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My top 10 tips for paying off debt

As my journey to debt freedom draws to an end, I’d like to share the 10 things that had the biggest impact to reducing my debt. I haven’t included ‘making a budget’ as I think that is a given!

I’ve separated these points into 2 categories:

Action and Attitude

I believe the Actions you take and the Attitude you have while paying off debt are intrinsically linked. You can’t take action without the right attitude.

5 ACTIONS that helped me pay off debt

Saying No

Learning to say no – to people, to purchases and to yourself plays a huge role in winning the war on debt. I found declining invites from friends for nights out, drinks, weekends away etc to be really tough. Tough, but an essential action to take if you want to set yourself free from debt.

While I didn’t tell friends and family how much debt I was in when I started the journey, I did make it clear that I was making a serious effort to tighten purse strings to pay back debt, and that meant I had to cut some fun things out for awhile. Quite awhile. I learnt to say –  ‘I’m sorry, but I really can’t afford to do ABCXWZ this weekend, I’ve got a tough budget to stick to this week’

Most people understand, and if they don’t, well too bad. Certainly don’t sacrifice your budget for someone who doesn’t respect your goals. This doesn’t mean you can never go out and have fun while paying off debt – it just means prioritise the activities that mean something to you and choose those over spending cash on random nights out every Friday.

 

Record every single purchase you make for at least a month.

I actually recorded every purchase I made for a year. It became a habit and it was the key to becoming completely aware of everything I spent. I mean, if I spent  50cents on a packet of gum, I’d record it. Yep, that probably seems excessive – and sometimes it did get to me. But it helped by revealing patterns and behaviours in my spending and where I could ‘cut the junk’.

When I was fully aware of the things that burnt a whole in my pocket, I continued recording everything I spent as a habit to keep me on track. Debt and paying it off HAS to be at the front of your mind EVERY TIME you make a purchase (big or small) if you plan to win the war.

I just jotted down the purchase and the cost on the note section of my phone. Even the simple action of taking out my phone to add to my purchase list was an opportunity to check myself.  I had a moment to think about what I was about to spend and scan the list of the items already purchased that day / week.

So give it a go – 1 month. Record everything. You will be surprised (and potentially alarmed! 😉 ) at where your money is going.

Implement spend free days

I don’t know who originally coined the term Spend Free days in the world of PF blogging, but it really is a genius concept. Many bloggers out there set themselves spend free days and weeks (and months!)

I soon jumped on board to employ this effective little tactic in my own Get Debt Free strategy. I would regularly set myself 2 spend free days per week. These are days where you spend nothing, except on essential items – ie, a train ticket. Ok, so what stops you buying something you really want on non spend day? Well I saw the whole point of spend free days to curb mindless consumerism on the junk items.  You know, the stuff you buy without even thinking *hand goes to wallet, money comes out, I’m $10 poorer without even batting an eye*….. magazines, coffee, lunch takeout, a glass of wine after work, that kind of stuff. The point of my spend free days was to put a stop to spending without thinking. It worked.

 

Cut the junk STRAIGHT AWAY  

We spend money on so much SHIT. Seriously.  Cut the junk from your spending. Like, straight away. If you are in debt and looking to get debt free, frivolous expenses must go immediately. These purchases add nothing of real value to your life except a fleeting moment of satisfaction or more likely, distraction. Then it is all over red rover and you’ve spent 5 bucks on a magazine to read about the latest Kimye scandal.

Make your budget REALISTIC – it is ok to ease into it.

Yep, I know the enthusiasm…. you are all ready to pay off your debt and you want to go in, repayment guns a blazin’ and smash it out ASAP.

This type of excitement is exactly what you need to get the momentum going. But one of the side effects to this excited attitude is a rather optimistic approach to setting your budget. Which is turn can lead to disappointment, frustration and wanting to give it all up, a few months in when all the excitement has worn off.

