One of the reasons I’ve been able to build a positive net worth quickly is because I was fortunate enough to graduate college with no student loans.
This was due to a healthy mix of luck, privilege, and hard work, so I thought I’d outline some of the ways I was able to make it happen so that you have a better picture of my journey and background.
Choosing a College
When I was applying to colleges, it was important to me that the school I chose wouldn’t send me into massive amounts of debt. I got into an out-of-state school that I wanted to go to, but even with them offering me a generous scholarship package (to the tune of $16,000 a year) it was still going to be much more expensive than any of my in-state options. So, as much as I wanted to go there, I cut it from the list.
The decision came down to my top two in-state schools I had applied to. They couldn’t have been more different. One was the state’s flagship university and promised a traditional big university experience. The other was a tiny public liberal arts college with a unique academic program and culture that promised small student-to-faculty ratios.
After going back-and-forth for a long time (and then changing my mind over the summer), I decided I was more interested in the tiny liberal arts college. My decision wasn’t based on finances, but it just so happened that the college I chose was much less expensive than the large university—and it offered me a scholarship.
This is the “lucky” part of the recipe in that I was super fortunate to live in a state that had a small liberal arts college in their public university system. I basically got a small private liberal arts college experience for less than the average price of in-state tuition. Looking back, I’m so glad I didn’t have the money to go to the out-of-state college because I wouldn’t trade my small college experience for anything.
I had done well in high school and qualified for Florida’s Bright Futures scholarship, which at the time covered a couple thousand dollars per year of expenses. The college I went to provided me with a yearly scholarship as well, and I applied to a few outside scholarships and won two of them. One of the scholarships was a decent size but only applied to my freshman year, while the other was recurring for all four years as long as I remained in good academic standing.
During my first year of college, my scholarships covered all but a little over $2,000 of my tuition and board expenses. I was fortunate enough that my family was in a financial position to make up the difference.
My parents also sent me $50 per week during the school year for all four years of college to help with groceries and general living expenses.
Since my expenses were mostly covered for my first year, I didn’t have a job and focused my attention on school and my social life. After my freshman year scholarship was up though, I knew that I’d have to make up a good chunk of change. So I got to work!
In my second year, I got a job as a Resident Advisor which covered 75% of my housing costs and paid me a biweekly stipend. This alone cut my expenses so that my bill was covered by scholarships and I actually got a refund check back each semester.
My second year I continued as an RA and also started working in the school’s communications and marketing department where I did event photography, videography, editing, writing, and web updates.
At the start of my third year, I also became a tour guide in our admissions department (which was a nice fun job).
I kept each of these jobs (RA, communications, and tour guide) until I graduated.
During my fourth year, I also worked for one semester as a Teaching Assistant for a course for one semester. That meant working 4 part-time jobs while writing a thesis and being the editor of the school paper.
Do I regret that decision a little bit? Yes, yes I do. But I did it and I survived!
(As a quick disclosure: That doesn’t mean I’m telling you to work four part-time jobs in addition to school. Balancing that was a lot, to say the least, and it is definitely not the path for everyone. It’s just what worked for me.)
I also did random gig work sporadically throughout my years in college, including photography, oral history work, and babysitting over summers.
The college I chose, my scholarships, family, and jobs were all integral to me being able to graduate from undergrad debt free, and I’m incredibly grateful that that was a possibility for me.
It’s completely okay to take out loans for your education and I know folks who have put in a lot of work to pay theirs off quickly, but I’m super happy that I was able to avoid them altogether and have that head start when it came to saving.
Since my undergrad years I’ve take on a little bit of student loan debt as I began a master’s program this year, but you can read about my plan for that debt here!
What about you? Do you have student loans or no? If so do you regret them? If not, what things made that possible for you?
Over the summer, I wrote a post about the basic math behind figuring out how much money you need invested in order to retire or become financially independent.
Essentially what it boils down to is this: multiply your annual expenses by 25, and voilà! You have your target number. This is because of something called the 4% rule and if you want to understand the why behind these numbers, go back and read that article (it’s linked below to make it easy for you).
I’m bringing it up again because you can use those same principles in reverse to find out how much cutting a monthly or annual expense reduces the amount you need to save for retirement.
For example, let’s say I reviewed my past few month’s spending and found $100 worth of monthly expenses that I could cut. Cutting this $100 from my monthly budget means I now have to save $30,000 less for my retirement.
$100 per month x 12 months x 25 = $30,000
Knowing how much you’ll need to have saved in order to cover an existing expense in retirement can be helpful when making those decisions on what to cut. (You can use the same formula above to figure out how much you’ll need to save to cover any monthly or annual expense in retirement.)
In 2019, the average cable bill in the U.S. was $85 per month. That means to keep cable service in your retirement, you’d need to save an extra $25,500 in order to cover that monthly cost. Meaning that one bill could add a year – or a few – to your working career based on how much you save each year.
Seeing these monthly bills associated with such high numbers might make you feel overwhelmed at first, but I think it can also have a sort of freeing feeling that allows you to feel more in control.
Just like a $100 monthly cost requires you to save $30,000, it’s flipped as well. By finding a way to shave $100 off your monthly spending, you’re cutting your savings target by $30,000 just with that one move.
By opting for a house with a mortgage payment or rent that’s $200 less per month than you currently pay, you reduce your savings target by $60,000. By choosing to save up and buy a used car with cash instead of financing the latest model, you could easily save $400 a month in car payments, reducing your target savings by $120,000.
