Budgeting,  Finances,  Life,  Optimization

My finances are a mess! The exact tools and plan to get you back on track and debt free!

Disaster often strikes when you least expect it, and it can hit you like a ton of bricks. Losing a job, divorce, death of a family member, poor health, foreclosure, bankruptcy, vehicle repossession. These are all just a few examples of how life can change the direction of our lives in an instant. Life’s circumstances are unpredictable, and we sometimes end up in a position we have no desire to be in. Don’t lose hope, don’t quit, keep fighting!

Have you ever woken up and thought to yourself, “what just happened!” Or maybe, “was that just a bad dream”? This is what happened to me twelve years ago. I had $54,000 worth of debt staring me square in the face. My home had just foreclosed, and I owned a soon to be repossessed Chevy Trailblazer with a $500 monthly payment. You feel ashamed, helpless, and you’re traveling down a road you don’t want to be on. You are not alone!

“Life is a marathon, not a sprint”

Fortunately, time is on your side and you don’t need to panic. You didn’t get into this mess overnight, so don’t expect to get out of it overnight. That doesn’t mean that you are in this position because of your own doing. You may be in this situation because of your own decisions, or possibly because of someone else’s. Or maybe it was a combination of both. The end result is, it doesn’t matter. The time has come to get out of the mess. From now on, there is no more feeling sorry for yourself. Set your goals, and get after them.

“If you aim at nothing, you’ll hit it every time” – Zig Ziglar

I was able to make changes in my own life to completely turn my situation around. I promise you, if I was able to do it, you can too! You may have debt that is twice, or triple what I had. But that doesn’t matter. This same plan will work regardless of your get out of debt number. I am proof in the pudding that it works!

Tell someone

Find one or more people that you can share your plan with. Finding people that are going to be supportive of you is of paramount importance. This strategy is all about accountability. If you’re tackling this endeavor all by yourself, the chances of you giving up increase dramatically. You need positive cheerleaders that are going to be on your side and help you accomplish your goal. This is your life we’re talking about here! You will experience highs and lows throughout the process of trying to get your life back in order. It is during these low times that you will need people in your life to keep you going.

Start a budget

The first order of business is to start a budget. If you don’t know where every dollar is going each month, there is a problem.

“Give every dollar a name when creating a budget” – Dave Ramsey

Imagine setting off on a journey with your family cross country with no fuel gauge. Not knowing when the car would run out of gas would put your family in a potentially dangerous situation. Most people would never even consider a trip like this. Not having a budget in place is actually very similar. Don’t blindly spend money throughout the month hoping your expenses don’t exceed your income. Don’t allow you, or your family to run out of gas.

EveryDollar budgeting app

I highly recommend using the EveryDollar app for your budgeting needs. The app was developed by Dave Ramsey’s company and is arguably the best budgeting app on the market. The best part about it is it’s free! How can you beat having your budget in your pocket at all times!

The app allows you to set up your own personal categories for your budget. You simply enter your income and track your expenses as you pay bills and make purchases. There is a paid version that allows you to drag and drop to match transactions to your budget categories. However, manually inputting your transactions into the app is a cinch. Every dollar of your budget matters and the free version will suit your needs just fine. This is the app I personally use every day for my own finances. I encourage you to click on the provided link to get signed up today and get your budget rolling.

“If you’re going to start your plan and achieve success, there needs to be a finish line in sight”

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Start an emergency fund

You need an emergency fund in the event that something unexpected happens. Dave Ramsey’s book, “The Total Money Makeover“, is the book that got me going down the right path. He teaches that you should have a $1000 emergency fund in place before you do anything else. Some might find that $500 is more attainable and comfortable enough for your situation. Having this cushion is super important to have before you begin your debt free journey. 

Get out of debt!

Having a plan to get out of debt is just as important as establishing a budget. When I first began the journey to pay off my $54,000 worth of debt, I had no vision. Your chances of success are far greater if you can see a light at the end of the tunnel. And it is even greater if you can see a finish line. Having an exact get out of debt date was the biggest game-changer for me. You need a tool that can assist you in getting out of debt. I found something that crunched all the numbers for me. It factored in all my debts, interest rates, and extra payments and spit out an exact month and year. The finish line was in sight! I had a plan in place! The game was on!

