Small Steps towards Financial Independence!
I’m always looking for ways to reach my goal of financial independence. I recently became debt free with the exception of my house so I’m one step closer to financial freedom! My current goal is to pay off my mortgage and it has been the biggest hurdle towards finally becoming financially independent.
Here’s what I did to become debt free:
CREATE A MONTHLY BUDGET (AND ACTUALLY USE IT):
1. Make a written budget first. It all starts with a written budget, a plan for how you spend your money. Write down everything that you spend your money on each month. Set priorities and stick to the plan.
2. Live within your means every day. Much easier said than done! But this is really the key to having extra money to pay off debt and be financially free! When I started living within my means, I really started seeing my debt decrease and my savings increase. Yes, we all have our vices, I’m not completely cheap, here are 7 Things I Refuse to Give Up to Save Money. But it’s all about having a written budget and living by it daily.
3. Pay with cash. This forces you to only spend money that you actually have. It also avoids overdraft fees and lots of stress! I actually love the look people give me at the grocery store when I count out my cash and exact change. It’s almost like they’ve never seen someone pay in cash before. It’s amazing how we all rely on credit cards these days.
4. Don’t use credit cards for every day living expenses. If you can’t afford something this month, add it to the budget for next month and save cash for it. If you can afford it, then buy it. Otherwise, keep saving your money.
CALCULATE YOUR DEBT:
5. Sit down and figure out exactly how much debt you have. Exactly to the dollar. It’s depressing to sit down and go through all the bills and really know how much money you owe. But it’s exciting too because you get to watch it disappear as you become debt free!
6. Prioritize your payments. Some people say to pay the lowest bill first to gain momentum and others says to pay the highest interest rate first to save money on interest. Either way, have a plan and get started paying down that debt. I agree with focusing on paying off one bill at a time while paying the minimum on the others.
CANCEL SERVICES THAT YOU NEVER USE:
7. Cancel your gym membership. I used to spend $50 a month for a gym that is across the street from my house but didn’t offer any classes that I liked. I kept making excuses and never went. A year later, and $600 later, I finally cancelled it. That was clearly before my frugal days.
8. Go for a run instead. It’s free. And for me, it’s the single best way to stay in shape, aside for yoga.
9. Find free, local events. My local Lululemon (a yoga clothing store) offers free yoga on Sunday mornings which is much better than the local yoga studios for $90 per month membership. And the instructors often bring coupons for a free class at their yoga studios.
10. Cancel your cable. Use Netflix or Redbox or an Antenna for TV shows and movies. Or at least cancel the channels that don’t use and cut down on the bill. Do you really have time to watch 400 channels anyway?
PAY FOR YOUR DEGREE WITH CASH & SCHOLARSHIPS:
11. Plan ahead for college and get scholarships. I was fortunate enough get my undergraduate degree paid for by a Navy ROTC scholarship, which really helped my goal of becoming debt free. So plan ahead for college by getting awesome grades and go to school for free!
12. Sign up for every possible scholarship. It’s amazing how many scholarships are available when you start researching. Ask your school, search online, and ask your local organizations. It will be completely worth it once you have a real job.
13. Save your money and go to school when you have the cash. I paid for my MBA in cash but it took nearly 4 years of saving money. I was deployed in the Navy for some of that time so I didn’t spend much money anyway. I’ve been considering Law School lately but am putting it off until I can pay for it with full scholarships or cash. What’s the point in graduating with $150,000 in debt?
DON’T SPEND $900 A MONTH ON A CAR PAYMENT:
14. Keep your car for 10 years. I have owned my Chrysler Ptcruiser for almost 10 years and I have been tempted to buy a new Mercedes-Benz convertible BUT there’s nothing wrong with my car so I can’t justify buying another car and paying that huge car payment.
15. Pay for your car in cash. I know it’s almost time for another car so I’m saving up now. It won’t be a Mercedes-Benz, probably something more realistic for my budget right now, like a used Honda Civic. But I plan on using cash for it, my budget for the car will depend on how much cash I can afford to spend on it at the time.
16. Drive safely to optimize your gas mileage. Driving over 60 mph is a waste of gas and money, slow down and save.
17. Drive safely so you don’t get traffic fines. I ran a red light and got pulled over for a $300 fine last year! Luckily the police officer let me go. But that would have really impacted my budget for the month.
18. Save money on gas. Look up lower gas prices with the GasBuddy app.
19. Carpool. And split the gas costs. That savings really add up if you commute far to work each day.
PLAN AHEAD AND STOP PROCRASTINATING:
20. Plan ahead instead of impulse buying for Christmas or birthdays. If you wait until the last minute, you’ll be tempted to buy something, anything, and you will likely spend more money. This usually happens to me at Christmas when I procrastinate until 2 days before and then am forced to spend more money. Last year, I bought almost everything online during Black Friday deals. It was quick, easy, stress-free and cheaper.
21. Shop year-round for holidays or birthdays. Buy gifts when you see great deals. Or buy online at Amazon for lower prices.
