*Today I’m excited to share a truly inspiring guest post from my friend Kate at Making It Rain.* Like many millennials, YOLO was her mantra, but she had a come-to-Jesus moment, and is now rocking her money after just one year. If you’ve ever felt like you wanted to read about money from someone who wasn’t born a perfect saver (which I do, obviously), then this post is for you. Enjoy! -Luxe*
Full disclosure: money has never been easy for me. I don’t know that it ever will be.
I will say this much, though. Money finally makes some sense to me and I feel in control of the financial life I am charting.
A year ago, this all seemed impossible. I was that person who had made a thousand different budgets and stuck to exactly zero of them. I spent frivolously, even during my undergrad years, because YOLO and hey, that’s what student loans are for, right?
It didn’t get any better when I graduated from university. 23 years old with a fresh teaching degree in hand, I managed to score an international teaching position in Southeast Asia. When I landed in Asia, student loan repayment was somewhere on my radar, but I suddenly had more pressing issues to attend to like figuring out how to communicate with my motorcycle taxi driver.
I was an intern but I still earned a very reasonable salary considering the low cost of living in Asia and the fact that my flights and apartment were all paid for by my employer. I started making the minimum payments on my student loans – but it never occurred to me to do anything more than that. Any disposable income I had went straight to booking my next flight to Phuket to island-hop or having fancy brunches at five-star hotels. “You only live once” was my mantra, and I was not going to waste a second of my twenties thinking about savings or retirement.
I relocated to Europe for another teaching position the following year. Despite earning a great salary in very affordable Eastern Europe, my YOLO lifestyle did not slow down and my bank account never seemed to go up. I continued to make minimum payments on my student loans, and threw extra money at my debt when I could – but I had no real game plan. I never thought about when I would like to have my debt paid off or any other financial goals for the future. Retirement seemed like a far-off, elusive concept. I was 25, and it just didn’t seem like something I needed to worry about yet.
Plus I had no idea how to save for retirement – I was not eligible to contribute to my RRSP (similar to a 401K) while overseas, and I felt immediately overwhelmed every time I thought about figuring it out. I told myself I would start thinking about retirement once I had paid off my student loans.
My twenties continued to pass in a blur of uninformed financial decisions and hardcore YOLO-ing. By my third year in Europe, I became eligible to contribute to a pension fund with an employer match – which I turned down. Yep, I gave up free money. The meeting with the financial advisor was totally intimidating and I never ended up setting up my account.
After my stint overseas, I returned to Canada to pursue a graduate degree. I took out another $20,000 of student loans. I made half-hearted attempts to track my spending while I was doing my master’s, but inevitably quit after a couple weeks. I knew I did not have enough money coming in to cover my monthly expenses, so instead I just ignored it.
By the fall of 2016, I had finished my graduate degree and started a new career. Right around the same time, my 29th birthday came and went and I entered student loan repayment – again.
This was a deeply confronting moment for me.
I was 29 years old with little to show for my twenties. Three degrees and an impressive travel CV to be sure, but I had accumulated exactly zero assets and tens of thousands of dollars in debt. I felt sick thinking about it. I strongly believe in the value of travel and experiences – but nothing? Not even a dime in retirement savings?
This was the tough reality check I needed to finally break up with my YOLO lifestyle and get my finances in order once and for all. But I had tried and failed to get a handle on my money a hundred times over with no success. So what could I do differently this time to actually make a lasting change and put my YOLO past behind me?
Here are six things I did over the last year to finally figure out my financial life:
1. I tracked my spending
Like, all of it. If you are going to get your finances in order, you need to get a hold of your numbers. You could decide to track your spending, your net worth, your debt repayment, or your savings rate. But I think there is something really eye-opening about tracking your spending. You probably have no idea how much you actually spend on groceries or Uber each month. I certainly didn’t.
If the thought of manually tracking every single thing you buy makes you die a little inside – don’t do it. Download the Mint app. Link it to your accounts and cards, and it will track everything for you. All you have to do is open the app every couple days and see how you’re doing. It required basically no effort and this was my first real wake-up call that some months I was spending more than I earned.