I had a huge budget fail when I first set about paying off my debt in March 2013. I drew up a budget which showed I would be out of debt in October 2013. The budget was unrealistic. It didn’t account for EVERYTHING and it left me with very little spending money.  I knew for awhile it wasn’t working but I kept at it, and kept beating myself up when I went over budget (surprise, surprise) each month. Then I hit Debt Fatigue in a big way – I was WAY off my (unrealistic) goal and it would be another 8 months of debt repayment past October. Frustrated, disappointed and sick of debt – I stopped blogging for awhile, although I continued to make smaller repayments. Then I regrouped – I got my shit together with a realistic budget that included everything and set about attacking debt again with my new debt free date.

Set yourself up for success with a realistic budget. A good budget is not rigid, it’s flexible and fluid and allows you to adapt when you need too. When you look at your expenses, cut the junk first – without even considering keeping those items. Then, slowly, you can whittle down your expenses.  You will be surprised what you are happy to go without and places your budget can be cut further once you get into a momentum.

5 ATTITUDES that helped my pay off debt

Never EVER EVER give up

We all know the saying and it’s cliché for a reason.

If you don’t give up making repayments, you will be debt free. At some point. One Day. Maybe not when you thought – refer to my Budget Fail – but if you don’t stop making those payments, the numbers will continue to tick down. We all have shit days when paying off debt. The days we want to buy everything in sight, where we are angry, frustrated and generally just pissed off at the hold debt has on our lives. Don’t let any of those reasons make you give up. Giving up is not an option. Take another look at the budget, cut yourself some slack for a week or buy a nice little purchase for yourself. Then get back on the horse and keep going.

Own your OWN debt

You are in debt because of you. If you acknowledge you are in debt but refuse to blame yourself, well, you are going to get nowhere fast. The most important thing when making a financial life change is the long term change of bad financial habits or behaviours. If you are looking around at everyone else to blame for your situation, you will never change the habits that got you there in the first place.

Continue to give and pay your own way

Ok, so this is a dual tip – action and attitude. People with stingy attitudes towards giving will NEVER BE SATISFIED with what they have. Getting debt free isn’t about being stingy towards others. I have continued to donate to charities and causes I support. There will always be others worse off than you. Sure, debt sucks but I don’t struggle to put food on the table or pay my rent. Others aren’t so fortunate. Never think that your situation is the worst. Wherever there is a lack, there is an opportunity to give – so have a giving attitude. Also, don’t skip out on a round of drinks with your mates if you have chosen to go out for the night. If you can’t afford it, don’t go.

Don’t think you are alone

If your attitude is Woe Is Me, No One Else In The World Understands This Debt Thing, then take 2 seconds to type I’m In Debt into google and you will see no, you certainly are NOT alone. There are so many stories, so much inspiration, so much advice out there around getting out of debt, you should never feel alone. Ok, so maybe you are the only one in your family or circle of friends in debt, but investigate the resources available to you – and the support! The PF blogging world has been a huge inspiration to me.

And my last piece of advice?

Be passionate

A passionate attitude toward doing all you can to get out of debt, will see you realise that debt free date sooner than you thought possible. So get started today – and change your life! Debt free is set free.

So, there are my top 10 tips – I’d love to hear they number 1 thing that has helped you on your journey to debt freedom!

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May update – glance at savings and debt

Howdy!

Here are the figures for how the month of May shaped up:

Debt

Credit card 1 – $0.00

Credit card 2 – $0.00

Personal loan: $ 1,273.01

Savings

$750.00

Buffer fund

$0.00- buffer fund hasn’t recovered since my visit to the dentist!

Total starting debt in March 2013 – $14, 774.12

Total debt paid to date – $13,501.11

Total debt remaining: $1,273.01

 

Later alligators!

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A slow shopping spree

I SO miss buying clothes. Debt smashing is rewarding and all, but damn, sometimes I just want to bust out and buy a new wardrobe.

