It’s that time of year when we all vow to change our ways and resolve to go on a diet, quit smoking, or get out of debt. How many of us actually have a plan in place to make our resolutions a reality? Unfortunately most of us don’t and this is why we are doomed to fail before we even start.
Yes, money is necessary to support our lifestyle, but do we let it determine how we live our lives? The fact is many of us do. We allow ourselves to live up to or above our means which often leads to debt, no savings, and dumb financial moves. Am I guilty? Absolutely! Can I change my money mind and resolve to do better this year paying down debt, saving, and being frugally smart? Of course! We all can but, we need a plan. This year as I change my money mind my focus will be on total debt elimination and savings.
Paying Down Debt
While I don’t have a credit card, I do have a mortgage, a car payment and medical bills to work on. The feeling these debts leave me with is fear. What would I do if I lost my job, couldn’t work, or was hit with additional debts I hadn’t planned for; such as home repairs, additional medical bills, or car repairs?
My emergency fund was completely depleted in 2011 due to a few unexpected curveballs that were thrown my way; divorce, renting an apartment, and medical expenses. Had I been better prepared I could have easily caught the balls, even those out in left field without a hitch.
- Paying off my mortgage early. My mortgage is on a home I currently am renting out. I earn approximately $200 more than the mortgage payment and associated costs and this year that $200 will go towards additional principle payments vs. in my bank account. Goal: Pay down an additional $2400 of the mortgage in 2012.
- Paying off my car. I owe approximately $8,000 on my car. My current car payment is relatively inexpensive and I plan to add an additional $100 a month in 2012. Goal: Pay down the car by $1200. This puts my payoff in early 2013 leaving me with no car payment after that=extra savings for 2014!
- Medical bills. Currently I am on a payment plan of $50 a month for my $6,000 in medical bills. I know I can do better and I plan to up that number to $100 a month in 2012.
- Credit card debt. As I mentioned, I am fortunate enough not to have any credit card debt. Unfortunately millions of Americans do and this should be the first debt you tackle in your plan to change your money mind. Credit card debt usually costs you the most with rates as high as 29%! Many are throwing thousands of dollars away each year in finance charges and fees that could be avoided. If you have credit card debt resolving to make a difference in 2012 will definitely improve your bottom line. There are many ways you can tackle your debt; to review your options check out this post.
When you are in debt saving money seems like an impossible task, but it doesn’t have to be. Again changing your money mind and how you view what money means to you plays a major role in reaching your savings goals. For example, my “get out of debt” goals are lofty—I am essentially resolving to use $350 each month in an effort to get out of debt more quickly. How much will that leave me with to achieve savings goals?
The only way to find out is a careful review of my budget and perhaps a few cutbacks. I found that by eliminating a few things I should be able to save at least $300 a month. Goal: A start to a rebuild of my emergency fund in 2012 of $3600.
Not just Frugal, but Frugal Smart
2011 was indeed the year of extreme coupon madness, a switch to simplistic living, and Groupon. But, how much are these tactics actually saving you and how do they affect your bottom line?
- Extreme couponing. Let’s face it most of us do not have the time to scour circulars, clip thousands of coupons and comparison shop to achieve the deals had by extreme couponers. What we do have is the ability to devote an extra hour a week to reducing our grocery bills by being frugally smart. Clip coupons or print online coupons for items you and your family actually use. Shop smart; I started shopping at a discount grocery chain for meat, produce, and pantry staples. Over the course of this year I have slashed my grocery bill by $100 a month. The price I pay is, the store is not in the greatest section of town, and I have to bring my own bags; a price I am willing to pay to save $100 a month.
- Simplistic living. I have watched many families switch to a “simpler way of life”. They make their own soap, furniture, and even grow their own food. While this works for many you need to determine whether this is a frugally smart idea for you. For my family it is not. The time I would need to devote to these activities is just not available in my 24 hour day where I am currently only sleeping 7 hours a night-a much needed bare minimum for me.
- Groupon. While Groupon is great, are you actually using the deals you score? I tried Groupon several times in 2011 and while the deals seemed great at the time, they really weren’t frugally smart as I found myself purchasing deals I didn’t really need, thus not being frugally smart.
By taking a systematic approach to change your money mind by getting out of debt, saving, and being frugally smart you can have a financially fit 2012.
What will you do to change your money mind in 2012?