Creating a Five Year Plan – Part 2A (Debt)

Since I spent the greater part of the day obsessing about my current state of debt, I decided that tonight’s foray into the confusing business of creating a five year plan would be to think about said debt and come up with some solid strategies to start eliminating it. Here’s what I said about debt in yesterday’s blog post…namely that it was time to: “Get my debt under control. It’s going to kill me. Literally – the stress will kill me if I don’t get it under control, and the #1 thing that’s on my mind 24/7 is student loan, credit card, and tax debt.”

So where do we start? I can identify a few different reasons that I’m currently experiencing so much stress re: my debt. While some things can never be changed (off the top of my head, I’d tell my young self to go to state school instead of a Southern ivy, avoid wasting money on pointless bouts of graduate school at all costs, and to never, ever get more than one credit card), there are definitely some goals that I can set right now and then try to work towards. These are (in no particular order):

  • Make more money.
  • Spend less money.
  • Make paying off debt my top priority.

See, that was easy, right? Totally. Kinda. Not really. But whatever, I have to try. So let’s break those major goals into smaller tidbits that start giving me at least the semblance of a debt-destroying road map, shall we?

Make more money.

  • Earn more money at my job. This could entail getting a new job that pays me more, getting a second job, asking my clients for more money, or any of the above. I happen to like the freedom of my freelancing schedule, and I’m counting on that freedom to give me the ability to take off for Santiago de Compostela one day in the next couple of years, so I’d like to keep the job I have. This means that I need to get a second job. However, since my primary job isn’t paying me what I’d like, to make it viable I also need to ask my clients for more money. 
  • Sell things that I own. I’m getting ready to go home and do this tonight, in fact. I’ve been a collector for much of my life. I’m constantly picking up knick knacks and trinkets and electronics that I really want at the time, but later just leave laying about the house. When I first moved into my own place a few months ago, I sold some of those things. Now it’s time to catalog and sell the rest. 

Spend less money.

  • Keep a budget document. I have a budget in an Excel file. It helps me keep track of my bills, but it’s not helping me keep track of how to cut costs.
  • Stop overspending on food. It’s my #1 expenditure each month. I spend WAY too much money on food, and that’s got to stop. As much as it pains me, I need to create a strict weekly budget for groceries and entertainment, and stick to it. $50 a week ($200 a month) should be about right for groceries, one movie a month, and a cocktail with friends every now and then. 
  • Switch to Simple. I’ve already signed up for a Simple account, and have the card, but I’ve yet to have enough money in the bank to switch my funds over to Simple full time. When I do, though, I’ll have a system through which to estimate savings goals and spending limits, and a card that will straight up tell me “No, you can’t spend any more money if you want to be out of debt any time this century.”
  • Pay bills first. From now on, bills have to be paid first, while I have the money. Being a freelancer means that you never know when you’re going to get paid next. Luckily, I work for a great company that pays me every two weeks, like a regular employee, almost. But since they’re freelancers, too, sometimes they’re not paid on time, which means that it’s inevitable that there will be times my paycheck will be late. Every time that happens, I’m going to be subject to late fees and overdraft fees for bills due during that pay period. To keep this from happening, I’ve got to pay my bills first, and worry about everything else later.
  • Cut back on expenses. I can quit Massage Envy, Netflix, and dance classes, plus cut back on data use on my phone. If I’m lucky, I’ll be able to get rid of my storage unit soon, too. All of that would save me about $150 a month, maybe a little more. I still want to join the gym eventually, but we’ll figure that out when I get there.

Make paying off debt my top priority.

  • Pay more than the minimum fee. The longer I pay the bare minimum for credit cards, the longer I’ll be paying them – and the more money I’ll eventually have wasted on them.
  • Don’t use credit cards unless it’s an absolute emergency. Lately, I’ve fallen back into using my credit cards when there’s a gap between pay periods. This can’t happen anymore. If I’m not going to be able to eat, I’ve just got to suck it up and deal with it. The credit card is not a solution. Making more REAL money is. I can keep a credit card around for dire emergencies, like the loss of a limb or something, but really craving a cheeseburger does not an emergency constitute.
  • Make a plan (with dates) for paying everything off.
  • Put all of second income into savings account for debt. If I’m honest about what it takes to scrape by, my primary job will allow me to pay the minimums of all of my bills, eat a simple diet, and go to the movies or out to a friends’ house now and then. If I could double my current income, I’m pretty sure that I could pay off all of my tax debt from last year and put away at least a little bit of money to pay this year’s taxes. It won’t be everything I need to cut my debt by the end of the year – not even close – but it will be considerably closer than where I am now.
  • Cut back on life. There has to be a balance. I need to look good to get ahead in my career, but I need to stick within a budget. Maybe $100 a month could go to my upkeep. That would let me get my hair cut every three months, buy most of an outfit every three months, and get my nails done every three months. OK, I need to budget more than that. But we’ll just have to work on that in the budget document, shall we?

That’s as much patience as I have for this right now. Tomorrow I’ll start making micro goals for each of these. Right now I’m going home to sort through my things and see what I can get rid of. Maybe I’ll have a yard sale this weekend…

Click here for the second part of my post on creating a plan to get out of debt.

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