The Fourth Step Towards Financial Fitness

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!