fighting and bickering on a daily basis and lived with a lot of fear and knew my parents were not happy. We always knew it was a matter of time before they would get divorced. Now after much anger, resentment,and sadness my parents are divorced and trying to start life over in their 60’s. I think it is more difficult to handle this as an adult because one has their own beliefs and values and it is much harder to adapt to changes as you get older. Children are resilliant and can adapt to new situations much easier than adults.
We are at a point now where we are trying to let go of our resentment towards our parents and accept their new lives. I can honestly say that my parents are both much happier and stronger people today and individually more pleasant to be around. The sadest part of this whole thing is that my parents spent 39 years married together and now don’t even acknowledge one another if they are in the same room. I often wonder if they would have gone their separate ways years earlier, if they would have been less angry towards one another and been able to have a civil and cordial relationship. Divorce is never easy on a family no matter what the age of the children. The most important thing for a child is to know they are loved and to grow up in a nurturing and stable environment. There are many factors that need to be considered when making the decision to divorce and it is never easy. The most important thing to consider is how your happiness or unhappiness will affect your parenting and what is the best possible environment for your children to live in so that they can thrive as individuals. Children learn by what we model and are much smarter than we give them credit for. Whatever your decision, it will be a brave one, that will require courage, but we are never dealt more than we can handle.
@ Keri – Thank you so much for your comment. I am absolutely in awe of how beautiful & inspirational your words are, even if they are coming from a sad place. You are so brave. I can not imagine what it must be like to go through what you are enduring. Even though you are an adult — this experience must be so hard to adapt to like you mentioned. Especially since you spent your entire life in a family that was intact (even if things were difficult at times).
You are so right, when you say that children learn by what we model & are much smarter than we realize. You are hands down one of the most incredible, inspiring mothers that I have ever known. You have a sweet, gentle, wisdom that is absolutely heart-warming. It is as though you were meant to be a mother.
I am so happy to hear that you parents are both much happier & stronger as a result of their decision. I hope that this happiness & strengths spills into the lives of your whole family. In the end, yes, the most important thing is that children know they are loved & growing up in a stable, nurturing environment. That is the greatest gift of all.
I know that your advice will mean so much to Lisa as she makes her decision. Thank you so much for sharing.
I had to say thank you for your comment…You have no idea how much it means! xoxo