The first step in saving for whatever goal you have, becoming debt free or otherwise, is creating a budget! I use the Every Dollar App and I absolutely love it. The basic app and accompanying website everydollar.com are free. They instantly update each other if any changes are made, which makes it a great tool if you're sharing finances with someone to make sure you guys are on the same page. Plus the graphics are super easy to understand, and the whole thing is basically dummy-proof. Also, I can't even believe I have to say this (who do I think I am with this blog... G. Paltrow? RVegan is certainly no Goop.) but Every Dollar is absolutely not sponsoring me, or giving me any money or perks to mention it. I just have fallen in love with this tool.
As Dave Ramsey says, if you want to become a millionaire you should follow the advice of a millionaire. If you want to become a broke person, follow the advice of a broke person. Since I fall under the category of "broke person", you maybe would be wise to disregard all the modifications I have made to the Ramsey plan and just take everything as an entertaining blog post from a flawed 25 year old's perspective while following the true Ramsey baby steps to a tee and laughing in my face.
For me the biggest goal this month has just been to finally get myself on a tight budget. It's just a great way to get permission for spending and saving money so I don't have to worry if I'm putting too much or too little in any category. I don't feel restricted by my budget at all because I know where the wiggle room is if I ever need it. A budget is not what I used to do: Pay all my bills and use the money left over for whatever I wanted. In a good budget, every dollar has a purpose and you should be honest with yourself when creating your budget. For me, personal shopping is not a priority but food is, and my budget reflects that. I would recommend taking a look at your budget before the month begins and tweak as needed. For example I will need to buy a formal dress for an event in September, so I already know I need to add a line item for about $100-$200 the month before. A budget shouldn't be so restrictive that you give up on it because you can't stick with an impossible goal of never having fun again. Any good budget will have money for giving AND saving AND spending. And the biggest piece of knowledge I will forever take with me is to save up money BEFORE I buy something, and never get a loan for ANYTHING. Ever again. Especially not a truck. Learned that lesson the hard way on that one :)
So here is how my budget is broken down. 15% of income to savings, 15% to housing (paying rent or a mortgage for a home base is a requirement of being a traveler, plus I have RV park fees at the locations I go to), 6% to transportation, 7% toward food, 5% toward lifestyle (shopping, personal money, etc) 5% towards taxes/fees, 2% towards giving (I hope to grow this number) and 45% towards debt repayment. Once you open the app you will see you're not expected to designate percentages because that would be a really bass ackwards way to budget. You plug in your real dollar numbers and the percentages will automatically populate. I have just chosen to redact my numbers for privacy reasons. If you want to know how much a travel therapist makes on average, check out THIS article that I found with fairly accurate information.
I did just write my entire last blog entry about getting out of debt with gazelle intensity. However...I consider myself a gazelle with 3 legs. I will 100% admit to not following the Dave Ramsey baby steps. If I was following those steps, my budget would look a lot different. I would not have more than $1000 cash on hand, I would not be spending any on savings/investment/retirement, and I would probably cut my food and lifestyle bills in half. That would bring my dept repayment up to around 65% of my income. I also would not be taking vacations (like the 3 week road trip I'm about to take with my mom) so my income would rise by about 8%. Also I still use credit cards (a bad word in the Ramsey house) because I have never had credit card debt, never plan to acquire credit card debt, and I pay my balance in full every month while receiving points for flights and gas, and so on.
There are 2 ways to pay off debt faster: 1) increase your debt repayment percentage or 2) increase your income. Last year I was putting 25% of my income towards debt repayment. Now that I have a true budget I am putting 45%. I could be putting in as much as 65% but i'm not because I'm only a 3 legged gazelle. As far as increasing income, my income changes every 13 weeks as I renegotiate a contract, or move to a new contract. I also probably make less than other travel therapists because I choose to take time off between my assignments. I have an RV and I like to go RVing. Imagine that! So one way I could increase income is by not taking these vacations (duh). I also plan on releasing an app (woot woot!), as well as bundled therapy materials for SLPs so I can make some extra passive income. I'm not planning on being the best selling entrepreneur ever, but I want to throw my hat into the ring. The income property I have will start cash flowing for me as soon as I pay off my loan, so there's that as well.
I'm so excited about my budget that I want to tell everyone about it! I want to know: Do you budget? Do you use credit cards? Are you the kind of person who wants to be a 4-legged intense gazelle, or are you ok with being 3-legged like me? Is there such a thing as a "comfortable" amount of debt? Do use EveryDollar or something else? Comment Below!