I used Mint for the first couple months of my financial recovery but then I developed my own spreadsheet to track every cent I spend on different categories like bills, restaurants, public transportation, etc. In it I also keep track of my debt repayment and savings contributions. That means I have to sit down for a few minutes a couple times a week and enter some stuff into Excel. But seriously, it takes about an hour a month to know exactly what is happening with my money. So worth it.
If you get bored of tracking your spending using Mint or a spreadsheet, that’s totally fine but it’s no excuse. Use You Need a Budget. Track your net worth. Figure out what works for you. Many of these approaches only take a few minutes a month to know what is happening with your finances. Five minutes a month to see if your financial life is headed in the right direction? That might be the best investment you ever make.
Whether you use an app on your phone, a notebook, or a spreadsheet – pick your poison and get ready to track your money. If the first approach doesn’t work, find something else.
2. I found my PFBs (Personal Finance Bibles)
I’ll be the first to admit that personal finance can be dry AF. I hated reading anything about money until I stumbled across Ramit Sethi’s “I Will Teach You to be Rich”. This book gave me a long-awaited victory: it turned out I could actually get through an entire personal finance book! It felt like someone was finally speaking my language when it came to money. As I became more curious about how people manage their finances, I stumbled onto some killer personal finance blogs predominantly written by millennial women that were facing many of the same things I was. Learning about how they handle their money suddenly made everything click.
Whether you listen to podcasts on your commute to work, pick up some finance books at your local library, or binge-read a down-to-earth money blog like this one, find a financial voice that you connect with – and read or listen to as much as you can get your hands on. Even if it doesn’t happen right away, your money mindset will slowly start to shift. What I found after inhaling enough personal finance blogs was that saving money actually started to become…fun.
3. I blew off the idea of minimums
Minimums are for suckers. Take the minimum payment on your car, your student loans, your credit card, and figure out how you are going to pay an extra $10, $40, or $100 more than that each month. My minimum monthly payment for my student loans was about $220/month, but that would have kept me in debt for nearly a decade. I was not having any of that.
So I came up with a rough monthly budget to see how I could do better than $220/month.
I jotted down my monthly take-home income and my main expenses like rent, public transportation, groceries, cell phone, and insurance. I compared my total monthly expenses to my monthly take-home income to see what I reasonably had left over for debt repayment. After taking care of the basics, it looked like I had about $500 that I could dedicate toward loan repayment per month. I knew it would be a bit of a stretch, but I also knew that I was committed to becoming debt-free fast and that I could make $500 per month work. I logged into my online student loan account and changed the repayment amount immediately. I also committed to contributing windfalls toward debt repayment, so my tax return and any big freelancing checks went towards my student loans as well. Instead of being in debt for another decade, my loans should be completely paid off in less than two years.
You can do better than the minimum, I promise.
4. I set up separate savings accounts and contributed to them monthly
This approach is revered in the personal finance community, but I never actually tried it until last year. I found an online bank that offers a 1.95% high-interest savings account and opened a handful of accounts with them – an emergency fund account, a travel account, and a home/wedding account. All said and done, this took a total of 10 minutes. Every month, I transferred anywhere from $30-$200 to each of these accounts.
Having separate accounts makes saving way more motivating. Saving seemed so boring before because it was for some generic, undefined purposed. Now that I knew my travel fund would pay for my next adventure, it was so much more fun to divert money into this account monthly. Of the many things I did over the last year to help get my finances in order, this trick might have been one of the best. It was largely what allowed me to pay down student debt, save for retirement, and still travel through Canada, Turkey, and Malaysia in the same year. You do not have to give up what you love to be responsible with your money. Which brings me to my next point…
5. I still spent money on what I love
What do you love? For me, it’s travel. I don’t care about drinking Starbucks every morning, I drink the free sludge at my office and I am totally good with that. If I get to divert the $50 a month I would be spending on coffee toward my travel fund, I am a happy camper.
