Have Budget, Will Pay Off Debt

You have your budget, you have your List of Debt, now what?

Total up all the categories you have budgeted, then look at your check stubs for the last month. If your pay varies from period to period, then pick a minimum. When I budgeted, I knew I was getting at least 20 hours per week, so that's what I budgeted with. Anything else I made went straight in to Savings.

Subtract your budgeted expenses from your total monthly income. If you have a positive number, yay! Allocate some of that money in to a 'Fun fund' (with the rest going in to savings) or tuck it all away in savings.

If you have a negative number, it's going to be a bad few months until you figure your shit out. This post is for you.

Let's review categories and make sure we didn't miss any of the basics:
1. Debt Payments
2. Bills
3. Non-Negotiable Spending (pet food, prescriptions, etc)
4. Negotiable Spending
5. Savings

We're going to start from the bottom up.

5. Savings
You'll read it time and again: Always pay yourself first! I agree, but only to a point. I was really good about putting money away each month. Sometimes it was only $10 per pay check, but I did it. When I was in debt I still did it. It got to a point where I had more in my Savings than my checking yet still went further and further in to debt. Why? Because I always paid myself first and had learned to never touch your Savings Account!

That was a great theory, but I was getting late fees on bills, never making progress on paying down my debt, and digging myself in to a deeper hole. I looked at my Savings Account and had 2 months worth of Bills, Non-Negotiable Spending, and Negotiable Spending saved up. I had plenty for the moment and let myself off the hook.

If you do not have a month's worth saved up, you do not have enough in your Savings Account and you do not have the option of not contributing money. Put at least 10% of the total of Bills, Non-Negotiable Spending, and Negotiable Spending in Savings as a minimum each month. Put more if you can. This safety net is integral. For me, a month's worth was only $800. Remember, this is not including Debt Payments.

4. Negotiable Spending
This is where I cut big time. This is where you should look to cut if you don't have a month's worth of money in your Savings. My Negotiable Spending consists of groceries, toiletries, and hobby money.

Obviously hobby money went out the window when I was really broke.

Groceries are the next easiest.

You know what's great about being young? Family. I'm on good terms with my family, but I was much closer to them when I was poor(er). Every evening and weekend that I had free, I would call a family member. I took my Grandfather to church (despite not being a religious person) because he would buy me breakfast. I helped my aunt work around her house because she loved to take me to lunch as a thank you. I called my dad for date nights and he'd cook us dinner.

I felt guilty initially. I felt like I was taking advantage of them. The more I spent time with my family members though, the more I genuinely valued and appreciated the time we spent together. It being good for my wallet was only circumstantial eventually. I now can afford to feed myself and still take time to be with my family. Just do it. It's good for your wallet, your relationships with these people, and your mental health.

What if family isn't an option?

• Learn to cook
• Look in to food banks (if you're in the red each month, you're poor enough)
• Community food assistance
• Low income mobile markets
• Ad match 
• Give up a vice (soda, coffee, cigarettes, pre-packaged junk)
• Have smaller portions
• Always buy store brand

One thing that may be negotiable for some of you that wasn't for me was fuel. I live in a rural area and work in town. At this point I can only cut down on extraneous trips so much before I'm stranded. If you live and work in town, start walking, taking the bus, and bicycling as often as possible. Be sure that any time you do drive somewhere, you make the most of your trip. Hit the grocery store on the way home from work, go to the closer store even if it's dirty and full of homeless people, and commit to staying home on the occasional day off. You do not need to leave the house just because you have the day off. That's your ultimate save money on gas day!

Toiletries are last because it's not like you can just stop buying deodorant and toilet paper.

I found a secret stash of old products under my cabinet. I think most women have this stash. It's our shame stash of products that just didn't work quite how we expected. Well, when you're poor, that's what you use. Use of that stash. I once found an ex's brand new, unopened deodorant under my sink. I smelled like a man for 3 months, but I saved myself $4.

 I used up old bottles of conditioner and shampoo that made my hair crunchy and as a result ended up wearing it in a bun every day for months on end, but I didn't buy shampoo for 2 years, and I went 9 months before buying new conditioner. a few bottles of shampoo and conditioner may not seem like much of a savings, but anyone who has a stash can attest that it was. In that time frame I would've bought some duds and added them to the stash, thereby spending even more money I didn't have. I easily saved myself $50 over the course of those 2 years. If you don't have a secret stash of products, then the only place to cut corners is buying store brand for a while and saving money a few cents at a time.

It does all add up though. It does make a difference in the end.

3. Non-Negotiable Spending
This is simple: Just make sure that what you've classified as non-negotiable really is non-negotiable. Cigarettes are not non-negotiable, no matter how many times you vaguely threaten that without them you'd be in jail. Suck it up.

The only thing to consider is prescriptions. If you're not using a generic, you may want to give your doctor a call and see if the generic is equally appropriate for your situation. I saved $15 a month by switching my prescription, but again, consult with your doctor. Generally a phone call is all that's necessary (and it saves you an office co-pay!)

