Today is the first time in…hmmm…a long time that I have taken time for an "Artist Date". I was a little nervous about spending time on my own, but then I remembered how much I crave creative time. As I sit at this lively little coffee shop, I am able to freely write without interruption! It feels incredible to be able to write during the day when I'm not exhausted! People are buzzing over their coffee, soaking in the short sun bursts and visiting with friends. I love people watching!
For some of you, reading a blog post about money seems boring, or even annoying, but if you are at all interested this post may inspire you :)
In the fall of 2010 I moved from the big city life of Chicago to the small mountain town life of the West Kootenays. Not only was I homesick for the mountains, but was nearly drowning from debt in the city. Most of this was my fault: I love eating out and working at a restaurant the last thing I wanted to do when I got home was cook for myself. Eating out was just easier. I also had an unconscious need for an "ideal" apartment…not too big, not too small, good neighbourhood etc. I was living beyond my means. Racking up credit card debt and even borrowing money from my parents. Near the end of my time in Chicago I moved from a studio apartment into a one bedroom that was way out of my price range. I had signed the lease thinking I was moving in with my boyfriend, but alas things change so quickly. My parents were able to help me with rent for the few months I stayed until I decided it was about time I moved home. They offered me their basement to help me get back on my feet and I was uber grateful.
When I moved back, I gave up my credit cards. No more spending money I didn't have. A few months later after finding out I was pregnant, I looked into consolidating my debt in order to pay less interest. I looked into the interest I was paying on my student line of credit, and it was fairly low, so I only asked for a personal loan to cover my credit card debt. This was a HUGE step in my financial journey. I knew that having a baby on my own was going to be hard enough without paying almost $900 a month towards my debt. With the consolidation I got my monthly payments down to about $500 over 6 years.
I've always been good at writing out budgets. I've made dozens of them over the years. The problem was I never knew how to really live out my budget. I was always guessing my income, and drawing up a hypothetical budget based on those estimations. Over the past year or so it's become very important to me to become more independent and get a place of my own. My parents are the most supportive and loving people I could ever ask for, and at the end of the day I love them. Lately I have been feeling like I am taking advantage of them, and really want to know what it would be like to be on my own with my son.
In December I was at a play date with a couple other moms, and we were talking about money and all those wonderful things parents talk about. One of the women J mentioned this program called "You Need A Budget", and said that although they had just recently started the budgeting system, it had already had a HUGE impact on their life. I was inspired, and went home to check it out. When I looked into it I saw that it cost $60, which, as someone with not a whole lot of income is kind of a big deal. I was worried about wasting my money on something I wouldn't follow through with. This is where my true colours come out. I guess I didn't really believe I could do it. Instead I made a new years resolution to keep track of my spending. The first 2 weeks of January was great! I had a journal I entered all my receipts into and was feeling pretty proud of myself. Nearing the end of the month I noticed receipts started piling up in my wallet, and once that happened I got overwhelmed and decided to give up. Who was I kidding? This wasn't for me!
Last month I was talking with my lover R about budgeting and how much I wanted to be in a place to live on my own. He was hesitant at first, but offered to tell me his story. It was inspiring to say the least. And guess what program he used to get out of debt? You guessed it! "You Need A Budget"! Now I have 2 people in my life that have had success stories because of this system, so…I went home and bought it. Yep, just like that. The funny thing, was that when I told R he surprised me by saying he had just bought me a gift certificate for the software! What a fabulous gift! YNAB issued me a refund and I was on my way. I was so excited!
The way that YNAB works, you input all the money you have to start with, and you assign every cent a job. This program is designed to work with your real life income and spending. So when I started, it was mid-way through the month. I entered my starting checking account balance and starting plunking in numbers. I was under the impression that budgeting would make me feel like I had less money. I was pleasantly surprised to find that I actually felt like I had MORE money! Somehow I found an extra $500 to put down on my student loan…ON MY FIRST MONTH OF BUDGETING! YNAB has this nifty app for your iPhone or Android so that each time you go to spend something, you can check that category to see if you have money to spend, and then once anything is purchased you just pop it right in your phone. This is great for me. No need to keep receipts anymore!
For those of you who don't know me personally, I work at a coffee shop, 4 days a week. I don't make a lot. I do have extra income once and a while from teaching Musical Theatre and Dance, but for the most part, my income is low. I am well under the poverty line. So being able to spare $500 was a BIG deal, and something I did NOT think was possible.
R recommended reading some material from Dave Ramsey, and what a difference that made. You can have a budget, but if you don't have an action plan to pay off your debt, you won't get very far. Dave Ramsey has 7 Simple Steps:
Step 1: Save $1000 for your Emergency Fund
Step 2: Pay off Debt (This is the hardest and most time consuming step)
Step 3: 3-6 month fund (save 3-6 months worth of income and put it away for safe keeping--you never know when you may be out of work)
Step 4: Invest (I'm working on learning about this)
Step 5: College (Start putting money away for your child(ren)'s education)--I've already started this step
Step 6: Pay off House (buy a house!)
Step 7: GIVE
These 7 steps potentially will get anyone to a place of financial freedom. I'm not looking to be rich, I'm just looking to feel comfortable about where I am financially. No debt, able to do the things I want, but still living frugally. Last week I sat down to crunch some numbers. Its only an estimation, as I don't know how to correctly calculate the amount of interest I pay on my student line of credit, BUT if I continue to find at least $300 extra a month to put towards my debt, I will be completely debt free in 17 months! This is an incredible feeling. Having an action plan is key.
Dave Ramsey has a concept he calls the Debt Snowball. Basically you work to pay off your smallest debt first, making only the minimum payment on your larger debts, and putting any extra money available on the smallest one. Once your smallest debt is paid off, all the money you were putting onto that one will be added onto your next smallest debt, and so on and so forth. It's a fascinating concept, and it actually works! Here's my action plan (Numbers are not exact, but this is my example):
I have 2 debts (which really when you think about it is not nearly as bad as it could be): my Student Line of Credit, and my Personal Loan. Every month I pay $275 on my SLC and $235 on my PL. If I pay an extra $300 every month on my SLC it will be paid off in 11 months instead of the estimated 2-3 years. After my SLC is paid off, that $575 will be added onto my PL making my monthly payment about $810. This is when I will really feel the snowball affect. My PL will then be payed off in just 6 months after that! Holy CRAP! After I am debt free, I am able to start putting that $810 a month away for my 3-6 month fund and a move-out fund. Now, instead of moving out in 3 years and just barely making it by, I'll be able to move out and be financially secure! How awesome is that?
Not only does this stuff now get me excited, but it's something I want to share with everyone and anyone who is seeking financial freedom. In order to truly be successful, you need to be completely ready for this huge change. But if you are…it's one of the best things you can do for yourself!
Thanks so much to J and R for helping me on my journey towards financial freedom! WOO HOO!
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