I avoided getting a handle on my money because I thought it would mean that life would be boring and I would have to stop spending money on things I cared about. In the last year, I have realized that dealing with your money like a grown-up – whether that means tracking your spending, sticking to a budget, paying yourself first, or aggressively paying down debt – frees you up to spend money on the things that you love.
If you love grabbing a Starbucks every morning, go nuts. But recognize that is money you are choosing to spend on Starbucks instead of something else. If you are buying coffee on the daily, and taking weekend ski trips, and joining an expensive yoga studio, and online shopping, and not saving a penny for retirement? Yeah, something’s gotta give. So choose the things you love the most, spend on those, and limit the rest.
6. I figured out how to earn more
There are a couple different ways you can approach this: focus on increasing your income at your day job or invest your time and resources into pursuing side hustles to supplement your regular income. I am currently doing both of these things.
If you go the first route, this might mean investing in training or professional development to make yourself more marketable in your field. It might mean reading articles and watching videos about how to negotiate a raise in your current role. If you have maxed out on raises at your current organization, it might mean polishing off your old CV and getting back out into the market.
I work in the non-profit sector and my employer has essentially had a salary freeze in place for years. I am currently completing an online course and continuing to publish peer-reviewed work in my field, but finding a new job takes time. Realistically, I knew that a side hustle was the direction I needed to go if I wanted to increase my income any time in the near future.
I am not going to preach getting a side hustle to everyone, but it was a big part of what allowed me to get my financial life together so quickly while still getting massages and going on vacation. But given that it is a pretty major commitment to dedicate your few precious hours of free time to a side hustle, I was pretty choosy about what kind of side hustles I pursued. In addition to some large one-off gigs that each earned me about $1500, I also eventually nailed down a couple steady side hustles that bring in around an extra $300-600 per month.
Some of my criteria for a good side hustle were that it had to pay fairly for my time and allow me to work from home. These can be hard criteria to meet in a side hustle, but it was well worth the months I invested to find side income that actually worked for me. Whether you are focusing on growing your income at your day job or finding a gig outside of work, I highly suggest investing your time and resources into long-term pursuits that will grow your income in a meaningful way, rather than spending your time filling out online surveys.
So…how am I doing now?
These six strategies have been absolutely instrumental to me getting my financial life together in 2017. It has been a year of hard won battles but it is so exciting to finally be in a place where I have some financial comfort and stability.
If you feel backed into a corner, totally confused by finances, or just generally overwhelmed by your money situation, I promise you that there is a way to break out of it. And if need more convincing, look at what this former financial flake was able to accomplish in just one year:
Let’s break this chart down a little more just in case these numbers look bananas to you. To be clear, I make a salary in the low 50s. So how on earth did I manage to pay down 14K of debt and save nearly 15K over the course of just one year?
A huge chunk of my retirement savings comes from a generous employer match and some fantastic gains in the stock market in 2017. In reality, I had to contribute less than half of that 11K to my retirement savings. Even if you don’t receive an employer match and you can’t swing much out of your own pocket right away – don’t stress about it. Start with $50 a month if that’s all you can do right now. For now, put the focus on building good habits and it will add up eventually.
A huge portion of this debt repayment and savings came from side hustling. Over the last year, I have earned about 9K from my side gigs. Almost all of that went straight to debt repayment and building up my emergency fund. The rest of my savings? Came from straight-up budgeting and tracking my spending. This practice made me so much more aware of where my money was going and made me excited to always look for an extra $100 a month that I could use toward debt repayment or investing.
I look at this before and after snapshot of my finances, and I can’t even believe that I accomplished all of that in just one year. It may not be easy, but ask yourself: what would you like your before and after to look like one year from now?
So I’d love to hear from you: Did anyone else have a total YOLO approach during your younger years that you are still trying to recover from? What are the single best tips and tricks you have used to recover from your past mistakes and get your finances on track?
Liked this post? Visit Kate at her blog Making It Rain.