Taking Control of My Finances: A Personal Journey
Growing up, I learned valuable lessons from my parents, both good and bad, about managing debt and finances. When I graduated from college, I was saddled with $60,000 in debt, while my parents struggled with their own consumer debt and credit card payments. One fateful night, my mom confided in me about her financial struggles, and I took it upon myself to help her get back on track.
A Fresh Start
With my engineering background, I approached debt repayment like any complex problem: I gathered data, built spreadsheets, and created a plan. I paid off my mom’s debts and then tackled my own student loans, making aggressive payments of $1,800 per month, or 38% of my income. This experience taught me the importance of tracking my spending and understanding my financial situation.
The Power of Awareness
For the past five years, I’ve tracked every penny I’ve earned and spent. This habit has given me incredible insight into my finances, allowing me to distinguish between wants and needs, allocate money to hobbies and investments, and build an emergency fund. I can confidently make financial decisions, knowing exactly how much I’m willing to spend and when to dial it back.
My Budgeting Routine
At the beginning of each year, I create a comprehensive spreadsheet to track my income, assets, and cost of living. I follow a simple, step-by-step process:
- Record my income
- Note my debt repayment (in red)
- Track my investments (in green)
- Calculate my cost of living (in blue)
- Subtract these numbers from my income to determine my recreational spending (in gold)
Annual Reviews and Five-Year Plans
I use my data to create annual spending reports and five-year progress reports, treating my finances like a personal business. This approach helps me predict my budget for the coming year and make informed decisions about my financial future.
Sharing My Story
I’ve shared my budgeting spreadsheets online, and the response has been overwhelming. People are eager to take control of their finances, and I hope my story can inspire others to do the same. By being open and honest about our financial struggles, we can encourage each other to make positive changes.
A Philosophy of Control
As an engineer, I believe that you can’t control what you can’t measure. By tracking my spending, I’ve gained situational awareness and set up an effective feedback loop. This approach has helped me navigate my financial journey and make better decisions for my future. I hope it can do the same for you.
Leave a Reply