SAVE ON YOUR MORTGAGE:
22. Buy a house that you can afford. This is key to having extra money to pay off debt. Calculate all of the hosts of owning a home including move in costs, electricity and water, maintenance, lawn care, furniture, and emergencies. Who wants to be house broke anyway?
23. Pay an extra $200 on your mortgage. I do this monthly to payoff my mortgage faster. For me, an extra $200 per month and bi-weekly payments cut 15 years off the loan.
24. Consider a 15-year mortgage. This will really cut down on the interest fees over the cost of the loan and allow you to get debt free the fastest.
25. Payoff your mortgage ASAP. Stop wasting money on interest rates. Look up an online mortgage calculator to see how much you would save by paying off your mortgage in 5, 10, or 15 years.
STOP EATING OUT EVERYDAY:
26. Make your own breakfast at home. Breakfast is so inexpensive to make at home, especially if it’s oatmeal or coffee or quick breakfast burritos. Buying breakfast out every day costs amount $10 and that really starts to add up.
27. Bring your lunch to work. We usually make extra for dinner and set up the leftovers in small containers, ready for lunch in the morning. That saves another $10-$20 per day compared to eating lunch out.
28. Eat dinner at home. My favorite dinner is prime rib and mashed potatoes. I used to spend $30 on it pretty routinely but now I cook at home for myself and my friends for the same price. I realized that cooking can actually be fun and is MUCH healthier anyway.
29. Pre-game at home or at a friend’s house. It’s almost free, probably healthier, and maybe even more fun than going out.
30. Have a house party with a potluck instead of going out on the weekends. Potlucks are a great way to be social while still saving money on eating out.
HAVE FUN ON A BUDGET:
31. Find free events in your city. Look up free concerts and outdoor activities. Meetup.com has lots of free local events or look up events in the newspaper or your city’s website.
32. Go to the beach and watch the sunset. Relaxing and free! If you’re lucky enough to live near the beach.
33. Have a picnic at a local park. Another relaxing and free idea that doesn’t involve the beach, but is just as romantic.
34. Make friends with people who are frugal. Share you ideas and goals, you’ll be amazed at how it motivates to become more frugal than your friends!
35. Consider if your hobbies are too expensive and look for free alternatives. I love yoga and it’s expensive but there are several options for free yoga in my city.
36. Tailgate with a group of friends and family. It’s fun and inexpensive, whether or not you actually go to the game.
CUT DOWN YOUR GROCERY BILL:
37. Shop at the Dollar Store. We routinely buy cleaning supplies, school supplies, party essentials, and holiday decorations at the Dollar Store.
38. Use coupons at the grocery store. And only buy what you need.
39. Skip grocery shopping for a week. Look in your refrigerator, if you still have leftover pasta or other leftovers, get creative and use the food you already have.
STOP WASTING MONEY:
40. Don’t buy the new iPhone or iPad if last year’s model still works fine. Do you really NEED the new iPhone 5C? I’m embarrassed to say that I actually waited in line to buy the new iPhone 4S even paid $199 even though my iPhone 4 still looked brand new. Not this year! I’m perfectly happy with my iPhone 4S.
41. Don’t buy everything you want simply because you want it. Having money in the bank does not you should spend it. Use it for debt or an emergency fund instead.
42. Don’t spend money on clothing if you don’t actually need new clothes. This was also difficult for me. I always wanted a new dress for a party but recently went shopping in my own closet and realized how much I have!
43. Go shopping in your own closet. You’ll be surprised how many outfits you really have.
CONSIDER A SIDE JOB FOR EXTRA MONEY:
44. Find a side job like blogging or teaching classes. Use the extra money towards your goal of becoming debt free. I’ve recently looked into teaching local undergraduate classes to payoff my mortgage ASAP! You might figure out that you love your side job more.
45. Figure out what you enjoy and see if you can teach it for extra money. If you love surfing: consider becoming a surf instructor. If you love yoga: consider teaching yoga. I’m a horrible surfer so this isn’t a good option for me. But I have considered teaching yoga and I have a friend who teaches step class and other fitness classes in the evenings and weekends.
46. Read books on personal finances and get motivated to save more money. There are a ridiculous amount of personal finance books about getting out of debt. I personally like Dave Ramsey’s “Total Money Makeover” as a get out of debt guide but there are lots of other great books too.
47. Read other personal finance blogs for motivation. Here’s a list of my favorite personal finance blogs for inspiration, motivation, and money-saving advice. Crystal at Budgeting in the Fun Stuff recently paid off her mortgage in only 6 years! Reading her amazing story motivates me to payoff my mortgage sooner! Alexa at SingleMomsIncome Confesses About Turning Into A Scrooge, which I can also relate to! And Michelle at Making Sense of Cents posted Fun, Frugal, and Free Activities. I’m always looking for free activities!
48. Find these books at your local library. I’m sure the local library has countless free books on personal finances. When I was in college, I always checked the library first for a textbook.
49. Track your progress. Keep track on how much debt you’re paying off and how much you still owe. Use an excel spreadsheet or online tracker and review it at least monthly to stay on track with your budget and your debt free plan.