Personal Finance Update
February 14, 2010 3 Comments
At the beginning of the year I wrote an article titled Attention to Detail: Finances where I discussed my financial situation as being weak. Having focused almost entirely on debt elimination, I have left myself in a position where my goal of becoming debt free is able to be undermined in an instant.
While I was paying off debt, my savings account was ignored and I emptied my Emergency Fund in order to pay off the last of my Auto Loan. While all of my effort has been for the greater good, I have been living from week to week as a result. To find balance in my finances, I made the following declaration:
“I will establish a savings plan to compliment my debt repayment plan. In doing so, I will create a balance in my finances which will help accomplish both goals simultaneously.”
By the time February arrived I still hadn’t been proactive in finding a balanced approach to my finances. Instead, I was focusing exclusively on rebuilding my savings account. I managed to put away $650 in that time, however, my debt repayment plan was pushed aside and largely ignored. I even procrastinated on personal financial obligations in order to boost my Emergency Fund.
While I succeeded in creating a small financial cushion, my other goals slipped through the cracks and I lost an entire month of repayment. Instead of further perpetuating this imbalance in my finances, I made a promise to create a budget that would balance my savings goals with my debt repayment goals. I am happy to say that today, that goal is accomplished.
I have a budget that allows both savings and debt repayment. The only disappointment in this budget is that working at both goals simultaneously slows down progress on each. I had hopes of being able to pay off about $15,000 of Student Loan debt in the next year and a half. This was highly ambitious to begin with and now seems even more unrealistic. Regardless, I will do all that I can to pay down my debt as quickly as my financial situation allows.
In addition to creating a budget, I have created accounts specifically for the expenses outlined in my budget including Household Expenses (Rent, Utilities), Variable Expenses (Cable, Internet, Cell Phone and Food), Auto Insurance and Emergency Fund.
It is a start, and while there are flaws, it is a beginning towards a more stable and balanced approach to my finances.
About Steven
It sounds like you’ve come up with a system similar to YNAB (Google if you don’t know about). I have been doing it for over a year and seriously, that approach has saved us from bankruptcy pretty much. I tend to be all or nothing but YNAB’s philosophy of live on last month’s income has taught me the importance of having cash in the bank. Like you said, if you don’t have a cushion your goals can go into the toilet and you have to be reactive to events.
I like the “live on last month’s income” idea, that is a great way to word it. It sure does beat living paycheck to paycheck and having money in the bank really lowers the stress level, something we can all benefit from! Thanks for the comment!
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