Baby Steps

To start, I figured cleaning up my credit card debt would be a good show of faith.  With only $13,000 or so on there at that point, it was about a 10th the size of Sallie.  Small potatoes.

But there was a problem.  This debt didn’t just magically appear.  It didn’t come from some large expense either.  It simply piled up as I lived my life.  One small purchase after another.

It didn’t feel like I was living beyond my means either.  I could make the payments.  In fact, I paid more than the minimum on my credit card every month.  If anything, I was living below my means, right?

Wrong!

Unbeknownst to me at the time but fully knownst to me now, debt serves one purpose and one purpose alone: it lets you buy stuff you can’t afford.  That’s it. 

Does that mean all debt is bad?  No.  Mortgages and real estate leverage are examples of where debt can be good.  Even student loans (to some extent) can be good to take on.

But financing a burrito?

It sounds ridiculous but that’s what happens every time you use a credit card you carry a balance on. You are financing (and will pay loads of interest) on whatever little purchase you make; be that a burrito or a tank of gas.  In short, treating your credit limit as an extension of your bank account is a bad idea.

All of this goodness can be yours for the low, low rate of 22.99% APY!

Speech over, back to the story.  After taking proper stock of the mess I had gotten myself into, the first step I took was to take the credit card out of my wallet and bury it deep out of sight.  It was not going to be used anymore if I could help it.

Getting on a Money Diet

Next, I needed to come up with a plan to pay it down, aka a budget.  Never being one to follow a budget, this was uncharted territory.  Thankfully, there was help.  A friend of mine had turned me on to an app called Mint awhile earlier and one of its key features was budgeting.  By linking your accounts to Mint, it would automatically download your transaction data and sort each transaction into categories.  From there, you could assign monthly dollar amounts to each transaction type and the app would alert you if you spent more than you budgeted.  Pretty easy.

So I played around with it for a bit.  A deep dive into my spending revealed a lot of opportunities for savings so many of the cuts I could make were obvious.  But others, such as food, not so much.  Thankfully, Alex helped me out a lot in this category as she’s a terrific cook and loves to ply her craft in the kitchen. 

Over the next few months, I saw the money in my checking account grow and credit card balance starting to go down.  Things were moving in the right direction; but, I got the feeling I wasn’t being as efficient as I could be. 

My budget was doing a good job keeping my expenses down, but not giving me much direction with my savings.  I would put more money towards the credit card than I was previously, but it was kind of a guessing game as to how much. 

To top it off, I didn’t like using the budget.  It felt intrusive and took more mental energy to manage than I wanted.  If keeping a budget was going to be like keeping a diet, I didn’t feel like I was in it for the long haul.

But, like someone who needs to lose weight needs a diet, I needed a budget.  Like it or not, it was budget or bust.  So I had two options. One, try and stick with it, grind away, and hope I don’t fall off the wagon.  Or:

Just build a better budget.

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