What...Now How

In an earlier post I detailed my 2009 Financial Goals. Now I would like to discuss how I plan on accomplishing these goals.

Let me preface this by mentioning my very average yearly salary from my full-time job; which is my way of saying that debt-reduction can be possible for anyone if you make it your priority...above average incomes are not required. Many of the steps were gleaned from advice given in Dave Ramsey's book "Total Money Makeover" and from a variety of frugal/debt reduction blogs I have visited over the past year. I highly recommend www.moneysavingmom.com for information on all aspects of living frugally!

Below are changes I have made regarding my income and spending habits in addition to ending credit card usage.

Step #1- Part-time J-O-B:

Several months ago I was offered an opportunity to make a few extra bucks and help out with a friend's cleaning company. Because I knew I could use the extra money I said "Sure!". Now 4 months later I average about 10 hours a week. It happens to work out that this "vehicle" to debt reduction was in place before I really even began my journey. This has been such a benefit to me because after all the monthly bills are said and done, I don't have a lot of extra money left over.

Step #2- Temporarily stop 401K Contributions:

This is something Dave Ramsey suggests. I have invested 6% for the past 2 years and I plan on being debt-free except for my mortgage in about 18 months. Temporarily stopping the 6% contribution allows me to pay off my debt considerably faster and then begin investing again in 12-18 months with at least 15%. If my debt payoff plan takes longer than initially determined, I will begin investing in 401K in 18 months no matter what.

Step #3 Back to Basics:

I do not necessarily consider this a debt-reduction technique as I do a debt-avoidance technique. By living fairly simply I will be able to steer off any future debt and stick to my monthly budget. Basics: No cable television, 200 anytime minute cell phone plan (I'm not a talker:), pack lunch everyday, limit going out to eat to twice weekly, Brita water pitcher, lower thermostat when I'm not at home, combine trips in my car, envelope budget system.

Step #4 Absolutely no sense of Entitlement:

Debt is debt is debt. In the past I have told myself "I work hard for my money, I deserve..." I believe this is the way most people find debt justifiable. It has been absolutely crucial for me to change my mindset when it comes to feeling a sense of entitlement. There is nothing I need or "deserve" so much that I am willing to go into debt for it.

Step #5 Weekly budgets:

As I mentioned in step #3, I have initiated a budget for my weekly expenditures using the envelope system. Some details- $20/week for gas, $25/week for groceries, $40/week for going out to eat/entertainment (for me these are inter-changeable). I also have a monthly budget for household bills, hair cuts, oil changes, etc. but thus far the weekly budget has really helped me gain back control of my money.

Step #6 Temporarily stop Vacationing:

As I considered ways to save I began putting together a list of activities that can sap a good month's worth of debt reduction. Vacations are one of these things; mainly because they are not a basic necessity and I've decided PTO time can be better spent investing in my house by making inexpensive improvements. I will be fine without taking a vacation for the next 12-18 months. I took a 5-week trip to Europe 4 years ago, if I feel like I deserve a vacation I will simply look at my photo album from the trip and reminisce!

Step #7 Be Unwilling to pay for Convenience:

I want to note that this is much easier for me to do because I am a one-woman show and have no direct responsibility for others. The following are some conveniences I am no longer interested in paying for: car wash, frozen prepared meals (trying my best to switch to homemade), coffee-shop coffee, workday lunches, bottled water, non-clearance clothing and the list goes on and on and on...

I have by no means done anything drastic to alter my habits. Save for the part-time job, it has really been a combination of small changes that have made and will continue to make the biggest impact. Another significant change is simply an increased awareness of where my money is going...and ensuring that the "disappearing act" stops! As I stated in my first post, a positive attitude is the only way to approach debt-reduction and quite possibly the best change I will make on my journey to financial freedom.

Keep on keeping on!