My journey to financial wellness – Part 4
Have you read Part 1, 2 and 3? So here we are…in a deep dark hole and seeing no way out. We have decided that debt is no longer welcome and we want to get rid of it. Is it even possible to live without debt? How? The same way you eat an elephant; one bite at a time. It may take a year, or ten, but the giant WILL fall. When I had a clear picture of what I was dealing with, I made some drastic changes. These are nothing new, and will probably leave you quite underwhelmed. Honestly, often we know what to do, we just don’t do it. This is what I did.
Control the controllable
My salary was set. I was working a government job with a set salary so I could not walk into my General’s office and ask for a raise. My income was something out of my control. What I could control though was my spending. So I typed a budget to see just how much money I had. Yes, I know some of you rolled your eyes at the word ‘budget’ since some find a budget so restrictive. For me it was freeing because after looking at my past months’ bank statements, I noticed that I spent about R1000 for take outs for example. Now that I had an idea of how much to budget for, I was free to spend in that range. If I go and blow R1000 in one evening, then that was done for the month. I had nothing more to spend on that item. Also, a budget showed me opportunities for extra cash because I could use R500 for take outs and R500 towards debts. Or, be radical and use the whole R1000 for debts and not eat out. YOU control YOUR spending.
I cut my hair because it was giving me drama, but also, short hair cost me R30 per month to maintain in Pretoria Central. I stopped doing nails, facials and downgraded my Dstv package. Since I worked for the police, I wore uniform most of the time so I did not buy new clothes and avoided shopping malls. I also cancelled my car insurance (I know that was dumb and I do not recommend it, but I was desperate). So in a nutshell, I tightened my budget A LOT.
List all debts
Initially, as advised by some financial advisors, I listed all my debts from highest interest rate to lowest. Two / three months in, I didn’t feel like I was making a dent on this elephant and I started feeling despondent, so I decided to follow my own strategy which became a game changer. I decided to flip things around and list the debts from the smallest balance to the largest. The smallest for me was Foschini at around R6000 I think, and the flat was the largest at R450 000. So after listing all of them from smallest to largest, on the next column I wrote down the minimum amount payable each month next to each debt. I adjusted my budget in such a way that I could afford to pay at least the minimum amount payable on each debt.
When Foschini was done, I emailed them to close the account. I then took the instalment for Foschini, added it to the instalment of the next smallest debt which was a credit card, and paid both into the credit card. If I got an extra R50 from somewhere, I would throw it into the debt I was paying at the time. When that was paid off, I would email to have that account closed. Then I would take both instalments and continue with the next smallest debt, overdraft and so I went, one by one. I used this method because I wanted the emotional satisfaction that came with each accomplishment and this was a HUGE motivator. Having one payment gone meant I was a few Rands lighter and it was enough encouragement to continue grinding and not to acquire new debt. This is NOT a quick process, not by a long shot. It has taken me four years to pay off all the debt and I learnt so many things about myself in the process. I learn that I was impatient and that I was addicted to buying stuff without really think about whether or not I really needed them. On the positive side though, I discovered that I could achieve a lot more if I was focused. Small steps do make a big difference.
Start each month on a zero balance
If it happened that a day before payday I had some cash in my account, which wasn’t often in the beginning, in the evenings before going to sleep, I would transfer that amount into the debt I was busy with at the time. When I did not do this, that money would be ‘lost’ together with the new money and I would not see what I did with it. Every cent counts.
Who is influencing your life and decision making? Instagram? In 2018, two years into this journey, I read the book, ‘How to make your first million’ by Warren Ingram which I finished in a day. I was so curious that when I finished it, I had hot coals under my feet. It increased my debt-slaying intensity and encouraged me to really be focused about finding my ‘why.’ I highly recommend it and if you are reading this blog and would like to read this book but cannot afford to buy it, drop me a message and I will get it for you.
The other person to influence me immensely on this journey whom I discovered in early 2019 needs a whole blog dedicated to him. Read about him in Part 5 of this series.
Please let me know what are some of the changes you are making to get out of debt. I’d love to hear from you. Your story can help others.