If You Must Make a Resolution….

2011-year-resolution-400x400“New Year’s Day… now is the accepted time to make your regular annual good resolutions. Next week you can begin paving hell with them as usual.” ~ Mark Twain


I have a few issues with making New Year’s resolutions.  First off, I feel as if my year begins in September; after all, I am on a school schedule with most of my jobs.  Therefore, the best goals I can make usually begin in September (like getting out of debt).

I don’t have an issue with resolutions themselves, but we hear about this in the media way too much come each New Year. The idea of a resolution has lost its impact. Everyone expects people to make (and then break) their New Year’s resolutions, which leads us to stop making them.

If we really must make a resolution (and I will post my official resolutions for all to see soon), let’s make it damn good.  I say start with your finances once and for all.

As all of you faithful readers know, I was a victim of lifestyle Inflation and got into some ridiculous debt. I had eight credit cards, two enormous car loans, student loans, the works. It took me a while to step back and admit that this situation was all of my making, due to my own choices and financial habits, but that it was possible to change.

Although I’m not out of debt yet, the end is near (hopefully in 5 more months).  I’ve paid off several debts except for 2 cards, my student loan and one car.  I am in great shape as opposed to a year and a half ago, when I could barely sleep thinking about the mountain of debt I was under.  I am in the driver’s seat now, and it feels great.

We all have dealt with living from paycheck to paycheck, and it’s time to stop. Even though I am throwing tons of money to debt, I stopped feeling like every cent was spent before my check even came in each month.  Here’s how you can make a New Year’s Resolution to stop living from check to check:

I have recommended tracking all of your spending on a daily basis for one month before going on the road to attacking debt, and I’m sticking to that. But I have also said that if you choose to forgo that step, you can still make this happen for yourself! Don’t let the tracking piece stop you from fixing your finances.

If you choose to not track, you must do this:

  1. Stop Using Plastic. Stop using your credit and debit cards immediately. Did you hear me?  Stop.  Cut them up, or put them in the freezer in ice (I never did this, but I hear it works). Stop taking other loans. Stop getting into more debt.  This you can do.  Start January 1st.
  2. Create an Emergency Fund.  Make it an automatic deposit, the first bill you pay each payday, because it is the most important!  Do everything in your power to get this account up to $1000 as fast as you can.  Do this before paying off debt.  When an emergency comes up, like your car breaking down or the dishwasher breaking, you won’t be thrown backward. You will have some cash to pay for that emergency, and you can use your regular paycheck for regular expenses.
  3. Cancel all Discretionary Spending. If you can’t find $100-200 to save per paycheck, then you need to cut some things from your spending. Eating out is the first thing you need to stop.  Check out all of your other expenses; you will find things to cut out.  This is why tracking your spending helps.
  4. Get on The Debt Snowball Method Now. List out your debts and arrange them in order from smallest balance at the top to largest at the bottom. Then focus on the debt at the top, putting as much as you can into it, even if it’s just a little extra. When that amount is paid off, take the total amount you were paying (say $70 minimum payment plus the $50 extra for a total of $120) and add that to the minimum payment of the next largest debt. Continue this process, with your extra amount snowballing as you go along, until you pay off all your debts. This method worked for me; my snowball is a force to be reckoned with now!

Those are the first steps to take. Doing those alone will make you feel incredible.  Start these next:

  1. Make a budget. This is the most important (and humbling) thing you can do for yourself.  Stop screwing around and create a budget. Start spending less than you earn.  The only way to do this is to see the plan on paper.
  2. Automate your bills. As much as possible, try to get your bills to be paid through automatic deduction. For those that can’t, use your bank’s online check system to make regular automatic payments.
  3. Create Savings Accounts for All Irregular Expenses.  Take into account all your irregular expenses, such as insurance, car maintenance or repairs, gifts (Christmas next year!), medical, etc.  List them out, estimate your annual spending, and begin saving for them each month. Again, if you spend $600 on car repairs, budget $50 a month for that expense, and put that amount in savings. Check out my post about savings accounts here.
  4. Spend Cash Only and Use an Envelope System.  This is huge.  Check out my post on the envelope system and spending cash only.

You can be free of paycheck-to-paycheck syndrome in 3 months if you follow these steps. You can do this.  I’ll be happy to help if I can!

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