Habits for Financial Freedom

by Liz Allen

Admittedly, this blog is under the influence of a Dave Ramsey fan-girl. For the last 8 years my husband and I have been very focused on financial freedom, tackling the infamous “baby steps” and building the proper habits (and budget) to get there.

Similar to fitness and nutrition, finances and getting out of debt are among the top ranked goals each and every year. With any big goals, we know that it’s the habits we integrate into our daily lives that truly make the difference.

Money can be a very funny thing. It feels real good to have it… but it also feels real good to spend it. Shifting from the mentality of “Keeping up the Jones’s” is not an easy thing to do – but once you form good habits it truly starts to become “the norm.”

“Live like no one else so later you can live like no one else.” – Dave Ramsey


THE FIRST THREE STEPS

Hubby and I have structured all of our financial choices around 7 beautiful Baby Steps we learned from Mr. Ramsey  - but it’s the first 3 Steps where the biggest changes take place. So much of budgeting, paying off debt and getting out of the “rat race” have to do with a shift in mindset and the implementation of good habits. Steps 1 through 3 really help with this shift.


Step 1: Put $1000 in an Emergency Fund


You would think that the first step to getting out of debt would be paying off that debt. Surprisingly… it’s not.

I remember really resisting this step. I kept thinking it was strange that our money was going somewhere besides our loans. But here I was in debt and looking for change - so I let go and decided to trust the process. I did end up finding this step to be a necessary component to making steps forward. When you set yourself up with a safety net, trouble doesn’t seem to come-a-knockin’. But... when we’re not prepared – it seems Uncle “Murphy” wants to move on in.

A flat tire, an air conditioning leak or a trip to the doctor used to be big stressors in my household. Having an emergency fund reduces “emergencies” to minor hiccups – making it easier to focus on step number 2.

Step 2: Snowball your Debt

After you have tucked away your $1000 for emergencies…the real fun begins. Throw all your money at your debts. Sort your debt from smallest to biggest and start at the front. Why not tackle the biggest loan first? The largest interest rate? Simple. You’ll pay off the smallest debt faster than any of the others, giving you more immediate gratification. It’s empowering and exciting to knock out debt - and this faster win will fuel you to keep going and going.

P.S. Mortgage doesn’t count here

Step 3: Now - Save your Money
Same concept of throwing all your money at something – but this time – all that money is yours and stays yours. We all know we should save money, but it's very challenging to do when we've got debt standing in the way.

The remaining steps, perhaps years in the future, offer recommendations on where your money should go moving forward. But, I figure we can save those for later. Financial freedom doesn’t happen overnight.


HABITS TO IMPLEMENT RIGHT AWAY

It all sounds simple right? It’s not rocket science. It sure does read easy. But how do we actually do it? It all starts with the most important tool at your disposal…a budget.

• Make a spreadsheet, use a paper budget or find a software or app. Your budget is EVERYTHING. I use Quicken and LOVE it.

 

• Review your budget frequently to be sure you’re staying the course. Be "on the pulse" - always knowing where you stand. Once a month is not enough. 

• Engage your S.O. in the process so you’re both on the same page. If you’ve got others that contribute to your household spending, you simply can’t go at this alone!

Now, to tell you the truth, when we first sat down 8 years ago and made our first budget, there wasn’t much “left over” for putting into that emergency fund or for making more than minimum payments to our loans. Approximately 60% of the U.S. population lives paycheck to paycheck, and that was us. We had to get a little creative to break that cycle and open up space for doing what we really wanted to do.

• Shop at generic grocery stores like Aldi. The prices on “un-branded” foods can be much more reasonable, there are less options and temptations and you can still find healthy options.

 

• Grocery shop online and select for in-store pickup (our local Walmart does this and it’s so convenient!). This allows you to control your spending a heck of a lot easier than walking around your local market with a calculator. Been there, done that!
• Cut back on eating out as much as you can. There’s no denying the mark-up on food when going out to eat – but did you know the average markup is 300%? If you choose to treat yourself to a cocktail while you’re out, you’re looking at 600%. Often, we choose to swap date nights out for date nights in.
• Pack your coffee and pack your lunch. Eating out may be convenient, but as mentioned before – you’re paying for it.

 


• Cut up those credits cards and make a decision not to take out other loans during this process. It’s almost impossible to make forward progress if your increasing your debts.
• Shift your mentality about spending money on your needs, rather than your wants. We tend to spend more on what we want than we realize.

So tell me, are you working towards your financial freedom? Do you budget your money? I’d love to hear your tips and tricks about staying the course in the comments below!