I thought it was only right after my post on Sunday to dive a little deeper into how to pay off debt. The best way I know how to explain paying off debt is to share my own story.
To be honest, I have never shared this before so it is a special moment. I am usually quiet about my finances and most of my friends just see me as the frugal one. But, I want to share my knowledge, so that more young adults can look at their finances differently and we can nip debt in the butt.
Let me explain something first before I head into how I did it.
I say don’t settle and go full force after your dreams a lot in my posts, BUT you still have to be realistic. You need to know the amount of stability you need before you quit your job and follow your heart. That courage is certainly admirable, but it is not always the smartest choice. Most times we don’t get paid much or anything at all for the beginning stages of growing our businesses or engulfing down a new career path. The transition can be timely depending on the field you are going into to.
So, be smart about your side hustles or your main job. I think you should keep your main job and save as much as possible, until you feel equipped to make the move. If you can’t stand your current job, look for jobs that are still within your passion that you can work at in the mean time.
One of the biggest reasons I was able to save a large chunk of money is because I’ve worked endlessly for the last 2 years. They weren’t jobs that I would do forever, but they were essential in giving me the money I needed to save a lot and paid off my debt. Right, it’s only really been 2 years, so it has not been that long.
My savings habits began when I was much younger, so I’ve had the savings bug in me for a while. It is almost second nature to me now to save as much as possible whenever I make money. When I got my allowance in high school, if I got $20 a week I would save $10. Then I would just limit my spending to meet those needs. Six years later and I am still doing the same thing except with more money 😉
My first official job and what spurred my ability to save a lot was working in a restaurant. I believe if you have to do a trivial job then I suggest working in the restaurant industry. The money is good, especially as a student with limited responsibilities. I didn’t make much per hour, only $5, but what really broke the bank were the tips! I still miss those tips till this day!
Nothing gets better than working somewhere that you can get tips. We spilt all credit tips which sucked but all the cash tips I received were mine.
As soon as I got my paycheck for that entire summer, I would save at least half of it or more. I would immediately transfer the funds into my savings account before I did anything else.
By that the end of that summer I saved: $1,741 in 2 ½ months
I wasn’t able to maintain that job with school and dance, so I took on 2 jobs at school that year. I would work 16 hours a week, 10 hours of office work and 6 hours as a dance teaching assistant. I couldn’t take on more because I had 9 hours of academics, and about 24 hours of dance a week excluding rehearsals.
So that’s close to a 50 hour work week, (haha and that’s before I started a blog)
I continued to save a large portion of my check once the year started and saved my entire sophomore year of school.
So, one thing I do is keep my savings off limits! I don’t touch my savings for any regular expenses. You should only touch your savings in extreme situations when it is crucial. I’ve only touched it for 3 things so far:
The great thing about saving is that the money is available to you when you need to make big payments.
As a dancer summer intensives are extremely expensive, so I offered my mother to pay a third of my tuition last year: $750. It feels great to be able to do my part because I have the money to do so.
Next after reading, Rich Dad Poor Dad I knew it wasn’t enough to just save my money I wanted to start investing it as well. So I opened an account with Vanguard and bought 2 stocks. I’m still in the process of educating myself on different investments that work for me but I decided to start with stocks and eventually I want to buy index funds
Read this article to learn more about index funds: Why I Finally Started Index Funding by Jamila Souffrant
I invested over $1,000 in stocks and now it has gone up about 35% since I invested it, but I don’t watch over them much because I am in it for the long run.
With the rest of my savings I finally stopped procrastinating, opened Navient and made a payment. Woohoo!
Now I am on the road to making payments every 2 months. I don’t make as much as I did over the summer I worked in the restaurant and because I decided to invest, I will have to make smaller payments in the next couple of months. My plan is to stay on the schedule of paying every 2 months no matter how much I can put towards it. If I can put $2k towards my loans that is wonderful, but if it happens to be $500 that is good too.
The important part is that I am starting early and avoiding post- graduation interest.
Right now, I try to save at least 30% of my paycheck but ideally it would be half or more.
In my email course: The Ultimate Guide To Managing Your Finances in 2017, I dive deeper into how to make better choices in your spending so you can save more. I know the problem is not always that we do not want to save, but we cannot find the sufficient funds to save and handle our responsibilities.
Why It Starts With How You Think
More than anything even if you cannot save more than 20% of paycheck, it is about your mindset. The main reason I was able to jumpstart this journey to financial independence is because I have a plan and I actively seek financial education.
Sadly, we do not adequately learn about this in school and it is so important that we do. It does not matter if you have the skills to get a job or even attain your dream job, if you cannot handle your money you will always have issues.
How I Think
First, I have the goal to be wealthy and successful and to be honest this is the main influence. I know to reach the level of wealth I aspire to achieve I need to be in charge of my finances and eliminate debt as quickly as possible.
Second, I know in order to get there I need to have a budget and purposely be tight with my money. There are so many budgeting apps out there, so get into them! There is MINT and YNAB for example. Or keep your own log in your notes. Having a budget makes it super easy to see where your money is going and helps to hold you accountable of your purchases.
Third, I write out and I am aware of all of my debt and responsibilities. Then, I work out how I will pay for it and how long it will take me to pay for it.
Read more on debt here with Power Over Life’s: Debt Destruction Plan. Learn about the different ways you can pay off your debt and pick a plan that works best for you.
Fourth, make smart choices! You know in the back of your mind when you take out your credit card whether or not you should really make an unneeded purchase. It is okay to say no to a few things and be frugal. I have accepted that this is how I will live for a few years and I am okay with it.
Also, if you employ these frugal qualities now, when you do make good money you will know how to maintain it. Don’t think if you get rich overnight you will magically know how to manage your money.
So, Start now!
I am so excited to announce that I email course is up and running! So, if you need more details on what exactly you can save your money on and how to limit your spending then enroll in my course! It is a FREE email course, so don’t miss it HERE.
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