Don’t go wild and cut everything out just for the sake of reducing that number though. Keep the things that you really enjoy, the things that you value and find meaningful, and the things you don’t mind trading some of your time for. With everything else, get creative and think critically if that extra cost is worth it.
So this week, here’s what I want to know:
What is one monthly expense you think you could cut?
How much less do you have to save because of making this cut?
Leave me a comment and let me know what expenses you’ve opted to drop!
In general, we work to make money. But there are costs that come with our jobs, too.
These expenses (that we may or may not ever think about) affect our true hourly wage. A few of the ways we spend money on our jobs include:
transportation costs related to our commute
professional clothing or uniforms
meals and drinks bought during the workweek
random supplies and gifts we might purchase in relation to our work
With so many people working from home now, many might be realizing for the first time how much their work-related expenses were adding up. When calculating the amount we earn, we really should be subtracting the costs we incur for the privilege of working. And when figuring out our hourly wage, we should also be counting all of the hours we spend on work (including commuting and those late-night work sessions) because it’s probably more than 40 hours a week.
When all of these costs and added time get taken into account, someone who thought they were making around $20 an hour may realize that their actual hourly wage is closer to $14.
Determining a “real hourly wage” in this way is a concept that found popularity in the classic personal finance book Your Money or Your Life. Taking the time to calculate your own earnings in this way can help you understand the value of, and relationship between, your time and money.
For example, my take-home pay after taxes and health insurance is around $18 an hour. However, when I calculate my real hourly wage using the above method, my hourly pay drops down to about $15 per hour (even though I have pretty low costs associated with my job). I don’t need to buy a lot of clothes for work, I have a nice short commute, and pack my lunch most of the time – but the extra time and money I spend on my job still reduces my pay by about $3 an hour compared to what I would have thought.
For folks with long commutes or childcare costs, the difference between their expected and real hourly wage can be significant.
Knowing your real hourly wage can be extremely helpful in calculating how much other purchases are costing you in time – or hours of your life. Now that I know I actually earn about $15 an hour, that means I have to work an hour for every $15 purchase. A meal out that costs me $30 costs me two hours of my time.
Your real hourly wage gives you a very concrete link between your money and the time and energy you spent earning it.
Let’s do another example.
The new iPhone 12 Pro costs $999. Since I take home about $15 an hour, I would have to work for about 67 hours just to pay for the new phone. That’s a little over one and a half weeks of work. Now that I know that, I can decide if that’s worth it for me. (For me, it’s not.)
Knowing your real hourly wage can also encourage you to advocate for yourself or make some changes. This might look like asking for a raise or moving closer to your work to limit the time you spend commuting.
Since buying our duplex in April, our to-do list has had no shortage of things to do. Every time we get to cross something off the list, it seems two or three things have been added to it in the meantime.
Don’t get me wrong—working on the house and starting various projects has been super fun and an awesome learning experience. Plus, I’m incredibly lucky to have a partner who is excellent at planning and research to help me along. But when you’re trudging through any long-term project (whether working towards FI, updating a house, or a major project at work) you’ll have days that leave you feeling demoralized or thinking you’re not making quick enough progress.
To help balance this, it’s important to make sure you set up milestones along the way and celebrate little wins.
Setting up milestones helps you realize the progress you’re making when you’re working on something longterm, and pausing to celebrate little wins is crucial to keeping up motivation.
This weekend we finally started installing the new fence on the rental side of the duplex and installed the new mailboxes (one of our mailboxes was so low to the ground, we got multiple notices from USPS that it needed to be raised). The fence was something that felt overwhelming to start, and we knew it meant long hours outside. We’d been pushing it off hoping for cooler weather to arrive, but Florida was not so obliging. I’m publishing this post on October 27, and today the high was 91 degrees and the heat index felt like over 100. (If you live somewhere cool, frolic in some orange leaves for me, please.)
We knew we’d be getting busier with the upcoming holidays and so this past Sunday, we decided to finally just commit to the project. We made good progress and now that it’s started, I actually feel excited to get back out and finish it.
Enjoy these work in progress photos (featuring the old, touching-the-ground mailbox):
After a very sweaty Sunday and some opportunities to exercise our problem-solving skills, we basked in the glow of our handiwork and a nice cold beer. (Come to think of it, that glow could have been our sweat.)
Sure, we still need to caulk the baseboards, install shelves in our pantry, fully set up my office, build the bench for our dining room table, and lay a stone patio in the backyard – but this fence will be done by the end of this week and we’re going to celebrate goddammit.
Anyways, all of this got me thinking about the important milestones you can set for yourself when taking control of your financial life – after all, that’s a lifelong project! Here are a few milestones that I think are worth acknowledging and celebrating.
Some Financial Milestones You Can Celebrate
Look at the full picture of your financial life. What you have, what you owe, and how you spend.
Save your first $1,000 in your emergency fund.
Successfully track your spending for 3 months.
Fund all of your sinking fund categories in a month.
Pay off credit card/s if you carry a balance. Celebrate each one you pay off!
Open a retirement/investment account (and set up automatic contributions).
Pay off an auto loan.
Save 3 months worth of living expenses.
Handle an emergency expense without feeling (super) stressed about the money.
Have a positive net worth.
Save up a down payment.
Pay off student loans.
Reach a net worth of $10,000
Reach a net worth of $25,000
Reach a net worth of $50,000
Reach a net worth of $100,000
Reach a net worth of $[insert number here]
Pay off your mortgage.
