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Sitting on the floor my freshman year eating chips and salsa with my best friend is a memory I’m quite fond of. It’s not something I want to feel forced do to save money now that I’m out of college. However, sometimes being a responsible adult means making tough choices. Luckily, chips and salsa are not something I HAVE to eat these days, they’re something I enjoy eating.
When I was helping a friend of mine form a strategy for paying off student loans recently, they asked me how I could make so much progress with my personal finances. I told them that I made sacrifices. And that I said “no” to invitations, often. In reality, it was much more complicated than that. So how did I make progress in my personal finance journey? With these 4 things I do to stay out of debt:
I Started Saying No To Things I Didn’t Want To Do
I’ve worked hard for my money and I don’t want to spend it on something I’m not comfortable with. With that I’ve established a certain threshold for what I feel comfortable spending on certain things.
A few examples:
- Dinner – if I’m not cooking dinner myself, which I prefer, I’d rather have a meal that’s less than $10, quick and somewhere I don’t need to add 20% in the form of a tip.
- Movies – I go to a lower-cost theater where tickets are $6.5 max (matinees are $4.5) instead of the slightly closer movie theater that’s $14 for the standard showing and $20 for the Dolby Digital. INSANITY!
- Alcohol – I don’t often drink at restaurants. I prefer to pre-drink and go to cheaper bars where drinks are $5 instead of $12.
I Created And Stuck To A Budget
Budgets suck, you heard it here first! But that doesn’t mean they’re something you can do without. If you’re serious about getting on the right foot financially, you MUST, and I repeat MUST do the following:
- Understand how much you make
- Understand how much you spend
- Analyze your spending habits
- Cut back and establish your budget
- STICK WITH IT
Personal Capital and Mint are both great options for tracking expenses and managing your budget. Check them out they’re 100% free!
I Increased My Salary
I worked my a$$ off day after day, week after week, trying to get ahead at work. With every big success, I’ve asked for a raise and often I’ve gotten one. Increasing your salary isn’t rocket science. It’s about building a case for why your productivity is worth more than what you’re being paid.
Once you receive the pay raise, you can’t just blow the extra cash. You need to take another look at your budget and adjust things. Maybe there are areas that you’ve been skimping on, it’s ok to add a little there. What you don’t want to do is inflate your life to adjust to your new salary with a more expensive car, home or clothing.
Don’t be a victim lifestyle inflation, it’ll take you years to dig out of it.
I Decreased My Expenses
Earning more money is a wonderful thing, it really is. However, the power of earning more money is far less than reducing your expenses. A dollar earned is worth $0.75, whereas a dollar reduced in expenses is worth $1. Focus on reducing large expenses like housing and transportation. Then cut out the remaining waste from any expense that doesn’t bring your life value or is frivolous. Eventually you want to get to a point where your income (W2 income & passive income) will cover your recurring expenses. That’s where your sweet spot for increase your investments and net worth is.
I Automated My Money
It’s easy to setup automated bill pay these days. This is an simple way to ensure you never miss a payment. Rent, utilities, credit cards, car payments. You name it, you can automate it.
If you travel often or you’re on the go frequently (hey millennials!), the water bill might not be top of mind and you could miss it. Things happen sometimes, but miss enough bills and it starts to kick you in you’re a$$. You don’t want to destroy your credit because of personal oversight.
If you’re funding a 401K through your work sponsored plan, you’re already on the right track. Now take it a step further – commit to investing a certain amount, even if it’s small. Setting a recurring payment into your brokerage account is an easy “set it and forget it” method. Other options include using automated investing apps like Acorns or Digit that invest your spare change from your banking accounts.
Make sure you’re taking advantage of your tax-advantage accounts and invest wisely in a way that supports your financial goals and increase your contributions over time.
Automating my finances allows me to focus on sticking to my budget, making better choices and staying strong to my financial values.
What methods do you use to stick to your financial plan?
-My Strategic Dollar