It’s happened, friends. The credit card debt is GONE. I don’t yet have a zero balance screenshot for posterity but it’s going to happen. Soon. Yes, I am side-eyeing all of my various financial institutions collectively because I see them making sure charges get posted to my credit cards way sooner than it takes for my payments to get sent over.
Anyway. The fact remains that IT’S GONE! 🎉
ETA: I spoke too soon!
LOOK WHAT HAPPENED THIS MORNING!!!
— Erin | Reaching for FI (@reachingforfi) February 27, 2018
I’m not completely debt-free yet, but all of a sudden that day seems so much closer. After the extra $350 I just sent over to my student loans last week, I’m sitting on about $800 left on those.
I could pay that off in a matter of a few months, but for now I’m going to let it ride at my usual $110/month. I may get bored and antsy and send over more later to pay it off even sooner, but the fact remains that my entire debt repayment story is decidedly unsexy. I’ll maybe decide to write about it later, but me killing my loans in one fell swoop now isn’t going to change how incredibly boring my story is. Plus I sadly am not able to just casually cash flow $800 like that (#goals though).
But all of a sudden debt-free status is imminent. And I’m a planner, which means it’s time for some changes in how I handle my finances.
The 9-5 income
Obviously my paycheck is for covering all of my monthly expenses and for putting aside some extra every month. That’s not changing, and I’m hoping there will immediately be more for putting aside (more cash flow freed up from not paying off debt), even if things may not look all that different to you in my spending reports.
It’s still new enough that I haven’t fully-registered the decrease in my paycheck from my newly-raised 401(k) contribution. As a personal finance nerd, my instinct there is “if I haven’t noticed the change, clearly I can save more. I should up the contribution from 20% to 25% and higher until it hurts.” At least my instinct is to save more instead of lowering the contribution!
Good intentions for myself aside, I’m going to wait on changing that contribution, as tempting as it might be. Not paying down debt is going to mark a major change in my cash flow and monthly finances, and I want to give myself some time to adjust to it and better plan for the future. Sure, I can easily change my contribution if I do set it too high, but I’d rather not.
One-offs (bonuses, tax returns, and the like)
Really I’m writing this part because my $390 Federal tax return (still waiting on the $1,200 from DC) hit my account today, not because one-offs are all that common for me (although I fully expect if I’m getting anything extra from work, it’ll be a bonus to shut me up about not getting a raise). This year, I’m probably putting a fair amount of my return into my emergency fund.
Obviously having money sitting in cash isn’t the optimal use for it, but emergency funds are important and I’ve always felt like mine should be bigger. Sure, I can cover three months of rent, but that’s not an actual three-month emergency fund since life tends to include so much more than my rent payment. I also used $400 of my emergency fund for debt payoff this month since I knew I was getting my return anyway. So I’ll be replenishing that and sending more to my savings accounts.
The rest I’ll throw into my Roth IRA, since one of my goals this year is to fully fund it for the first time ever. For anything else extra this year, it’ll go into the taxable account.
True to word, every penny (aside from the pesky 1/3 I’m putting aside for taxes) of what I make at my weekend job (plus one-offs like the petsitting I did earlier this month) has gone to debt repayment. I cannot tell you how awesome it’s going to feel to actually pocket those paychecks now!
I’m also glad this is happening now in winter when it’s still generally gross weather. I’ve worked A LOT of my weekends since I started this job in October; if I didn’t work at least one shift, it was because I was out of town or otherwise couldn’t (like the weekend of my chorus concert). That’s been great from a money standpoint, but it’s tiring as hell. I’ve promised myself that I won’t continue at this pace, especially when the weather gets better. It’s important to have free weekends for hiking season!
But working less often obviously means I’ll get paid less. That’s going to hurt a bit from a numbers perspective (I’ve certainly enjoyed the side-hustle numbers I’ve been posting lately), but at least from here on out it’s all gravy.
My post-debt plan was this:
“After that I’ll probably split it about 50/50 for building up my emergency fund and for my Roth IRA and taxable accounts.”
Given that I’m probably going to use a fair amount of my tax return for bulking up my emergency fund, I’ve decided not to make that a priority for my part-time paycheck; investment options it is! For now I’ll split it 50/50 between the Roth IRA and my taxable, but I reserve the right to change my mind on that allocation at any time.
I also said maybe I’d be less responsible and send $50/month towards a travel fund. I’m sure as hell doing that!
For one, my brother is maybe going to get a job offer in Amsterdam (not sure, since he’s horrid at keeping in touch with the rest of the family 🙃) and if you think I’m not going to take advantage of that and visit him if it happens, you clearly haven’t been reading my blog for the last 11 months!
Thanks to the never-ending uncertainty at work, I’ve been thinking a lot lately about time and money and the travel I want to do, and I’m 100% sure contributing to a travel fund is a good use of my extra income. So travel fund and investment accounts. That’s so much more fun than sending this to debt payoff!
Ahem, I have a confession to make. I don’t have a budget. At all. Of any sort.
My “budget” involves meticulously tracking my spending via Personal Capital weekly (let’s get real though, I log into that sucker AT LEAST once a day…) and an end-of-month postmortem when I fill out my various net worth/spending spreadsheets and write my monthly spending posts. So I’ve got a fantastic idea of what happens to my money every month, and now over a year’s worth of spending tracked to see what my averages are in each category. If something’s higher or lower than normal, it’s easy to tell.
But that’s a bunch of coasting, and I can imagine it’ll be easy to slowly inflate my spending once I’m not sending every spare dollar over to my credit cards.
Have I done it already with my tax return? Yeah—last weekend my cousin and I went to see Black Panther (a matinee, natch, I’m not trying to spend all my money. But also it was so good!) and then went out to eat after. It’s more money than I would’ve normally spent (and she did say we could go back to her place and make food there but I was the one who said I’d buy her food since I owed her for the movie ticket anyway). But I wanted to spend it and also knew I had tax return money coming in the near future so what the hell.
That’s a one-off and not likely to happen again. But I know myself and I know that it would be so easy to decide to let it happen once a month. And then one or two times a month, and so on. And, because I know myself, I know for a fact that I’ll beat myself up about it anytime it happens.
I’ll just go ahead and save myself that guilt before it ever happens. I might introduce a budget into the mix just for a bit of a challenge and to change things up. Now that I’ll have more money available each month, it’s time to see how far I can kick up the savings rate.