Reach Financial Independence!
There are tons of big and little milestones that are worth acknowledging and celebrating, and the examples I listed above don’t necessarily need to go in that order.
Celebrating doesn’t mean you have to throw party or buy yourself something nice. It might mean cooking your favorite meal, making your favorite drink, telling a friend about your accomplishment, or planning a special night and opening a bottle of champagne.
When I hit a big money milestone, one of my favorite ways to celebrate is to sit with Cassie on our porch, listening to music, drinking a beer, and talking about how wild it is that we’ve come so far in such a short amount of time. It’s simple, but it makes me feel grateful, and hopeful, and filled with a tipsy sense of wonder – which is really what I want out of any good celebration.
Otherwise, in this house, general life milestones get celebrated with really good Mexican food.
What is the next financial milestone you’ve set for yourself and how will you celebrate when you get there?
In my last post we talked about paying off debt, so I figured a natural follow-up would be to talk about credit and how to improve your score.
I didn’t understand credit for a while.
I didn’t have a credit card until my last year of college and was pretty adamant about not getting one. My thoughts were that credit cards were bad and that I would never need one if I only planned to spend money that I already had.
Cassie gently explained to me that I probably needed to get one in order to start building credit, since I hadn’t needed to take out any student loans and didn’t have a car loan. At that point in time, I was pretty much a ghost to the world of credit — in fact, the first time I tried to sign up for Credit Karma, they couldn’t find me.
My principled stance against credit cards was great in theory, but not so great in the capitalist reality we currently live in. And my lack of credit at the time made it difficult to get approved for my first card, which was such a catch 22! (Thanks to Discover for approving me way back when!)
Since my first credit card, I’ve come to be a big fan of the responsible use of credit cards and currently have over $1,500 in cashback and travel rewards saved up for when I can finally travel again.
Understanding how credit and credit cards work helps you take advantage of them, rather than them taking advantage of you.
We won’t be going into all of the details of travel hacking and sign-up bonuses in this article, but we will cover the basics of understanding credit and how to improve your score (so that you’ll be able to qualify for those cards with great sign-up bonuses, when you apply!).
So, let’s dive in!
What Is Credit?
Credit is essentially money that is loaned to you with the expectation and promise that you will pay it back at a later date, usually with interest. Generally, this looks like lines of credit provided to you through credit cards, a mortgage, and other various types of loans.
There are three types of credit: Revolving, Installment, and Open.
The most common type of revolving credit is credit cards. You are only required to pay the minimum balance and the remaining balance rolls over to the next month (revolving).
Installment credit is credit that has a set payoff timeline with a fixed amount due each month, like a car loan or mortgage.
Open credit examples typically don’t have interest and are things like your utilities. You’ve received your water or electricity for the month on credit with the expectation that you will pay for it when your bill comes due at the end of the month.
However, when someone talks about your credit they are usually referring to your credit score.
How Credit Scores Work
Your credit score is a number between 300 and 850 that represents your creditworthiness based on your credit history. There are different scoring systems that have their own unique ranges bands, but FICO is the most common, and their range is as follows:
Excellent: 800 to 850
Very Good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Poor: 300 to 579
Your score is determined by a variety of things that we’ll get to shortly!
Why Credit Scores Are Important and How They’re Used
Your credit score will affect not only your ability to actually borrow money in the first place, but also the interest rate you will be required to pay on the borrowed funds.
The better your credit score, the lower the interest rate. The lower your credit score, the higher the interest rates you’ll be charged to borrow money.
By building up good credit and keeping your score high, you’ll end up saving a lot of money in the long run, thanks to those lower interest rates.
For example, according to Nerd Wallet, someone with a FICO score of 620 would pay $65,000 more on a $200,000 mortgage than if they had a credit score of 760. That’s a lot of dollars!
But aside from interest rates and credit applications, your credit score is used for lots of other important things. If you’re looking to rent a house or an apartment, your landlord will look at your credit score as one factor in whether or not they’ll rent to you. Your auto and home insurance premiums are partially determined by your credit score, too.
For all of these reasons, it’s a good idea to pay attention to your credit and work to improve it. Next up, we’ll talk about how to do that!
What Affects Your Credit Score (and How to Improve It)
You can keep track of your current credit score by using the free app Credit Karma. Most banks and credit card companies now come with some form of a free credit score tracking service, too, which can help you catch fraud faster. If you don’t know your credit score, find it out! This will let you know where you’re starting.
You also have the right to request a free credit report from the three major credit bureaus (TransUnion, Equifax, and Experian) once a year by visiting annualcreditreport.com. Your credit report provides a much more detailed picture of your credit history and the things that are affecting your score. It’s good to look through this once a year to keep your eye out for any mistakes that may have shown up on your report and be unfairly affecting your score.
How Your Credit Score Breaks Down
Payment History: 35% of your score
Your payment history makes up the largest chunk of your credit score and therefore has the biggest impact. That’s why it’s incredibly important to avoid late payments (or missing payments entirely). They can negatively affect your score for up to seven years!
To simplify things, set up auto pay for at least the minimum payment on your credit cards and loans. That will ensure that you avoid the dings to your score and the associated fees.
If you accidentally make a payment a day or two late (and it’s not a common occurrence for you), you can usually call your credit card company and ask them to forgive your late payment this one time and not to not report it.
