Three years ago Mike and I were in a very different picture financially. We were entrenched in debt (about $45,000 down from $70,000 at that point) and slowly paying it down….very…slowly. Our income was probably more than double what it will be this year and so was our spending. I’m bringing this up because I realize many of you don’t know this about Mike and I. You just came on board and we don’t talk about it anymore since it isn’t news. It was a real pivotal point in our lives. We took drastic moves in the summer of 2009 to change our path around spending. It changed us. It made us happier… and not the kind of happy like we are skipping-down-the-lane-happy but a deep contentment. It didn’t just happen though. The transition was bumpy. I was really pissy about it. Today I thought it would be interesting to revisit that transitional time so I’m reposting something I wrote back in November 2009. At this point we had cut back on our spending for about 3 months.
After five years of paying on $70,000 of debt we still had $35,000 left. Mike, my husband, had sold me on the idea of paying off the rest as fast as we possible could rather than as slow as the credit card companies would allow us. We began planning how to implement this goal. In the last four years we have not taken on any more debt (good thing) but we have only been making the minimum payments on what we owed (not so good). We were on the right track but we needed to learn to live within our means rather than buying stuff on credit and borrowing from our future selves. Presently we’re pissed at our past selves for putting us in the position we are in now. Covering the minimum payments on our credit cards is a large burden on our monthly budget.
In order to free ourselves from it as quickly as possible we had to take a long hard look at our spending and make some decisions about what we were willing to do without in order to use our money to pay off our debt as soon as possible.
As I looked at every line item in our budget and I asked myself, ‘Is spending this money now worth putting off retirement one more day?’ If we stick to this budget for seven months our consumer debt will be gone! In the back of my devious mind I thought, “I could always go back to my old spending habits after I got through this.” I can do most things short term. It’s the long haul that kicks me in the butt.
For those of you that have never tracked a dime of your spending here is my advice: Start simple, if you get too complicated you’ll have a difficult time sticking to it. It’s about having an idea of how much money is coming in and how much is going out. If you know how you actually spend your money then you have choices. It creates options for you. I like having options. Five years ago I started with a budget that had eight categories that I tracked on an excel spreadsheet. I now have forty-seven categories that I track in Quicken. For the last two years we have also had a ‘mini-budget’ on a white board in our kitchen. It has seven categories that track the discretionary (‘mad’ money) items that we have problems keeping on budget. It’s hung up for the world to see. At parties it’s always a topic of conversation. The board has our monthly budget for each category and how much we actually spent. I update it every week. This has been our most successful tool for keeping our spending in check. Anymore, we tend to earn gold stars with these categories of spending. I compare it to someone trying to lose weight and posting an inspirational saying on their refrigerator to give them pause before opening the door and stuffing their face with a million calories before bed.
In order to achieve our new svelte financial lifestyle we’ve had to cut back on some things I considered essential. I’m finding myself resistant. I’m thinking about everything I can’t buy. I feel like an entitled brat. My brain is just ticking away the same mantra: ‘I want, I want, I want!’ And here is the kicker: this is the best time for us to do this. In the past we have earned less money, a lot less. I find myself going to the library (and not the bookstore) to check out every book I can find on financial advisement. I need reassurance and guidance that this is not the scary blob it appears to be. Michael can do without many things. He’s ready to go live in the woods and eat berries for the next year. I like ‘things’. I like to go to the store and peruse the aisles for hours just looking at stuff.
But do I love stuff all that much? How much do I really love stuff? Do I love it more than retiring earlier in life or ever? Would I rather be spending my time working more to buy stuff or spending a few more hours with my family? In fact, I’m wondering right now, do I really love stuff? I’m starting to hate all the stuff in my house. I’m looking at it and remembering how much it cost and resenting it.
As I thought about how I got to the place I’m at today I realized that the majority of the debt I incurred was the result of businesses I had started that were not financially successful. In the past, I have followed my passions, tripping over myself to get out of the starting gate. I realize now I have done it at the expense of financial stability. Lately I have softened or maybe just calmed down. This softening has allowed me to take a moment to think about the possibilities and consider what is important. I’m now seeing the choices in my life as a gourmet meal to be savored slowly rather than chomping through each one like a starving child. Having more choices with how I spend my money seems a revolutionary thought. – Molly (Nov. 2009)
There’s a few interesting thoughts I had when I recently re-read this post. My memory of the situation was that I was going along with Mike’s plan but really unhappy about it. I believe that this was true in moments but I forgot how making fat payments to the credit card company was a huge stress reliever. The other thing I discovered was that both Mike and I had forgotten that we had been using our white board to track our expenses for years before we cut back. We were having a really hard time not spending more than we were bringing in with our enlarged incomes! This was monumental to see because last year we actually under spent on a much reduced income! This proves my theory that back then it did not matter how much money we made-we were going to overspend. We’ve switched gears now and even with our income going up and down (and down some more) we consistently spend less than we take in.
You may read this post and think “Man I really need to get my finances in better shape but it’s just too hard, not the right time, I don’t know where to start…” We could see we needed to rethink our spending for years but it just seemed impossible until we decided we were going to do it and once we did it our lives changed dramatically. You can do it too.
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