Friday, January 21, 2011

Day 100 - Step 8: Cut Back Where You Can

January 22, 2011

I have developed a guide to help you (and me!) achieve the mindset and principles required to successfully become debt free.  This is the eighth in a series of posts about my Twelve Steps to Debt Freedom.

Step 8: Cut Back Where You Can
Image: renjith krishnan /
Day 100 feels like a huge milestone to me.  Partly because of the fact that I have actually stuck with a difficult task for 100 days, and partly because we have made so much progress.  In the past 100 days, Mike and I have paid off the same amount - $22,000 - that it previously took me 18 months to pay off.  Talk about progress!  A word of advice: When it comes to the Twelve Steps to Debt Freedom, don't expect to get everything right immediately.  Each step I discuss includes advice based on the mistakes I have made up to this point.  I hope to pass it along so that it doesn't take you as long as me to figure out how to pay off your debt.  Now, on to Step 8: Cut Back Where You Can.

I spent some time looking back at my archived posts where I discussed the spending cuts Mike and I made to our budget.  On Day 18 I discussed our budget for the month of November.  We decided to completely cut cable TV, eating out and spending money that month.  Day 25 talked about my previous budgeting habits and how I cushioned my spending categories so much I was living a relatively good life with a lot less progress on my debt payoff goals.  During the mid- month report on Day 32, you can see that there were even more cuts to the budget for unnecessary items like a wine club and an online fitness tracker.  Finally, you will see we hit some rough patches in December (see Day 51) but weathered the storm and made it through the holidays.

Now that you have your budget down on paper, it might be time for you to do some expense cutting of your own.  A few words of advice:

Don't expect to get it right the first time.  Although most of us are used to a lifestyle that includes instantaneous access to most everything, don't think that you are going to be able to get the right expense balance immediately.  It has been 100 days since we really got serious and it has only been in the past couple of weeks that our budgeting habits have really started to click.

A budget is not something you create once.  In the past, my attempts at budgets were the "one size fits all" method.  I tried to make every month's expenses fit into this one specific mold.  In my opinion, this is just a waste of time that results in never looking at the budget again after a few months of failure.  Recognize that what you spend in December is most likely very different from what you expect to spend in August.  Rather than creating one budget, review your budget every period and tweak it for expenses you know will be happening and those you might be able to put off.  Your budget should be a living document that you revise every period, not just at the beginning of your plan.

If you budget for it, you will probably spend the money.  I used to budget about $200 a month for "spending money".  Guess what? I always spent it.  Now, the term "spending money" is banned from our household and I don't carry "spending money" cash around.  And guess what?  I decreased our total expenses by $200.  I know it is tempting to cushion your budget just in case you might need it.  But that cushion was an underhanded way for me to continue with my poor spending habits under some sort of ridiculous justification that it was all right because it was in the budget.

Make your new lifestyle into a habit rather than a sacrifice.  I never thought I would get used to a lifestyle that involved this amount of reduced spending.  I just figured it would be miserable until all of the debt was gone.  Surprisingly, I actually feel good.  I don't feel as deprived or miserable as I did a month ago.  Paying off the student loan a few days ago actually reinforced our new behavior and gave us additional momentum.  Just remember that new habits don't form overnight - it might take about....ohhhhh.......I'd say maybe 100 Days!!!
We are what we repeatedly do.  Excellence then, is not an act, but a habit. -Aristotle
 Be excellent today.  Stay tuned.

Read About Step 9: Set A Goal

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