Right before I left for my South American backpacking adventure I spent quite a lot of cash on the items I needed for the trip – backpack, locks, headlamp etc. I also spent quite a bit on clothes.

When you have a small amount of clothes on high rotation for months and months, you want to start the trip with clothes you aren’t already sick of wearing. I am pretty much sick of my entire wardrobe at the moment. Unnecessary clothing purchases were the first thing to go when I got serious about paying off debt and saving.

In preparation for my trip to Central America, I have decided to approach my clothing purchases in a different way. I have prepared a list of the items I want to take and plan to purchase these throughout the year and pop them in a box to stay all nice and new for my trip!

Sure, I could put the money aside instead but I think this approach will give me the little shopping hit I need occasionally, and it’s just a bit of a different way to prepare 🙂

Here is my list:

  • 3 x pair of shorts
  • 3 x t-shirts
  • 3 x singlets
  • 2 x casual summer dresses
  • 2 x hoodies
  • 2 x leggings
  • 1 x pair of jeans
  • 1 x pair of hiking pants
  • 1 x rain jacket
  • 1 x cardigan
  • 1 x jacket

I will be taking other things (underwear etc!) but these are the things I’d like to have new 🙂

Speaking of holidays, I’m off to New Zealand tonight! Just for a week 🙂  but I can’t wait! I won’t be posting my normal weekly spend report on Sunday but I’ll check in after my trip and let you know how I went on my holiday spending – holiday budget vs actual spend.

Ciao!

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Week 43 – Spend and Debt update

Week 43 report reporting on my expenses that come from my allocated ‘spending allowance’ per week. All other regular and fixed expenses are outlined in my budget here and automatically debited etc. Grocery spend – although variable, is outlined in my fortnightly budget too.

Spending funds allocated for Week 43 – $35.55 – yep, super duper small allowance this week! I am heading to New Zealand next week (YAY!) so really wanted to channel as much cash as possible into my spending for NZ!

Actual funds spent for Week 42 – $24.85. Under budget! Yay!

Monday: No spend.

Tuesday: No spend

Wednesday: No spend

Thursday: $7.45 lunch takeaway

Friday: $4.95 coffee, $5.95 lunch, $1.00 movie rental

Saturday: $2.00 movie rental

Sunday: $3.50 coffee

I passed my 2 spend free days per week challenge, actually had 3 days!!

Starting debt at March 2013: $14,774.12

Current Debt: $5,850.05

Debt paid: $8,924.07 divided by 43 weeks = $207. 53  debt repayment per week on average

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Budget makeover : 2011 vs 2014

This week I found an old notebook with some previous budgeting records. I have always tracked my money on the fixed expense side of things, and it was quite interesting to see this old record from August 2011:

Circumstances in 2011 – I was single and living alone in an apartment I absolutely loved, right on the beach – the cost of rent not allowing me to save a lot. I am big on fitness and health and I recall at this time in my life I was doing several paid classes (not included in a gym membership) of boxing per week plus personal training. I was also trying to save for my South American backpacking adventure. My phone, laptop and whitegoods were all on rental contracts – which, in my mind, are debt.

Fortnightly budget 2011

My wage was $1677.00 per fortnight (actually $50 more per fortnight than I earn now)

  • $44.00 laptop rental ($84 per month)
  • $185.00 payment to credit cards
  • $600.00 rental payment ($1200 per month)
  • $50.00 phone (I was on a contract that went came to between $90 – $100 per month)
  • $12.50 internet (pre paid, $25.00 per month)
  • $75.00 personal loan – I was only making minimum repayments ($130.00 per month, at that stage my loan was smaller)
  • $32.00 boxing classes ($64.00 per month)
  • $40.00 personal training ($80.00 per month)
  • $25.00 whitegood rental ($50.00 per month)
  • $100.00 travel ($200.00 per month)

So that left me with $513.50 which is $256.7 per week for groceries, spending money and savings. I know I spent around $100 – $120 on groceries per week when I lived alone. So that would be about 136.00 for savings and spending. No wonder I found it difficult to save money during this time, although I constantly did feel like I was saving, but not large amounts.

