She Strengthens

From Financial Hole to Financial Freedom

Breaking Free from Debt and Building Savings

Just a short time ago, I was drowning in a sea of debt, with no savings to speak of and a terrible track record when it came to budgeting. But I knew I had to take drastic action to turn my financial situation around. I realized that I needed to tackle my financial crisis head-on, with the same determination and focus that I had previously used to avoid dealing with it.

Creating a Budget That Works

To get started, I developed a pay day-based budget that takes into account my monthly expenses, from highest to lowest, along with their due dates. I also listed my paycheck amounts and pay dates, and then played around with the numbers to assign expenses to each paycheck, leaving a small buffer for unexpected expenses. This system ensures that 80% of my income goes towards debt reduction and savings, while I live on the remaining 20%.

Budgeting for the Unexpected

One of the key components of my budget is what I call “budgeted savings.” This is money set aside for expenses that I know I’ll need to pay for, but that aren’t part of my regular monthly expenses, such as medical bills, car repairs, and social events. I use a credit card to make these purchases, and then transfer the money from my “budgeted savings” account to pay off the credit card in full at the end of the month. The credit card earns cash rewards, which are automatically deposited into my savings account.

Giving My Accounts a Personality

To make it easier to keep track of my accounts, I gave them nicknames. My checking account is now called “Minimum $500! Checking,” a constant reminder to keep a $500 buffer in my account to avoid overdrafts. I also created a “Budgeted Savings” account and nicknamed my credit card “Budgeted CC,” to remind myself that it’s only for planned expenses.

High-Yield Savings Account

Paying off debt is crucial, but so is saving for the future. That’s why I opened a high-yield savings account, which rewards good savings habits with a competitive interest rate and bonus incentives. This account serves as both my emergency fund and my savings vehicle for buying property.

Spreadsheets and Tracking

To stay on top of my finances, I created a range of spreadsheets to track my budget, savings, and debt repayment progress. I also use a spending tracker app to monitor my daily expenses and identify areas where I can cut back. By regularly reviewing my spending habits, I’m able to make adjustments and stay focused on my goals.

Money Rules of the Month

Finally, I created a set of “Money Rules of the Month” to help me stay on track. These rules are based on my spending habits and goals, and include things like designating the last week of the month as a “no-spend week” and setting limits on certain spending categories. By following these rules, I’m able to stay focused and motivated, even when it feels tough.

Staying Disciplined and Focused

It’s not always easy, but I know that staying disciplined and focused is key to achieving my financial goals. By using these systems and tools, I’m able to stay on track and make progress towards financial freedom. It may seem like a lot of work, but it’s worth it in the end.