Credit Utilization: 30% of your score
Your credit utilization refers to the percent of revolving credit you have access to that you are actually using. So for example if you have three credit cards that when added together have a $10,000 credit limit, and your current balances add up to $2,500, then your credit utilization would be 25%. That’s because you are currently using 25% of the credit available to you.
It’s general guidance to keep this amount below 30% to not negatively affect your credit score, and if you can keep it under 10% then all the better!
Credit History Length: 15% of your score
The length of your credit history can either help or hinder your credit score. There’s nothing you can really do here — just be patient! But, this is one of the reasons why starting to responsibly use credit sooner rather than later can be helpful. Getting a 0% interest, low-limit credit card just as you start college (and paying it off consistently and completely) can help you later on. If you’re not a student, you may still be able to access credit cards designed for credit newcomers.
Credit Mix: 10%
Credit agencies like to see a mix of types of credit such as credit cards, an auto loan, mortgage, etc.
I wouldn’t worry about this too much because it doesn’t have that big of an impact on your score, relatively. I recommend having a few key credit cards that you pay off each month, but otherwise, only borrow money for things you need to borrow for.
It doesn’t make sense to take out a car loan and pay interest if you can pay cash. Same for student loans.
New Credit Lines (Hard Inquiries): 10%
If you’ve recently opened a bunch of credit cards or taken out multiple loans, this is a red flag to lenders and will impact your credit score.
When you open any new line of credit you may see your score dip immediately afterward because of the hard inquiry they made. A hard inquiry is when a lender pulls your credit report to determine whether or not to approve you for credit.
Hard inquiries stay on your credit report for up to 2 years, but as long as you don’t more than three or four inquiries in that two-year period, it shouldn’t really affect you too much.
People sometimes get really stressed about the hard inquiries component of credit scores, but honestly, I wouldn’t worry a ton about it. The dip is temporary, and the newly available credit will reduce your credit utilization which will have a bigger net-positive impact on your score.
Important Note: The only time I would say to be wary of opening a new line of credit is if you plan on making a home purchase in the near future. This temporary dip could affect the interest rates you’re offered, and on a $200,000 mortgage that small difference in interest rate can equal a lot of money!
Your payment history and credit utilization are the things that have the biggest effect on your score, so they are definitely the ones to keep an eye on. Make those payments on time and try to keep your debts low and pay them off as soon as possible.
Credit Karma will walk you through each of these factors and explain how they are affecting your particular score, so that’s a great place to start if you’re generally new to understanding the world of credit! And remember, you may not see instant change as you work to improve your credit, but by diligently sticking with it and working to improve your score you will see slow and steady progress and get to where you want to be!
If you have debt, you’re not alone. Not by a long shot.
The average household with a credit card has over $8,000 in credit card debt. And the U.S. as a whole totals nearly $14 trillion in consumer debt, including mortgages, auto loans, credit cards and student loans.
But just because everyone else has it, doesn’t mean it’s a good thing (or healthy for your financial and mental wellbeing, for that matter).
If you currently hold debt, it’s not something to be ashamed of or hide from, but it is something you want to actively working towards eliminating. In this post, I’m sharing six totally manageable steps to help you get out of debt and closer to financial freedom (and an update at the end on our own debt situation).
1. Figure out how much you owe.
The first step is to figure out what your debt is. Too often, we feel overwhelmed by debt and avoid facing the reality of our situation. If you want to pay off your debt (and get rid of the associated stress and monthly payments), you’re going to have to face the facts of your situation and take a close look at the amount of debt you currently have and your current living expenses.
Understanding Your Debt
First things first, you want to get a picture of how much you owe, who you owe it to, and how much it’s costing you.
To do this you’ll want to make a table, either on paper or in an Excel sheet or a tool like AirTable. Go through each of your credit cards, loans, and things in collections and make columns for your remaining balance, the interest rate, your current monthly minimum payment, the due date, the type of debt, and who you owe it to (plus a payment link) .
Seeing it laid out like that can be stressful, but the clearly-displayed information will come in handy when making your payoff plan.
Your Living Expenses
Next, you’ll want to take a closer look at your monthly expenses and how that compares to your income. If you don’t already track your spending through YNAB, Mint, or some other tool, you can pull your bank and credit card statements from the past couple of months and do your best to piece together a picture of your spending.
This step is important for two reasons. First, it’s to assess if your current spending levels are causing you to go more and more into debt each month by living outside your means. If that’s the case you’ll need to have a more extended conversation with yourself about lowering your expenses and your relationship with money.
Second, having this blueprint of what you’re spending money on will help you identify funds you can redirect to debt payoff when we get to step four.
So, if you’re serious about paying off your debt and living a debt-free life, take a break from reading this article to complete step one. Come back once you’ve figured out where you stand. I’ll wait.
Back? Great! I’m so proud of you! Having the courage to face your debt head-on and take stock of what you owe can be difficult, but it is so incredibly important to making the changes that will let you live the life you want. You’ve taken a big and important step already!
2. Pick your payoff method
Okay, next up is picking your payoff method. In the world of personal finance, there are typically 3 methods of debt payoff: The debt snowball, debt avalanche or stacking, and debt consolidation. We’re going to go through them one-by-one so that you can decide which one will work best for you.