Undebt.it

Using the website “Undebt.it” gives you the vehicle you need to see the finish line. I have tried several platforms for getting out of debt, and this is by far my favorite. You will need to create an account to get started. If you happen to be a YNAB user, you can sync everything right into the program. If you use EveryDollar or any other budgeting software is still a very simple process. You will enter all of your debts and interest rates into the program. It doesn’t matter how many you have. Whether you have one, or five or more, just list them all. The beauty is that once you have completed this process, it shows you the exact month and year you will get out of debt. 

Although this particular article is not an in depth analysis of how to use undebt.it. It is worth mentioning three of the features I find particularly awesome! 

Extra “snowflake” payments

Using this program ultimately becomes a game. If you’re a competitor like me, I can’t wait to watch that number drop! Any time you make extra money and can make an additional payment, you are able to add this into the program and it recalculates your get out of debt date. Seeing this date move closer to the present is motivation in itself! The program calls these “snowflakes”, and you can add them in as often as you would like. The initial date given once you enter in all your information should be looked at as a temporary date. How much can you move that needle to get out of debt sooner?

Spreadsheet

You may also download all of your information from the program into an excel spreadsheet. For spreadsheet lovers, this is a real bonus. I personally use google sheets. When I click the button to download into excel, it automatically open up into google sheets since I have a chromebook. So whether you use excel or google sheets, Undebit.it will work for you. This feature is not a necessary step but it does allow for even more spreadsheet fun!

Debt payoff methods

Another nice feature is that you get to choose your method for getting out of debt. If you are a Dave Ramsey follower like me, I chose the snowball method. Using this method, you pay off debts smallest to largest. Once you pay off your smallest debt, it automatically takes that minimum payment and adds it to your next smallest debt’s minimum payment. This process continues and the snowball just keeps getting bigger and bigger.  

Other methods include the debt avalanche (highest interest rate first), hybrid, custom, highest monthly payment, highest credit utilization, or highest monthly interest paid. You can compare all the methods and see which one will pay all the debts off the fastest.

Why I chose the snowball method

Some people will argue that it makes more mathematical sense to start with the highest interest rate first (avalanche method). This is actually true. However, there are a few things to consider.

To win the debt elimination game, you must stay the course without falling off. Paying off your smallest debt first allows you to “win” right away. My smallest debt was a balance of around $300. I was able to pay this off in a short amount of time and it felt so good! It was time to move onto the next debt!

Using the avalanche method, your highest interest rate card is often your largest debt. Two common examples would be your car, or maybe your student loan. These can be absolutely huge amounts of debt! Imagine not paying off your first debt for years! For motivated individuals, this may be possible. But for some, it will be hard to stay motivated. Ultimately, the goal is to pay off all of your debt. By saving money and attacking your highest debts first, it might just knock you off track! Start with small wins, stay motivated, and let that snowball grow and grow!

Sell your stuff

One person’s junk is another man’s treasure. Gather together all of your belongings that you feel you can live without. If you haven’t used an item in a year, consider selling it. Sites like Offerup.com and Facebook Marketplace make selling your stuff an easy task. Having a Saturday garage sale can also earn quick money. The exciting part is getting to enter an additional snowflake into Undebt.it and shortening your debt freedom date!

Side hustle your way to wealth

I currently have six different side hustles I use to supplement my teaching salary as a high school physical education teacher. In total, I make $14,000 extra per year side hustling. All but one of my side hustles takes place right at my school. These are my current side hustles: 

  • Summer school teacher
  • Prep period teacher
  • After school detention teacher
  • Head of department
  • Locker room supervision

On weekends, I teach basketball lessons to the youth in my area. I am a former college basketball player and high varsity basketball coach. Because of my experiences, this  is a natural side hustle opportunity for me to pursue. Consider thinking of talents that you have that can earn you extra income. Teaching tennis lessons, yoga instructing, tutoring, driving Uber or Lyft. These are just a few examples of side hustle possibilities. Make a list of skills you possess and brainstorm the possible side hustles that might bring you extra income.

If you are looking for side hustle ideas I recommend checking out Side Hustle Nation. This site will give you a multitude of side hustling ideas you might consider pursuing. The site also offers a podcast called, “The Side Hustle Show” if you enjoy listening to podcasts.

Cutting expenses

I view getting out of debt as having two parts. One is to raise your income, and the other is to cut your expenses to the bone. While raising your income has no ceiling, lowering your expenses does. However, there are a variety of things you can do to tackle this. I’ll start with the biggest potential savings for you. 

Is your vehicle holding you back?