I didn’t include electricity, or any buffer.

Circumstances for 2014

I live with my boyfriend, closer to my workplace (less travel) and split costs of rent, groceries and electricity. We have a small older apartment, which has been very very hot during the summer (no aircon) but I can see already from the summary below that our decision to rent a modest place has really impacted savings.

Fortnightly budget 2014

My wage is $1620.00 per fortnight

  • Rent: $295.00 ($590.00 per month – $610.00 less than 2011)
  • Travel: $45.00 ($90 per month – $110.00 less than 2011)
  • Phone: $15.00 prepaid  ($30 per month – $60.00 less than 2011 and no contract)
  • Internet: $15.00 – On an internet plan for $30.00 per month – $5.00 more than 2011)
  • Electricity: $20.00 – I had no inclusion of electricity in 2011 budget.
  • Gym: $47.80 ($96.20 less than fitness costs 2011)
  • Groceries: $250.00 ($5.00 more than 2011 per week – however, I’ve actually got this as an allowance in my budget now)
  • Tithe / donation: $20.00 (didn’t have giving allocation in 2011 budget)
  • Loan repayment: $160.00 – ($190.00 more than 2011. My minimum is higher at $173.00 but I am making addition payment of $73.50 per fortnight towards the loan)
  • Buffer: $50.00 (didn’t have a buffer allocation in 2011 budget)
  • Spending: $230.00 – Most weeks will leave me with $115.00 as spending / entertainment money.
  • Savings: $490.00 from March 2014 – my 2011 savings were variable based on what I had left over, however I have built the amount of $490.00 into my budget for 2014. The start of this year has been variable due to NZ trip and 2 interstate trips.

So 2 main things have changed.

I have rid myself of most contracts and 2 credit cards and I include everything in my budget now, rather than just seeing what I have left to pay the variable amounts (spending, savings and groceries)

So it was interesting – and encouraging – to come across an old budget and see I have made progress. Slow progress, but I’ll take it as a win!

 

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January 2014 – At a glance debt and savings stats

During 2014, I will be posting a monthly ‘at a glance’ update on my Debt and Savings balances.

At the end of January, things were looking like this:

Debt

Credit card 1 – $0.00

Credit card 2 – $0.00

Personal loan: $5925.05

Savings

$140.54

Things are going to be fairly quiet and unexciting around the savings corner until March!

Later alligators 🙂

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Money – Getting the feel of it

Over the holiday season I read a book called:

It’s Your Money: Becoming a Woman Of Independent Means by Gail Vaz-Oxlade.

One of the tips she gave, is to physically handle your money. Get back in touch with the paper.  I’ve heard this tip before, so it’s not anything new but I’d never really tried to put it into action. It’s so easy to swipe your debit card for purchases. Money just becomes numbers and dots on a screen.  Unless you have many different bank accounts for all money allocations (which she also recommends) if you are like me, you are constantly doing the sums in your head to figure out what still needs to come out of that amount in your account.

But this year I’ve got my lil’ envelope plan going on!

So, I set up direct debits for as many of my expenses as I could, so BOOM! they are just whisked away on payday with no chance to spend. My holiday savings go direct to my savings account.

Then I withdraw a lump sum of cash which includes:

  • Spending money for both weeks (I get paid fortnightly)
  • Buffer fund
  • Electricity
  • Any other ad hoc expenses: ie, at the moment I am saving for my trip to NZ

Then I allocate the cash into the appropriate envelope and I’m done!

So really, once I withdraw that cash, there is no reason for me to do the sums on what is left in my account and I actually handle the money. Plus I don’t get hit with the $2.50 withdrawel fee from ATM’s when I use other banks to withdraw cash. Man I HATE those fees!

