I’m Bianca, a 26 year old Gen Y – a generation of “I want it and I want it now”. Well at least that is how I used to be!
I would fall under the category of a ‘Binge Budgeter’. I saved $15,000 for a trip to Europe and $30,000 for our wedding. I can do it but the times in between, I rarely have anything to show. I was never given the education about money and finance until it was too late. We began our married life $102,788.21 in personal debt, made up of 2 car loans totalling $80,000, 4 credits cards that were all maxed out totalling $19,000 and money owed to my Mum $5,400.
It hit us when we had got our payslips one month, looked at the YTD column and said “Where has that money gone? We have nothing to show for it.” We compared our credit card statements from the same time last year and we’d made no progress at all in paying them off. This is when we started to hate our debt, and hate it with a passion. Ideally, we want our personal debt paid off before we start to think about having a family and time is running out. I sat down with my husband and said, “We’ve put ourselves in this situation, we’ve got to pull ourselves out.”I started following a few finance/frugal pages on social media and thought to myself, I could do this – I already had all the knowledge I needed from reading Sarah Riegelhuth’s book “Get Rich Slow”. Perhaps this was a way to keep myself accountable and stay motivated to living more frugally and start to tackle our debt with a vengeance.
I started an Instagram page and got a very warm welcome. It’s given us the support and motivation that we were lacking previously. You can login and talk about your financial situation as if you are sitting around with your closest girlfriends – something I am now starting to do with my close friends in person… (Baby steps!).
Here are some tricks and tips I have picked up along our journey:
BUDGET. Have a budget and know where your money is going – you work darn hard for it after all. List all your expenses for the year (including gifts, holidays, takeaway, medical, etc). Work out how much you need to put away for each category each pay cycle. Have a sinking fund for all your expenses. Work out an average of your utilities and budget for that. No bill or occasion should come as a surprise for you!
EMERGENCY FUND. Start with a small emergency fund of $1000. When you’re dealing with cold hard cash, you can distinguish between what you think is an emergency and an actual emergency. Once your debt is paid off, work towards a bigger emergency fund of 3, 6 or 12 months of living expenses.
BUY SWAP OR SELL. You probably have a wardrobe full of beautiful dresses that have only been worn once (and be honest, will never wear again)! Why do we hold on to these? Go through your wardrobe and sell anything you haven’t worn in the past 12 months! Use this extra cash to jump start your emergency fund!
GO WITHOUT. Once you go over your current budget have a look at what you could possibly go without. Cable was a big one for us – cancelling our subscription saved us $1320 a year! Also cutting down on eating out is another huge saving for us!
MEAL PLAN. Meal plan and cook at home. Grocery shopping is easier when you know exactly what you need to buy – this also saves money at the register.
REDUCED, REDUCED, REDUCED. Look for those stickers! A lot of the time, meat goes straight in the freezer at home anyway. Most of the time the meat is still good for a few days after the best before date.
SHOP AROUND FOR INSURANCE. A great tip from Sarah’s book. Shop around every 6 months just to make sure you’re getting the best deal, which is easily done online these days. We’ve already saved ourselves $360 on car insurance this year by shopping around!
DEBT CONSOLIDATION. One of our credit cards had an interest rate of 25.9%! We got a personal loan at an interest rate of 12.9% which we used to consolidate the debt. We paid out the card and closed it immediately – saving us money on interest. The key is ensuring you close the credit card or you have the temptation of starting the debt cycle again!
SNOWBALL. List all your debt, with amounts owing and your interest rate. Decide whether you wish to pay your smallest debt to largest or highest interest rate to lowest. Starting with the lowest amount first allows you to have a few quick wins and sets the momentum to tackle the higher amounts.
SEPARATE ACCOUNTS. We have separate accounts for everyday, expenses and savings – our savings being at a different bank. Reason being, if we did want to get our savings out – we need to physically go to the branch and withdraw the money as we do not have a card for the account – and ain’t nobody got time for that!
FIND MOTIVATION. Find a way that will work for you to keep you motivated and accountable. Whether it be start up an anonymous Instagram account, confide in a close friend or colour charts.
SAY NO. If you can’t pay cash for it, you can’t afford it. Say ‘NO’ to keeping up with the Joneses, say no to brand names and say no to those mid year sales in the malls – you probably don’t NEED it! It only has to be temporary and soon you will have the financial freedom to say YES, YES, YES!
So far we have paid off about $30,000 of our personal debt and we are slowly seeing the light at the end of the tunnel. I look back and wonder if we hadn’t taken out the car loans, if we had never got any credit cards –how different/easier our life would be. I am slowly learning the difference between “I want” and “I need”, and also learning the frugal phrase “Use it Up, Wear it Out, Make it Do or Do Without”. Life is all about learning from your mistakes and I hope our story gives some sort of inspiration to make a change in your life. Feel free to follow us on our debt free journey on Instagram @FrugalLivingAmateurs