How I Got My Financial Life In Order

It wasn't always easy for me to deal with my finances. I used to be happy spending money every weekend on things I didn't need. It wasn't until my student loan payments were due that I realized that I needed to change my ways or I'll end up in a bad financial situation.

Here's how I got my financial life in order:

Step 1 - I figured out my expenses per month. Mint.com was very helpful with this task since I can see all my spending in one place and it was done mostly on my debit or credit card. This was an eye opening experience. I thought I was good about my money. I estimated that I spent under $2,000 a month for all my expenses including student loan payments. I was really off - it was closer to $2,600 to $2,800 per month. At the time, I wasn't making that much more than my expenses.

While figuring out my expenses, I also used this time to gather all the information for my student loans - lenders, principle amounts, total owed, monthly payments, and interest rates and created a spreadsheet. It also helped that most of my lenders were online except for my Federal Perkins loans. I was able to find the information quickly and put all the information in one place.

Step 2 - I created a budget. I use the 50-30-20 rule with my post-tax income. I allot 50% to needs, 30% to wants, and 20% to savings. This number tends to shift from month to month, but not by much. Some months I save more and spend less on wants. To this very day I'm still struggling with this. My budgets are still fluid enough from month to month, but I still have a hard time sticking to it. Maybe I'm being too stringent. I think part of it has to do with the fact that I don't have money set aside as "fun" money. I find myself overspending the month after a super savings month.

Step 3 - I categorized my expenses by wants and needs. This was a bit harder to do. I knew that rent and loan payments are needs. Groceries was a need, but it varies week by week. Dog food was a need and so were the vet visits once a year for a yearly check-up and shots. After sorting through all of this I was able to figure out where to cut the fat.

Step 4 - I made the cuts. I reduced the amount of money that I was spending on groceries and dining out. I was spending enough for two people. I stopped visiting the malls on the weekend for mindless shopping. I was more conscious of the amount of time I spent driving from place to place. I try to do my errands in one trip instead of multiple trips throughout the week. I cancelled my Blockbuster Online subscription since I wasn't using it enough. All these little changes helped me to cuts unnecessary cost from my expenses.

Step 5 - I automated all my student loan payments and savings deposits. It's amazing what this will do for your peace of mind and your bank accounts. I also created a savings account for my dog, Kujo. I started it off with $300 and deposit $25 every month. The goal is to have $3000 in the account by the time he's 10 years old. It will help offset any medical emergency he might have in old age. If he's healthy, then the money will go to the next dog, and so on. I call it my own pet insurance policy.

I've been keeping tracking of all my savings since May 2009. There was a bit of a bump in the road last October when my fiance and I first moved in together. I used my some of my savings to put down the deposit. C has since repaid me for his half. In December, I used my savings again to put down a 20% deposit on my new car. I'm slowly rebuilding my savings, it's not at such a rushed pace as before.

Step 6 - I always pay my credit cards off in full each month and send extra payments for student loans. It's important for me to not carry a balance on my card since I don't want to pay the high interest rates. I also send extra payments when I can to my student loans and have them apply it to my principle. I have Sallie Mae loans and I separate the loan with the highest interest rate into it's own billing group. Once I'm done with that loan, I'll do the same with the next highest interest rate.

It's been a long journey, but it's not over yet. The tough part was the feeling that I was doing this all by myself. I know that's not the case, but it feels like it most days. I have to admit I feel envy sometimes for friends that don't have student loan debt. They were lucky that their parents paid it off. Some of my friends are probably in the same situation, but we don't usually talk about it.

Discussion: Has something in your life caused you to re-evaluate your personal finances? How did it affect you?