Choosing Freedom Over Debt
On Tuesday I wrote about how I have changed the way I spend my money in order to accelerate my debt payments. I wrote about ditching my car, cutting cable, eating healthier and cheaper, and destroying my frivolous spending habits. All of these changes have compounded into each other and allowed me to dramatically cut my monthly variable expenses.
The tips on cutting costs that Mr. Money Mustache lays out actually do work. Today I have the proof.
This week I have been busy inputting all of my spending from 2012 into my budget tracking worksheet. With all of this data collected I have analyzed it in order to illustrate how my new spending habits have impacted my finances compared to last year. The effects are great to see.
The secret to my extra monthly debt payments is keeping my spending under control. I have been able to cut my variable monthly spending by more than half. These costs include food, bars, shopping, restaurants, etc. Rent, student loan payments, utilities, etc. are excluded from these totals.
Click to enlarge.
This right here illustrates the effects of making smart spending decisions. More importantly, I don’t feel like I’m missing out on anything compared to last year. I don’t miss the daily lunches out or the weekly junk food trips or cable. I didn’t need these things in my life and I don’t miss them now that they are gone.
The 12 Steps to Fixing Your Financial Life
Mr. Money Mustache says:
Your attitude determines your lifetime wealth much more than your knowledge of financial nuts and bolts.
I’m blatantly stealing part of this post title from Mr. Money Mustache, my unofficial personal finance/badassity mentor. In a recent post he writes what is probably one of the best paragraphs on the interwebs relating to personal finance. He says:
Here’s how to cut your life costs in half. Start by getting rid of your Debt Emergency if you have one. Live close to work. Move to another city if you enjoy adventure. Don’t borrow money for cars, and don’t buy stupid ones. Ride a bike wherever you can. Cancel your TV service. Stop wasting money on groceries. Give your kids the opportunity to achieve greatness without being pampered. Lose the overpriced cell phones. Learn to appreciate the life-boosting joy of using your own body to get things done. Learn to mock convenience. Practice optimism.
13 sentences, one overarching message: take control of your own financial well-being. This little paragraph is the best road map to getting on the path to financial freedom. It eschews the bullshit and minutiae to get straight to the point. Don’t let your debt control you. Don’t let keeping up with the Joneses control you. Don’t let your paycheck or your bills control you. You should be the one in control.
I have either directly been following this advice or found it on my own through common sense. I love that it is now all put together into one concise paragraph with links to further details. If you really want to find out how to improve your finances then take each sentence, put it into a list and work towards achieving each step.
Thanks to MMM we now have this 12 step process that will tell you how to cut the frivolous spending in your life and get on the path to financial freedom. And guess what? It actually works. I am living proof.
Status: Ahead of Schedule!
- Extra Payment: $1,435
- Total Pay Down: $1,740.66
- Total Pay Down Since Start: $8,482.46
- Total Outstanding Balance: $62,690.29
- Percent Complete: 11.9%
*These numbers are for my Wells Fargo Private Loans only.
Month two of my rapid debt pay-down adventure is complete. Overall I did very well in February. I was able to make a pretty large extra payment thanks to low rent this month and modifying my 401(k) deduction.
Again I have tracked every dime I spent during the month and graphed it all out to give myself a visual representation of how well I am doing. I love seeing how my new habits are having a positive impact on my financial health.
Outstanding Debt & Goals
This chart plots my high interest rate Wells Fargo loan. The black bars give you my outstanding balance goal each month and the red line is the actual monthly ending balance I achieve.
Click to enlarge.
I ended February $600 below my goal! Thanks to a special rebate on rent during the month and a clever adjustment to my 401(k) deduction I was able to make a much larger extra loan payment than anticipated. The best part: the adjustment to my 401(k) will allow me to keep making larger than expected extra payments. This means I will be well ahead of my goal in the coming months and this graph is going to keep looking better and better. Stay tuned.