The Debt Snowball method is a debt payoff strategy popularized by Dave Ramsey, and many folks swear by it. If you are using this method, you’ll list your debts in order of smallest to biggest. You’ll make your minimum payments on all of your debts to avoid any late fees and negative effects on your credit score, but you’ll throw all of your extra cash at the debt with the smallest balance. Once you’ve paid off your smallest balance, that minimum payment and any extra cash now gets thrown at the debt with the next smallest balance.
While this strategy may not make sense if you are looking at things from a pure numbers point of view, it takes advantage of the psychology of motivation. You’ll be able to see and feel your progress faster, which is likely to inspire you to stick with it and tackle your debt more aggressively.
The debt avalanche strategy is similar to the debt snowball method in that you will pay the minimum balance on all of your debts, but rather than throwing all of your extra cash to the account with the lowest balance, you throw your extra cash at the account with the highest interest rate first. Once you’ve payed off your debt with the highest interest rate, you’ll transition the funds from that minimum payment and your extra cash to the balance with the next highest interest rate, and so on.
This method will save you money and time, as more of your cash will be going to the principle of your debt. However, you may feel like it takes longer to see progress which might cause you to feel less motivated to stick with your payoff plan.
If you have a lot of debt, it might be worth it to look into debt consolidation. Depending on your situation and your debt payoff timeline, this might look like a personal loan with a lower interest rate, or a balance transfer credit card with a 0% interest intro period. If you’re using a balance transfer credit card, be sure to read the terms carefully — some credit cards offer 0% interest for the first year or so, but that term doesn’t apply to balance transfers, and you may get hit with high interest there. So pay close attention.
Consolidating your debt can save you a lot of money in interest and therefore speed up your debt payoff timeline. But it can also seem more overwhelming because you’ll see your total debt in one balance rather than broken up over numerous cards and loans. The even bigger danger with debt consolidation is that if you haven’t adjusted the spending behavior that may have gotten you into consumer debt in the first place, you could just be opening the door to more debt by consolidating your credit card debt and therefore opening up your credit cards that had previously been maxed out or close to maxed out of their spending limit.
If this is something you are worried about you can call each of your credit card companies and ask if they will lower your interest rate, as this may save you a few percentage points on each. It won’t be as much as consolidating, but it’s still a good idea to do no matter which payoff method you’re using.
Choosing your debt payoff method is a personal choice and will depend on the way you think, your relationship to money, and your motivation. There is no right or wrong choice, no matter what the numbers on paper may say. The right choice is the one that will work and that you can stick with.
3. Automate your debt payoff method
Now that you’ve chosen your payoff method, it’s time to automate it. You’ll want to set up auto pay for each of your minimum payments to avoid late fees and make sure you’re making progress. If you already know you can afford to put an extra $50 or $100 per month to your debt payoff, add that amount to your auto payment on whichever balance you are targeting first (the smallest balance if using the debt snowball, or the highest interest rate if using the debt avalanche).
Making your payoff plan automatic ensures that you’re sticking with your plan, and since the money will be automatically transferred from your account, it takes away the decision-making process and the risk of forgetting or rationalizing your way out of what you’ve planned to pay.
4. Find extra funds
If you’re serious about crushing your debt, or as you get excited seeing the progress you’re making, you may want to find extra funds to attack your debt balances. You can do this in two ways: cut current spending or earn additional income. I suggest a combined approach.
By this point you should be tracking your spending using some form of budgeting app to make sure you’re spending is in line with your income and your debt payoff obligations. If this is the case, run through your categories from the previous month and pick at least 2 or 3 categories that you think you could lower. This might be subscription services, dining out, groceries, or clothing.
Choose a few categories to cut this month and keep track of the savings you make in those few categories, then use that money to pay off more debt. If you can eliminate or lower a monthly bill, great! Now use that monthly amount towards your debt payoff.
The other way to aggressively payoff debt is to earmark any extra income for making additional debt payments. This could mean birthday money, cash your neighbor paid you for dog sitting, a tax refund, or holiday bonus. Using these extra funds to turbocharge your debt payoff is a great way to spend that money.
5. Maintain motivation
If you’re paying off large amounts of debt and have a long road ahead of you, it can feel demoralizing at times. It’s important to maintain motivation on your debt payoff journey, so here are a few suggestions:
Visually track progress
Seeing the progress you are making on your debt pay off journey can be a big motivator. Hang your payment tracker on the fridge or over your desk; basically, just put it somewhere that you will see regularly. If your partner or a friend is also trying to pay off debt, you can even create a shared spreadsheet so that you can be motivated by each other’s progress (be careful of the comparison trap, though — they might be paying off things at a faster rate than you, and that’s okay. Your debts are different).
Celebrate the smaller milestones
When you’re on a longer debt payoff journey, it’s important to celebrate milestones along the way to keep you motivated. Here are some small things you can celebrate:
Setting up automatic payments on all of your accounts
Your first $1,000 paid off
The first balance you eliminate
The first interest rate you successfully negotiate down
Designate markers for your journey and be sure to appreciate reaching them (just don’t break the bank with your celebrations!).
Set specific challenges for yourself
As humans, we like a good challenge. One way you can take advantage of this is by regularly creating challenges for yourself to turbocharge your debt payments. This might mean setting a challenge to find an extra $100 this month to put towards your debt. Or doing a “buy nothing” week or a “buy nothing” month in a specific category and using the savings for your debt. It might mean seeing how many thoughtful and creative gifts you can come up with for the holidays to save money. Get creative, and tell someone else about your challenge to add some additional accountability (remember that friend from earlier?).