What to do with a List of Debt

You've got your List of Debt from the last post, right? If not, do that now.

When I sat down to write my List of Debt, it was a little embarrassing. The more I searched my brain, the more I remembered $20 I borrowed from a friend, $400 I never paid back to my dad when he lent me money to buy a new vehicle, the list went on. For me, I organized my debts based on highest interest rate to lowest.

Then I sat down and added up my minimum payment totals. By the time I was getting serious about my debt, I'd found a new job already, so luckily what was $600 per month had more than doubled to a healthy $1500 per month. With money flowing in at a rate I'd never experienced before, I wasn't worried about paying off my debt.

That was Mistake #1.

Mistake #2 was not have a budget.

Budget Guru Lizzy taught me about 0 Sum Budgeting and The Envelope Method, These are more parts of Dave Ramsey's program and she rocks at it.

I did not. I sucked. I still suck at it.

I sat down at the start of each month and spent hours figuring out the perfect budget. I'd then abandon it because it was weird, and hard, and I didn't like it, and it just didn't make sense to me because so many of my bills were paid online, and as someone who had never budgeted before, I had no idea what I actually spent my money on!

I'd look at each category in my budget and labor over numbers.

Groceries. Should be simple enough...but does that include dog food? What about soap and shampoo? Fast food? Soda and coffee? How much should I spend??

When I decided to get serious, I knew the key was finding out how much I already spent. Because I spent a mixture of cash and card though, tracking what I'd spent in previous months was going to suck.

I took the easy way out and the very next month, I made every single purchase on my debit card. It was a totally cashless month for me. I didn't even dig through my purse to find coins to buy soda at the gas station.

If you already pay for everything on card(s), this will be an easy activity and you don't have to waste a month figuring out where the hell your money went.

My month of shame

I sat down and made a category for savings (because I at least always put a few dollars in savings each month), each bill, debt payments, Grocery (which lumped together and food and necessary purchases without stressing me out), gas, fast food, home repair (my weakness and most expensive hobby), and highlighted all necessary spending in yellow. As you can see in the picture above, I had a lot of non-yellow purchases where I could cut back.

Online Banking + Notebook = Sucking Less

The next thing I did was put stars non-negotiable categories. Non-negotiable categories were savings account, debt payment, and feed. Negotiable categories was pretty much everything else. (No picture this time, sorry.)

Categorize your spending, then be honest about your budget categories. I'm a soda junkie. Diet Pepsi and I are best buds. It was unreasonable for me to not budget that and the occasional gas station tacquito purchase in, so I lumped that in with my Food+ category on my budget. I knew that my soda habit was robbing me of my food, but that was somewhere that I personally felt I had a little more wiggle room.

When I first did the 0 Sum budget part of the problem was that I wasn't honest with myself when I made my categories. When I sat down to make my budget I pretended I wouldn't eat fast food, I wouldn't meet friends for coffee, and I would never make any extra driving trips around town.

No wonder I couldn't stick to my budget.

Based on your spending habits and categories, challenge yourself this month to cut back 10% on your negotiable categories. It should be easy because you weren't even trying to keep track of your spending! Make it a challenge. Make it a big deal. Find a buddy to stay accountable. Do whatever it takes.

If you're not as stupid as I was, then you may already have a budget that works for you. That's awesome! Move along.

A Man in Debt is so far a Slave

It may be cheesy to use a quote as a blog post title, but maybe Ralph Waldo Emerson was on to something.

I don't think I would understand how liberating it is to be out of debt* if I hadn't "unexpectedly" found myself $6,000 in the red.

For people with student loans, $6,000 may not seem like much, but I didn't earn this debt by attending a university and getting a degree. Nope. I was just dumb.

Looking at you, online shopping and poor impulse control.

When I was trying to buy a house, I researched how to build my credit. Every article I read told me to get a credit card and use it each month. When I went to speak with a banker about setting up a credit card, she told me that I didn't qualify for their credit cards and could only acquire a secured card. She also told me that it's better to carry a small balance so that it "registers" in the system that I'm actually using the card. She warned that if I paid it off in full before the system tracks the usage, I wasn't going to build my credit. Don't do that. That's incorrect. Always pay it off in full.

Needless to say, I got a "real" credit card, ended up in real debt, then made more bad decisions and ended up in even more debt. In November of 2015 I had officially owned my home one year, had a $600 per month job, was about to leave my fiance, and had a ton of debt.

I knew I had a lot of work ahead of me, and while I loved my job, I had to find something else if I wanted to pay off my debt, eat, and pay my bills. While I was on a weight loss kick, I didn't think foregoing food and utilities was going to solve my problems in the long run.