Everything should be on the table when you are trying to dig yourself out of a hole. If your vehicle is holding you back with a hefty payment being dragged behind it you may want to sell it. If you have equity in your vehicle you are sitting in a good position. Consider selling it and picking up a beater car that you can pay for in cash. You may not be getting around in style, but you’ve instantly put yourself in a much better financial position. 

My Chevy Trailblazer I previously mentioned carried around a $500 car payment. It was worth $13,000, and I owed $26,000. This is what is known as being upside down. Unfortunately for me, my problem was a bit more complicated.

Repossession

I decided a drastic measure was necessary to help spearhead my charge to becoming debt free. I contacted the bank to have it repossessed. They allowed me to set up a payment arrangement with them.  Dropping off my Trailblazer at the bank and putting the keys in the drop box wasn’t exactly the highlight of my life. Fortunately, my brother owned a Nissan Stanza he wasn’t using and gave it to me so that I had transportation. But I was able to responsibly payback the difference over a 2-year period and the repossession was a thing of the past. Keep in mind that your credit score will take a hit if you go the repossession route. 

Avoiding repossession when upside down

Another option is to sell your car and avoid having your credit impacted. If you are upside down, you will have to get a loan to pay the difference. A local credit union may be your best bet when trying to get a loan to cover the difference. 

In both instances of being upside down on your vehicle, you will need to find new transportation. Some people are fortunate enough to have access to public transportation. If this is not an option, you will need to save money until you are able to purchase an affordable car. Remember that this does not have to be your dream car. This is just your point A to point B car. When the mess is over, then you can pursue something a bit more luxurious. 

Other expenses to consider cutting back

This is a list of specific things I have done to cut back my expenses:

  • DirecTv to YouTube TV – My DirecTv bill was $141 per month. By moving to YouTube TV at $40 per month, I was able to cut my bill by a whopping 28%. I actually like YouTube TV better as I can view it on my laptop and phone with much more ease. YouTube TV allows you to watch “live” T.V. with approximately 60 channels. News alert: I don’t miss the hundreds of channels that I no longer have! Other streaming services that offer “live” T.V. are Sling, Directvnow, and Hulu.
  • Electric bill – I have a hot tub that has really been robbing my budget the past three years. After turning off the hot tub, I ended saving over $100 a month just from this one change. I had always thought I’ll just keep it on at all times and let it run 24/7. Although my kids and I like using it, I realized we weren’t using it very much. And it definitely isn’t worth over $1200 a year! You may not have a hot tub, but how else can you make cutbacks in this area?
  • Car insurance – I called my insurance company and raised my deductible to $1000 from $500. Make sure all drivers on the policy are getting the “good driver” discount if this applies to you. Do you have a student? Good grades will also qualify you for discounted insurance. 
  • Internet – Make sure you shop around. Living in a rural area doesn’t leave me many options. However, I was able to lower my plan still having adequate speed and storage. It’s definitely worth a phone call!
  • Cell phone – Just last month I found out that I could move to an unlimited data plan with Verizon and save about fifty cents per month! While this is not a huge savings, it eliminates the worry of exceeding your data limits. Last year I paid off my phone in full rather than making payments which brought it down another $40 per month. I had received a small sum of money of around $450. Rather than piddle the money away, I applied it towards my phone. I highly recommend checking out Googlefi and Republic Wireless as options you may want to consider. They are both two of the cheapest options on the market today. 
  • Haircuts – Okay, I realize this is much easier for the guys. But this is a huge savings. I used to pay $25 per haircut. Eleven years ago I realized I can do the exact same thing my hairstylist does using clippers! I have to say, I am a self-proclaimed expert! My savings equals $300 per year. Over the last eleven years, that’s $3300. Had I invested that in a Roth IRA at 7% from 2007 to present, my $3300 contribution would be worth $5067. I didn’t like my hairstylist that much!
  • Cut down the food bill – This is an area most people can do better with. I have found limiting my trips to the store helps immensely. If you haven’t been budgeting, you will find that having a set amount budgeted will help save you money. Stop eating out! It’s as simple as that. Eating at home will save you incredible amounts of money. 

Win the game!

You can do this! The weight that will be lifted off your shoulders will be so worth it! The sacrifices you make now, will make your future bright. Without action, there is no future, and there is no hope. Being debt free will be one of the best feelings of your life!

 

 

 

 

 

 

 

 

 

 

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