6. Stay out of debt
It’s super important to also address what caused you to go into debt in the first place. Some debt may not require any kind of examination of your relationship with money, like medical debt.
But if you’re getting out of credit card debt that was caused by high spending, you’ll want to make sure you’re also addressing the habits that got you into debt in the first place or your success will be short lived and you might just end up back where you started. Make sure to live within your means, and think critically about if your spending is aligning with your values and the life you want to live – not just in the moment, but down the road.
My Debt Journey
My wife and I aggressively paid down around $15,000 in debt that we had accrued during a really rough year. You can read about that here! Since then, we’ve also paid off both of our car loans.
On the flip side, we have also accumulated more debt through our mortgage and a 0% interest home improvement credit card that we used to cover our very expensive new hurricane windows for our house.
We could have cash-flowed this update, but it would have meant pulling money out of investments that were earning money. In this case, since the windows came with a two-year 0% interest rate, it made more financial sense to keep the money invested and pay off the balance over the two-year interest free period. We have our auto pay set up so that we’ll pay off the balance a few months before that period is up, just to be on the safe side.
Once we get rid of the PMI on our mortgage, we won’t be paying it off aggressively (right now we have twice-monthly payments set up). I don’t mind having mortgage debt and as a rule, I don’t worry too much about aggressively paying off debt with an interest rate of less than 5%. Since money invested in the stock market will earn an average of 7% annually, my money will likely be better off invested and earn me more than I’ll be charged in interest. This will also be a personal call, because some folks prefer that pure, unadulterated, totally debt-free feeling.
I also recently took out my first student loan since I started grad school this semester (as an undergrad, my RA job and scholarships covered my cost of school). This was another instance where I could have not taken out the loans, but doing so let me keep more money invested and borrow the money while the interest rate was 0%. I plan on paying off this loan before the start of the next fall semester and paying for the second year of my program in cash. My original plan was cash-flowing the entire program, but since we ended up buying a house sooner than we expected (and making quite a few updates) this method gave me more flexibility with my cash and didn’t cost me anything extra.
Understanding and managing your debt can be overwhelming, I know! But it can also help you feel much more in control of your financial life, and that feeling is one worth pursuing.
But, I also love living a good life. I talk a lot about how saving money doesn’t need to mean living a life of denial or feeling deprived – in fact, I would argue that having control of your finances gives you a blissful sense of security and outright joy.
That’s because my philosophy on saving money isn’t one of “making cuts” but of “making choices” and aligning your spending with your priorities. With a few simple tweaks to your life, you could save hundreds of dollars per month and not feel deprived of anything (except stress).
I know—this sounds like a phishing scam or a pyramid scheme, but I’m serious!
Buying the fancy chocolate (but not the fancy car) is one ingredient in the secret sauce to becoming wealthy.
That’s because the fancy chocolate gives you that same sense of luxury and decadence, but only costs $5 more than a Hershey’s bar, while that fancy car will cost you hundreds of dollars more every month. The chocolate bar is literally treating yourself, but the fancy car is just treating you to…more expenses. Your chocolate bar doesn’t need cleaning and maintenance. It just needs to be eaten.
If you try to build in daily decadence without designing a life that cost less (by paying attention to the big 3 categories of housing, transportation, and food) you risk living beyond your means and succumbing to lifestyle inflation. That’s really easy to do with influencers and advertisers constantly selling us the *~*new perfect item*~* we simply can’t do without. Sometimes that item is a $300 pan. Sometimes it’s a brand-new car. Often, it’s a bigger, nicer, more recently renovated house.
But you don’t need that fancy car and you can probably be just as happy (if not more so) in a smaller house. Spend time with your loved ones in that smaller house rather than spending time with them at Chili’s. (No offense Chili’s…Okay, maybe a little offense.)
Lifestyle inflation is absolutely a one-way express ticket to looking cool! And to living in stress city. Nobody wants to live in stress city. Especially not you.
At least once a week I turn to Cassie and tell her that I can’t believe how luxurious and awesome our life is.
Part of this is because I’m acutely aware of how lucky we are compared to others in our life (let alone across the country and world) and I try to make it a daily habit to practice gratitude for this.
But it’s also because our life is just objectively pretty dang great.
We eat delicious food at a beautiful table (that we built). We live in a beautiful home that we’ve fixed up to our taste. We buy A LOT of craft beer and enjoy it regularly on our screened-in porch. I top my oatmeal with dark chocolate, fresh strawberries, and shredded coconut (can you taste the luxury?!?). And under normal circumstances, we travel regularly – last year even paying to bring my two brothers along to Ecuador (where we did, indeed, buy a lot of fancy chocolate).
Not to mention we have family and friends who we love and who love us. I must have been a saint in a past life or something.
So I challenge you to build decadence into your everyday life. Spend extra on the things that truly bring you joy and make you pause to appreciate them, but design a life that costs less on the things that are purely superficial (that’s where the real savings come in).
By practicing gratitude and enjoying the simple pleasures in our lives, we can start to free ourselves from the capitalist trap that more or bigger is better. Instead of fixating on the latest status symbol, focus on cultivating your community and small pleasures instead.
This weekend I was hunched over my computer working when Cassie slid a bowl in front of my face. It was filled with our leftovers from the night before — a Budget Bytes recipe for Creamy Spinach Artichoke Chicken. We had run out of egg noodles, so to beef it up, she made a box of white cheddar mac and cheese and mixed the leftover chicken and sauce in.
