Have you ever dreamed about that magical day when you finally have paid off all your debts and are enjoying a debt free life? It’s like seeing a unicorn at the end of the rainbow. For me being debt free equals a simpler life. It is not easy, and a lot comes into the mix for you to pay off all your debts. The truth is you can actually be debt free and have the financial stability to afford a simpler life.
If you are asking yourselves, But how? Well, during this month (January 2021), I have been sharing my journey toward financial stability. There are no magic tricks or weird formulas here, but just what has worked for me. When it comes to income and expenses, there will always be adjustments, and we would need to be flexible but still focused on the end goal. Following the steps below have really helped me simplifying the whole process and make adjustments as needed:
- Understand spending habits
- Get financial advise
- Create a budget, taking into consideration mindful expenses
- Pay debts in a shorter time using the extra amount of money left in your pocket after paying all recurrent monthly bills, setting money aside for savings, emergency funds, etc.
I talked about the budgeting bubbles and mentioned monthly bills, recurrent expenses, and cash during my last post. In this post, I will share those three items mentioned before, what we have already paid off, and the reminding debts we are still working on paying off in a shorter period. The monthly bills, recurrent monthly expenses, and cash are different categories. Let’s summarize them:
Recurrent Monthly Expenses – Services paid monthly (e.g., daycare, Internet, TV streaming, utilities, etc.). To pay off our debts, we made adjustments to our recurrent monthly expenses. Making these changes allowed us to have approximately $470 extra monthly to put toward our debts.
Cash – These are daily expenses we used to pay for with our credit cards (FOOD), which increased our bills and drained our money. As mentioned in my previous posts, food was the item draining our money. The budgeting strategy was to have a weekly cash amount of $250, which we would use to pay for grocery, dining in (pre-COVID era), and take-outs. Anything related to food will come out from that cash amount. If any cash was left from the previous week, we would put that toward the next week’s amount. This was a big one for us. We have changed our eating habits so much that we only expend less than $120 in food weekly. Just with that, we have approximately $520 extra monthly to put toward our debts.
Monthly Bills – These are our debts and the ones focused on paying off in a shorter period (e.g., mortgages, auto payment, trailer payment, student loans, etc.). We started with accelerating our debts to pay off a year and a half ago. In summary, from our three significant debts, two have already been paid off (truck and student loans). The third (travel trailer) will be paid off by this September.
A lot is coming into play for having a simpler life, regardless of your definition of a simpler life. To be honest, it not easy. One of the more significant factors is money. We all need money for living. At the same time, we all want to work for a living and not the other way around. For me, that’s a simpler life, work for what I want and enjoy what I worked for. I hope you enjoy this month series and my journey toward financial stability.
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