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The Fourth Step Towards Financial Fitness

April 11, 2008 By Megan Smith

It’s been a few weeks, but I am still helping my friend get on the path to financial fitness. You can read the previous steps here, but in short, so far she has figured out how much debt she has, categorized her expenses to figure out where her money goes, and checked her bills for additional services.Since I last talked to her about the subject, she had gathered all of her bills and cut back on some of her services. She realized that like me, she rarely uses text messages on her phone, but was paying $10 a month for an unlimited service. She switched over to paying per message – even at 15 cents a message, she would have to send and receive over 65 messages a month to make that worthwhile. Looking at her bill, she typically had less than 20. So she’s managed to shave what she thinks will be anywhere from $6-$8 off of her cell phone bill every month.

She also realized she was paying for a gym membership and not using it much at all. She looked into canceling her membership, but still has a few months left on her contract that she has to pay for. So while she can’t save any money, she’s decided she’s going to get the most of her money and go to the gym more often. Definitely not a bad decision.

I told her that in my opinion, the next step would be to create some sort of a budget for herself, be it either a categorized budget like YNAB, where she would set a specific amount to spend for each category, or a very general budget where she would allocate $X to savings, $Y to her debt, and $Z to her spending for the month.

I also explained debt snowflaking and the idea of throwing every extra cent she had at that debt to try to get it paid off faster. $3 check from Pinecone research? Put it towards the debt. $6 left in the grocery budget for the month? Put it towards the debt.

One thing that I’ve noticed is that her attitude has changed. When we started, she seemed a bit terrified by her debt, as if it just overwhelmed her and she had no idea what to do. Now she seemed to be almost angry at her debt, and determined to “beat it” as soon as she can.

I reminded her that it is important for her to be putting money into savings to build up her emergency fund, just in case something happens and she needs extra money one month. No need to put more money onto that credit card, after all.

Stay tuned for the next installment!

Megan Smith
Megan Smith

Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance.  It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information.  It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck.  While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan.  I needed to budget.  I needed to know what I was spending my money on.  I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way.  I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.

Filed Under: debt reduction, financial fitness

Comments

  1. J. Savings says

    April 11, 2008 at 3:26 pm

    You = Awesome friend! I think that is wonderful what you are doing. Helping others is always a beautiful thing, ESP when little changes can make such a huge impact!

    I give you the Humanitarian-of-the-day award 😉

  2. Bankruptcy Ben says

    June 1, 2010 at 8:31 pm

    Your an awesome friend but it takes a pretty good relationship for someone to ask for help.

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