All that remains in my account as a fluctuating balance is the money for groceries and regular loan repayment as that is deducted at the end of each month.

And…I’m going really old school with a piggy bank!

Well, it’s more like a piggy box. That doesn’t have pigs on it. It has elephants. But I digress…

I am trying to put in $2 coins and $5 notes into the box – not every single $5 note as I would go through cash pretty quick! But all my $2 coins.

This year is about seeing the money I spend!

Do you have a great tip on how you allocate your funds?

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Debt Breakup goals for February

February is almost here! January has just flown by!

So, time for some goals for the coming month. Keeping it simple and not huge amounts:

  • Pay $320.00 off personal loan  – current outstanding balance: $5925.05
  • Add $150.00 to savings account – current savings $140.00
  • 2 spend free days per week – aiming for Tuesday and Thursday each week to keep consistent
  • Contribute at least $30 to my ‘piggy bank’

You can see my savings account is very low – so anyone out there who is new to The Debt Breakup, it’s a good time to follow the blog – my savings are just starting! I hope yours are too 🙂

Let’s make some kickass progress together!

Have a great Tuesday 🙂

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The Debt Breakup – My 2014 financial plan

I am back to blogging.

Back with a financial plan for 2014. Back with more enthusiasm. Feeling awesome about reaching my goals.

My Biggest Debt Mistake of 2013

I set myself an unrealistic goal to be debt free by the end of 2013. That was my biggest mistake.

When I arrived back from travelling at the end of 2012, I was so overwhelmed by the amount of debt I was in, I felt like I must attack this debt with everything I had. Which is a good attitude in theory, but this mindset lead me to setting up an unrealistic plan and budget to knock out almost 15k in just 8 months. For some, this may very well be possible. For me it wasn’t. And without a flexible budget, when life gets in the way as – surprise, surprise – it does, I felt frustrated and un-motivated by the end of the year when I knew my goal was not possible.

Armed with this ‘be practical about stuff’ revelation, I have started 2014 with a different mindset and a more realistic financial plan – that actually (I hope!) covers everything.

And, this may come as a surprise, it is not necessarily to be debt free by the end of 2014.

The Debt Breakup plan for 2014:

  • Pay off $4000.00* of my remaining debt – currently at $5925.05
  • Save $10,500 for travelling at the end of 2014

Travel is the true motivator, the real reason behind wanting to rid myself of this debt. After I travelled in South America in 2012, I returned home with an even bigger passion to travel than I had before – but also with an epic amount of debt. While I was travelling, I still had to account for monthly repayments etc and it sucked up funds I could have used to go further and longer in my trip.

Ok, so yes, the above plan means I still will travel with SOME debt. However, not 14+k worth and what the  * means is I actually hope to pay off more than this.

By channelling any extra funds (tax return, payrise etc) into the debt, I hope to knock out more. But $4k is what I can comfortably pay and account for – therefore any extra is a bonus.

The most important thing is, I am comfortable with the above plan. And I am looking forward to blogging about my journey again, with renewed enthusiasm.

I will continue to update on my weekly expenses and each fortnight – on payday – I will post the budget for the coming fortnight. Which will pretty much remain similar or the same as the following:

