The good news: this is changing!In addition to making more money, I'm also re-implementing my plan to save money. I'm more or less following the principles of Dave Ramsey's Total Money Makeover, which appeals to me because it espouses a credit card-free, debt-free lifestyle. My desire to be debt free is not rooted in religion or morals. I just think debt's really dumb.
"...but shouldn't you buy it before you have the money?"
Ramsey's six-step plan in a nutshell
- Save up a starter emergency fund of $1000
- Pay off all of your debts, smallest to largest, but do not reallocate the money freed by paying off the first debt. Put it toward the next debt and pay it off faster
- Fully fund your emergency fund with three to six months of living expenses
- Invest 15% of income into Roth IRAs and pre-tax retirement
- College funding for kids if you got 'em (I don't, and don't plan to any time in the next ten years)
- Pay off mortgage early
- Build wealth and give
Step 0, if you are not current on your debt payments, is to get current.
My 'year of broke' is coming to an end
I've written out a budget for the next two months. My income is increasing 250 percent over that period. I'll be getting current on my payments this coming month and re-starting my emergency fund the next (I had it about a year ago, and had also managed to throw $1,200 at my student loans before choosing to travel with the money I'd saved instead of holding on to it. It was fun and I certainly don't regret my awesome month in Southern California or the financial consequences it incurred, but 'lesson learned'). I can't believe that I'm only $3,000 away from establishing a positive net worth.
I'm very lucky because I graduated college with a relatively small debt load (about $8,000). I've never owned a credit card and have never had the chance to get into any kind of credit card debt. My situation got bad, but it could have been a whole lot worse.
Anyway, having a positive net worth has a strong psychological association for me. It's something that I've never really cared much about, but climbing out of the hole symbolizes the the beginning of building real wealth. I should get used to saying that word: 'wealth'. After all, I won't be saying 'broke' much anymore.