There are a lot of different strategies for paying off debt. While I was bemoaning my financial situation, my BFF (and by that I mean Best Financial Friend) Lizzy talked to me about the Snowball Method. The Snowball Method basically says that you should make the minimum payment on everything except your smallest debt.** Your smallest debt then gets all your extra money. Once it is paid off, you use all the money that was going to your smallest debt to pay off your next smallest. In this way you gain momentum. You get that quick reward from paying off a small debt, and can use that quick gratification to continue. Lizzy, like we all are, is a fan of instant gratification. The Debt Snowball works for her, it works for lots of people, and especially if all your debt has about the same interest rate, it makes a ton of sense.

But that seemed really dumb to me given that some of my debt had a 29.99% interest rate and some of it had no interest at all.

Then I looked in to the Debt Avalanche. The Debt Avalanche made more sense in my situation because you pay off the debt with the highest interest rate first, then work your way down. 

The first step to getting out of debt, regardless of what method you choose, is by figuring out who you owe, how much, when its due, and the minimum payment (and if you like the Debt Avalanche the interest rate).

Go forth, fellow millennial! Gather up all your bills, sit down, and make that list. Organize them by amount owed, interest rate, due date, alphabetically, whatever makes you happy. Have your List of Debt handy for the next post.

*Currently the only debt I have is my mortgage. Many financial advisers are under the impression that a mortgage is an unavoidable debt to owning a home, so for the time being, we're going to use that definition as well.

**There's actually quite a bit more to Dave Ramsey's financial strategy and I'll go in to that in a later post.

How to be Unbroke

I already addressed what unbroke means, but getting there can be a bit of a lengthy process depending on where you start. For my situation, unbroke was 5 steps.

1. Get one month of expenses saved up
2. Learn to budget
3. Get out of Debt
4. Build a Fuck Off Fund
5. Save for micro-retirements

The next few posts will be boring. They'll be practical and all about managing money, budgeting, and being honest about your financial situation. It isn't going to be fun, but it will get you to the point of having fun.

Today will be a fun post with a fun activity. Right now, grab a notepad (or your phone) and write down what you would do if you didn't have to work. If you were retired all of a sudden, what would you do? Make your list of 15 things and really think about how you would spend your days.

Retirement doesn't have to wait until arthritis and gray hair.

My List:

1. Fish
2. Run
3. Pursue artistic interests
4. Learn new hobbies
5. Read more
6. Cook and bake more
7. Visit friends
8. Spend more time with my family
9. Learn a new instrument
10. Go camping
11. Annual ski trip with family
12. Learn woodworking
13. Home projects
14. Travel
15. Write more

 Luckily for me, my list has lots of things that don't require a ton of money. While traveling, skiing, and a new home projects all can be expensive, most of the list I can do pretty cheaply. This is good news for my micro-retirements. Chances are, hopefully, your list doesn't just contain 15 things that cost thousands of dollar each. If it does, you'd better be willing to postpone your micro-retirements longer than me.

In just under a year, I've gone from having more debt than my annual income to my first micro-retirement. I have 13 weeks off with two vacations planned. The boring, tedious follow up posts will show the strategies that worked for me and what didn't and how to implement them. Trust me, it's worth it.

What Does 'Unbroke' Mean?

I don't think I'll ever retire. There are lots of blogs about retiring early. Some of them are really inspiring! But a lot of them focus on not retiring in the traditional sense, as much as having enough money to pursue hobbies and the priorities in life. This blog isn't really any different, but the target audience is. There are literally hundreds of articles that denounce us as flaky, selfish, entitled job-hoppers. I know that's not all there is to tour story, and that's why this blog is different.

One thing that really shaped the way I think about money is 'The Four Hour Work Week'. I listened to that audio book voraciously. The author, Tim Ferris, talks about how most people who retire young either get bored after a few years and end up going back to work, or they get sick and die. He proposed that "micro-retirements" were the way to live. In theory, one sets up a business that generates enough income with a minimal amount of work in the end, so that one can then "retire" for a few months. Once "retirement" is over, either the individual once again manages the business from a hands-on perspective and expands it, or starts a new business and repeats the cycle.

Let's say that Average Joe works 40 hours per week*. Let's just pretend Average Joe had the luxury of not working until graduating with a bachelors degree at the age of 23.

One of the many reasons someone might take an extra year or two to graduate.

Average Joe finds a job (maybe not his dream job, but let's cut poor Average Joe a break and have him be employed) the summer after graduation. Average Joe then will be more-or-less consistently employed for the next 42 years. If he takes two weeks of vacation each year, he'll have worked 84,000 hours by the time he retires. This assumes he never works overtime or becomes a salaried employee.

84,000 hours is more than 9.5 years!

That's a lot of hours. I worked long before Average Joe. I'll work long after Average Joe. Being unbroke is about not being miserable for 84,000+ hours of life.

To me, being unbroke is about having enough financial freedom to stop and start traditional jobs as I please, or opt out of traditional work entirely. It's about putting my money to work so I can experience things, not just working for the weekend/vacation/retirement. That's how this generation is different, and why we feel differently about money.

*I know for young individuals, hours spent working per week varies greatly. There were times in my life I worked 16 hours each week and times I worked 75+ hours each week, but his name is Average Joe for a reason.