My regular fortnightly budget

  • Rent: $295.00 – I split the rent with my boyfriend
  • Travel: $45.00 – Bus fare to and from work. Most days I am lucky enough to get a ride to work with my boyfriend so it is mostly just the journey home I pay for.
  • Phone: $15.00 – I have a prepaid phone and $30 recharge voucher lasts me the month – for calls and texts, mostly the data runs out before 30 days.
  • Internet: $15.00 – On an internet plan for $30.00 per month (not prepaid)
  • Electricity: $20.00 – We are yet to receive our first electricity bill, which we will split evenly, so at the moment I am putting $40 per month away for this but will adjust accordingly when the first bill arrives.
  • Gym: $23.90 – I spent a lot of time deliberating whether or not to keep my membership, and instead just work out at home with some basic equipment and running. However, the gym recently started offering classes at no additional cost to the membership, which is awesome,  and  I decided to keep my membership.
  • Groceries: $250.00 – Grocery costs I also split with my boyfriend and have been tracking the expenses on our grocery spending. Although it does sometimes vary, $250 is a good amount to put aside each fortnight.
  • Tithe / donation: $20.00 – I donate $40 a month to a children’s home in India run by a Christian pastor and his wife. The home assists young Indian girls create a life outside child prostitution which is rampant in that part of India. I was very moved by the pastor and his wife when they spoke at a church sermon here in Australia last year and decided to allocate my donation to the home. It is my plan to increase this amount slowly.
  • Loan repayment: $160.00 – My set monthly repayment is $173.00 so I have allocated another $73.50 per fortnight towards the loan.
  • Buffer: $50.00 – For the first time, I have allocated a ‘buffer’ amount into my budget. It isn’t too large but it is better than nothing!
  • Spending: $230.00 – Most weeks will leave me with $115.00 as spending / entertainment money.

So, where does that mean I will be saving each month? And what about other expenses?

As of 5th March, I will be saving $490.00 per fortnight. Up until then, the amount allocated for savings is smaller and varied, I will outline these in my fortnightly budgets.

At the start of this year I had a few expenses / additional things to save for. I am taking a week trip to New Zealand in February– YAY! – so I need to put spending money aside for that. I also have an interstate wedding (Mach) and interstate hen’s celebration (January).

These are the only interstate trips I am planning this year – last year flight costs etc burnt a big hole in my repayment plan. The trip to New Zealand will be my only holiday this year.

So, I built these additional things into my budget for the first 2 ½ months of the year – which is why  savings amounts are smaller until March.

So, let’s DO this!!

 

A note to say thanks to Eva @  Girl Counting Pennies – who has a fantastic blog and reading her Goals for 2014 really helped me get back on track  🙂 

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Week 31 – Debt and Expense Update

Hey peeps.

I’m a few weeks behind in my spend and debt updates, so planning to post a few all at once and then let you know what the heck I’ve been up too.

So week 31 I moved out of my folks place and into an apartment with my boyfriend. For the sake of my mental health, I could no longer do the epic 4 hour daily commute from my folks place to work and back. I had reached the end of the line on that one, mentally and physically drained and not far from having a public meltdown on the way to work one morning when delays meant the trip to work alone took 3 hours!

A grown woman crying and thrashing around in the 2nd carriage while screaming ‘for the love of God, I’ll get out and push this train – just hurry the f#$% UP!’ is NOT a good look.

A week later, a lease was signed and my commute went from 2 hours one way to 25 mins. WINNING.

However, it has been expensive and thrown a spanner – one of many this month it seems – in the debt smashing works.

Monday

$5.50 coffee

$21.80 postage for gifts

$12.85 groceries

$25 internet

Tuesday

$1.00 bet (It was the Melbourne Cup in Australia – big horse racing day!)

$40 travel

$3.95 health / personal care

$15 drinks

$7.95 Juice

Wednesday

$0.00

Thursday

$52 dinner – took my folks out to dinner to thank them for helping me move the following weekend

Friday

$30 drinks

$26 cab fare

$875 rental bond

$3.80 coffee

$10.00 gift

Saturday (I flew interstate for the day)

$15 lunch

$25 petrol

$8.90 wine

$5.75 soup / takeaway

$20.00 drinks

$3.95 magazine

Sunday – move day!

$56 groceries

$18.00 takeaway coffees /breakfast

$70.00 cash to my brother for helping me move

$14.00 take away

Total spend for Week 31:  

$1,366.45

Debt summary for Week 31:

Credit card 1:  $0.00

Credit card 2:  $0.00

Personal loan: $6618.83

Bank balance:

$529.37

 

 

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