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.