I swear to you, it was better than the first night’s meal.
I love leftovers, and I think you should too. They are easy and delicious. They are there for you when you need them. They are the gift that keeps on giving. I mean, really, they should be called lifesavers.
If a recipe won’t make enough for there to be leftovers the next day, I will either seriously consider not making it, or double or triple recipe. And if I go out to eat, leftovers always help me feel like I’m getting more for my money.
There’s nothing better than knowing you already have a delicious meal prepared for the next day that doesn’t require more than heating up and will result in almost no new dishes.
Leftovers help you make the most of the ingredients you buy by letting you make larger quantities, and they set you up with convenient meals down the road to avoid some of the last-minute take out decisions for convenience. If you have more leftovers from a dish than you really want to eat in the next few days, freeze them for an easy convenient meal sometime down the line. We use wide-mouth, freezer-safe mason jars to freeze leftover curry, meatballs, various sauces, and soup.
Not to mention, eating your leftovers helps cut down food waste!
To make your leftover experience as great as possible I recommend the following four things:
1. Invest in a set of quality glass Tupperware
Having a nice set of varying size glass Tupperware will make sure you always have the right container to keep your leftovers in. Plus, glass Tupperware makes heating things up much easier (some are even oven-safe) and they are super easy to clean for those times your leftovers get lost in the back of the fridge (no fighting to remove spaghetti sauce stains).
We have a set by Rubbermaid that we love, but it doesn’t seem to be available from Amazon or Target anymore. We also have some by Pyrex, which are great. But word to the wise: The Pyrex options with the snap and lock lids are great, but the ones with the plain lids suck. The lids chip and slowly fall apart.
2. Know how long things stay good for
If your someone who gets nervous about things going bad, check out stilltasty.com. It’s a website that lets you know how long things stay good for and how to store them. Knowing the proper way to store your food will help it stay better longer, whether it’s leftovers or fresh produce!
3. Make leftover-friendly recipes
I love leftovers, but I also know that some things don’t make great leftovers. Soggy second-day french fries, anyone?
If you’re looking to simplify your week, plan just two or three meals for that week that you know will make delicious leftovers. There are plenty of recipes that I think actually taste better on the second day once they’ve had time to really soak in all the flavors.
Stews and soups tend to make great leftovers, and also pretty much anything you can make in a crockpot.
Here are some of my favorite recipes to make for leftovers:
Yes, leftovers are meant to be simple, but don’t forget you can also revamp them if you’d like some more variety.
If we have leftover chili, we’ll make chili-cheese fries or loaded baked potatoes one night. We’ll use the creamy spinach artichoke chicken leftovers for a decadent grilled cheese filling. Salsa verde chicken will be used for tacos one night and then top a baked sweet potato the next. And sometimes, all it takes is throwing a fried egg on top to make it something new.
I hope this post has rekindled a love for leftovers, or got you thinking about leftovers as the gift they truly are.
A couple of weeks ago I received a reader question about high-interest savings accounts, so I thought I’d dedicate a blog post to talk about them. We’ll go over what they are, when to use them, and how to pick one!
What is a high-interest savings account?
Many folks keep their extra savings either just sitting in their checking account or in a savings account at the same bank as their checking. These accounts typically come with a low interest rate somewhere between 0.01 and 0.1%.
A high-interest (or high-yield) savings account is what it sounds like. It’s an account that will earn you a higher-than-average interest rate on your saved money. This means more money in your pocket. It could be a lot more.
Let’s say you have $5,000 hanging out in your bank’s savings account earning 0.1% interest (this is being extremely generous; my Chase savings account earns 0.01%). Over the course of the year, you would earn $5. Now let’s say instead you put that that same $5,000 into a high-interest savings account earning 1% interest. In this case, you’d earn $50 over the same time period—or 10 times as much.
How to compare high-interest savings accounts
Typically, high-interest savings accounts from brick-and-mortar have come with some restrictions such as high minimum balances or fees. However, given the competitiveness of online banking, it’s become increasingly easy to find a high-interest savings account that fits your needs and is super accessible!
When comparing high-yield savings accounts you’ll want to compare a few things:
Interest Rate: The higher the better.
Required Initial Deposit: This should be an amount that you feel comfortable with. It’s not uncommon to find accounts that require $1- $100.
Minimum Balance: This will be the amount of money the bank will expect you to keep in the account. Make sure this is realistic for you, otherwise you could incur fees. Again, it’s not uncommon now to find accounts that only require a minimum balance of $0-$100
Fees: Is there a fee for maintaining your account or for specific situations, such as dipping below the minimum balance?
Accessibility: If you need to access funds from this account, how long can you expect for it to take?
Between me and Cassie we have had high-yield accounts with a few different banks over the past few years.
I currently have a Marcus high-yield online savings account which earns 0.60% APY (it started at 2.35% when I opened it 2 years ago, but the current economic situation has led to dropped interest rates on savings accounts). I like this account because the website is super easy to use and they have solid communication and customer service.
Cassie and I also keep our joint savings in an Ally online savings account which earns 0.80% APY (this has also dropped since we first opened it, but obviously far exceeds the 0.01% we would earn in our bank’s savings account). Ally’s website is also super easy to navigate and use and they have some neat features, like tracking accounts at outside institutions. Ally also uses Zelle, so transferring money in and out of the account is very fast.
We each previously also had an HSBC Direct Savings Account but found their user interface less than stellar and also had negative experiences with their customer service help (or lack thereof).
