[Today we have another guest post, this time from MomCents. I’m grateful she is sharing her journey to get out of debt (none of us are perfect!), and her systematic way of using her IT skillz to create a basic loop to keep going through things is genius! It’s like watching your favorite Vine over and over again, except you’re actually doing something productive 🙂 Hope you enjoy it as much as I did.]
[Also, please excuse the construction here…I’m making some changes to the site, hopefully for the better, but since I know nothing about how to do any of this, it may take a while :)]
A little over a month ago, I got my head out of the sand and decided it was time to do something about my financial situation. With over $30K in debt and a plummeting credit score, I knew if we were ever going to get a larger home for our family, something had to be done – NOW.
Being an IT specialist by day, I turned to terminology I knew and understood best to come up with a way to simplify my finances. I’m using a technique called the BASIC Loop. Don’t worry. You don’t need to understand computer programming to follow this method except to know that in computer programming a loop is a sequence of instructions that are continually repeated until a certain condition is reached.
Below are the set of BASIC instructions I’ve adapted to simplify my finances, meet our goals, and ultimately achieve financial freedom.
Behold, the BASIC loop
Automatic & Un-automate
Separate & Consolidate
Consider Again (Loop)
Find Your Motivation
Before you embark on a new system, you have to have a motivation. What is driving you? Why do you desire change? For my family, our son was a huge motivator! We want our little guy to grow up seeing his parents handle money responsibly. We don’t just want to teach him about personal finance, but want him to observe us applying the same principles.
We also may adopt another child in the future; our current 2-bedroom starter home would be too crowded. Through some number crunching, I determined if we eliminated debt and get our credit back on track, we could afford a slightly bigger home.
Having a system in place helps tremendously! Systems become routines, and routines become habits. Every Friday, I chart out what needs to be paid that week. I project one month out and make payments accordingly.
Since I practically live in my Gmail, I create a draft email and on pay days I go down the list…making sure everything is accounted for.
Automate Some Payments…and Un-automate the Rest!
My mortgage and insurance payments are automated. These are fixed amounts that come out on the same day every month. They are a part of my weekly list and I know exactly where they fall in the budget.
However, I find that manually making payments through online systems or bill pay helps me to remain conscious of my spending. Not only that, it helps to catch discrepancies or anomalies with payments. For example, my water bill is typically estimated. One year we had a leak that resulted in a $700 bill! Fortunately we didn’t have to pay the whole thing, but around that same time every year we get a high bill (based on an estimate) and we have to request a meter reading that will bring the bill back down to a normal range. If I automated this bill, I may not catch the error.
Determine which bills it makes sense to automate and set those up accordingly. Come up with a manual system for the remaining bills.
Separate & Consolidate
These verbs are opposite, but when it comes to simplifying my finances I’ve determined that not all accounts can be treated equally. The definition of simple is easy to use. I have a separate bank account for mortgage and other payments that are too important to miss. The result? Even though I have made careless money mistakes, I have NEVER missed a mortgage payment, or been late. On payday, I transfer money over to this account which is then automatically (see above) drafted out on the 1st and 15th.
Our problem is not an overwhelming amount of debt; the problem is it is all over the place! We have over $6,000 of medical bills spanning back at least 3 years. It took an entire day to go through everything! We have bills that are due, overdue, and grossly overdue. There are bills that insurance didn’t pay that I need to dispute and some that should have been covered by my husband’s workmen’s compensation claim; yet others that were coded wrong. I happen to like spreadsheets, so I created a tracker for over 50 different accounts.
I noticed that many of the bills where less than $20, I knocked those out right away. A little debt snowballing to get the momentum going!
Identify Your Hindrances – Then Overcome Them!
As you go through this process, or even before you start the process, identify any hindrances. When I got married, hubby and I tried sharing the responsibility of paying and managing the bills. We tried several different strategies to share the workload. Nothing seemed to work effectively for us. The result was late payments, missed payments, overdrafts and a whole lot of finger pointing. Now, I manage the finances, and I send hubby an e-mail summary so he still sees the financial picture. While I would love for us to sit down for a couple hours a week and do everything together, that isn’t something that he enjoys. It’s simpler for one person (me) to manage our finances.
Consider Again (Loop)
Once you get a system in place, take a moment to reflect and see if it is working for you. Are you keeping up with your budget? Are you meeting your goals? Is the system working for you or is it frustrating? If it is still frustrating it is not simple enough. Simple should be easy! Don’t get discouraged – I had to try a number of methods before I found something that is working for me.
Put your finances where you are. If you are an email junkie like me – use your inbox. If you smart phone is an additional appendage, there are plenty of apps that will help you manage your finances. If you prefer old fashioned pen/paper – that works too.
I’m not convinced there is a perfect system, but there is a perfect system for YOU. The hard part is figuring out what that is.
What about you? What methods do you use to simplify your finances? What do you think about MomCents’ BASIC loop?
[MomCents is a 30-something Christian, wife, and mother of a 2-year old son who is jumping back into the wonderful world of blogging with her attempt to create a PF/Mom Blog. If you’re looking for expert advice, she advises you to stay away! But, if you want to follow the up, downs, twists, and turns of a real person who will make mistakes along the way…stop on by. Hopefully you’ll find a laugh, encouragement, or both! Find MomCents on Twitter & Facebook]