Inside the Guide, Section 5 – Finances
People often wonder what drives me to be so thrifty.
The answer is simple. I was raised in a single-parent home, in a series of rental houses, and we never had enough money. I have sad memories of bare cupboards, food stamps, government cheese, and powdered milk. I remember a school field trip day when we were supposed to bring a sack lunch. I went without lunch that day, because there was nothing to bring. Most significantly, I remember feeling worried and insecure far more than a young child should.
Because of this, I decided that my children would always have a stable, secure, and comfortable home. However, my frugal life actually began in high school. I wanted to go to college, so I saved every paycheck from my part-time, after-school job in a hospital kitchen. In college, I worked a full-time job while taking a full-time course load, until I finally received an academic scholarship in my senior year. I completed my BA degree in 4 years, with a double major, and no debt. I’m a big believer that financial success is not determined by how much money you earn, but by how much of that money you keep. If you want to keep more of your money, the first thing you need to do is get off the debt rollercoaster. My husband and I did it, and so can you. We have no debt–no mortgage, no car payment, no credit card bills. Everything we have, including our home and our vehicles, is paid for. No, we don’t have a 6-figure income, and we didn’t win the lottery or inherit a big pile of money. We just worked really hard, made wise investments, and were very careful with our money. More importantly, we’re still careful. After our mortgage was paid off, we didn’t say, “YIPPEE! Now we can spend!” We just went about our life as we always had. True frugality is more than a means to an end–it’s a way of life.
If you want to get out of debt, you need to do these two things:
1) Know how much you owe. Exactly. To the penny. And to whom.
2) Make a plan for paying it off.
The “Finances” section of the Home Management Guide can help you get your finances under control. In my finances section, I have a current personal financial statement. In our 7-year journey toward debt freedom, we made an updated financial statement every six months. A financial statement helps you monitor your progress, because it itemizes your assets and debts, and allows you to calculate your net worth. Watching your debt drop, and your net worth increase is very motivating!
I also have the following:
-Our monthly budget
-A calendar showing when all of our bills are due
-Helpful articles about money management
-Account information. If you choose to keep this in your binder, you must keep your binder in a safe place. Don’t take it shopping! This is not something you want to forget at the grocery store.
I also have the plan that we made to achieve debt freedom. This is inspiring to me, because it’s a reminder of our lofty goal, and how we achieved it by working together. Our plan was very simple. On a piece of ledger paper, we listed all of our debts, from the highest interest rate to the lowest. For us, paying off our debt involved selling a lot of stuff (see The First Step), so we decided what to sell, and when. Every time we sold something, we applied the money to the debt with the highest interest rate. When we paid that one off, we started working on the debt with the next highest interest rate. We kept this up until every debt was paid. It took 7 years.
Making the plan was the easy part. Sticking to the plan meant a lot of persistence and hard work. If you want to get out of debt, you’ll have to work hard too, but I’m here to help! The first thing we’re going to make for your “Finances” section is a personal financial statement. You can get a blank one from your bank, or you can download one here.
To fill out this form, you’ll need to gather up all of your bills and account statements. It may not be fun, and it will probably stress you out, but when you’re finished, you’ll have a clear picture of your financial situation. This is the first step toward making a plan of action. It’s worth it, I promise.