Each of these have no monthly fees and minimum deposits/balances of $1 or less.
When should I use a high-interest savings account?
Like any savings account, you can only make withdrawals from your high-yield account six times per month. Because of this (and the fact that it’s your savings account) you’ll want to only put money in this account that you don’t plan on using anytime soon.
It’s a good idea to keep your emergency fund and any sinking fund money that you don’t plan on using for a while in a high-yield savings account. This will let that money work for you and earn you more money.
Since many of these accounts may take 2-3 days to transfer to your checking account, there’s the added protection of it not being immediately accessible. This “out of sight, out of mind” approach to savings can be super effective if you find it hard to not dip into your savings when tempted to splurge.
Also, if you’re someone who has extra money each month but isn’t comfortable investing yet, a high-interest savings account is a good option. Your money is FDIC insured, plus you’ll be earning a bit of interest.
So, whether you’re saving for a down payment, a big vacation, or peace of mind – put that money to work in a high-yield account.
Now that you now the basics, I want you to open a high interest savings account this week and set up automatic deposits to it, even if it’s just a buck or two.
When you hear the terms “insourcing” and “outsourcing”, you probably think of businesses and big corporations, but it’s a framework we can also apply to our individual lives and households as well.
Over the past few decades, millions of folks have begun outsourcing more and more tasks in exchange for money. Commonly outsourced tasks include things like cooking, childcare, yard work, general DIY tasks, house cleaning, tax preparation, car washing, moving, drink making, and tons of other small and large tasks.
Some of this outsourcing makes sense given the rise in dual-income families — sometimes you need that extra support and you just don’t have time. But I would also argue that both our wallets and mental health might stand to benefit from insourcing a few more chores and tasks.
What we’re able to insource will look different based on the amount of time we have, our physical ability, and a whole host of other factors. Here are a few examples from my personal life to get your brainstorm started.
To have regular upkeep of the yards on either side of the duplex we own would be around $160 each month.
Instead, I spent around $300 and bought an electric mower and trimmer to do it myself. That means after 2 months, I’ve already paid for the equipment I now own.
The mowing itself takes me about 4 hours in total each month. This means I’m essentially getting paid $40 an hour to do my own yard work because I’m saving $160 in exchange for 4 hours of my time. I don’t even make $40 an hour at my salaried job, so it wouldn’t make sense for me to work more hours at my job to pay someone else to do this.
On top of the financial benefits, it also gets me outside in the fresh air and doing light exercise a few times a month. I might be sweaty when I finish, but I always feel accomplished and less stressed. Honestly, it’s quite therapeutic.
Cooking Our Own Food
Another area of my life where I save money by insourcing is food.
Throughout the month I would say our cost per serving for the food we cook ourselves averages somewhere between $3 and $4. My cheaper meals, like bowls of oatmeal or pasta, are balanced out by other meals with higher quality meat or lots of ingredients.
When we go out to eat or get delivery I would say our cost per serving averages around $15 after tax and tip, and it’s not wildly uncommon for it to cost us much more than this, especially if we get drinks as well.
Cooking takes time and there are dirty dishes to clean at the end of it, but considering there are tons of meals that can take anywhere from 5 minutes to 30 minutes of active time, that’s a pretty good hourly rate of return.
Plus, eating out takes time as well. This is why I try to avoid eating out for “convenience” as much as possible. Instead, I try to save my dining out dollars for when I’m craving a really specific food, want something that would be difficult to make at home, or am going out to celebrate something or someone.
Not to mention when I eat at home I tend to eat a lot healthier and feel better day to day. I also really enjoy cooking and trying new recipes. I typically put some music on, pour myself a drink, and talk to Cassie about our days while I cook. Cooking food helps me feel capable and is also a skill I love getting to share with friends.
Installing Our Floors
When Cassie and I bought our new house, we knew we wanted to put in new floors before we moved in (OK, Cassie knew and eventually convinced me). We could have paid someone to install the flooring we had bought, but the installation alone would have cost around $2,000 for our size house, plus the materials.
Instead, we watched a few YouTube videos and set out to do it ourselves. We traded probably 60 working hours between the two of us. We effectively paid each of us over $30 an hour by installing it ourselves, since we got to keep that $2,000 in exchange for our hours.
Sure, there are a few places where you can definitely tell it’s amateur work. But overall, it looks pretty dang good and we learned a new skill that has the potential to save us more money in the future!
Getting a Haircut
My last example is my hair! Rather than getting it cut at a salon, Cassie cuts my hair whenever it starts getting a little too long for my liking. We have a buzzer, hair cutting scissors, and thinning scissors and she’s gotten really good at it over the past few years. So good that I actually prefer the haircuts she gives me over the last few I’ve got at a haircutting place.
While this isn’t something that might work for everyone’s hair (Cassie won’t let me cut her hair; she says it’s too complicated), it certainly works for mine and saves me both money and time! Instead of paying $25-$30 per cut and having to drive to the salon and wait around until it’s my turn, Cassie just sets up shop on our back porch and I’ve got a fresh cut within 30 minutes. Plus, Cassie cutting my hair is always a nice way for us to connect, since it combines my two top love languages – acts of service and touch!
While these are just a few examples that are specific to my life, I’m sure there are a few things in your world that you might be able to insource. You might be surprised by how much you could save by insourcing a few more tasks, and you might be even more surprised by the additional positive effects these activities can have on your life beyond finances.