Part II: How I paid off $70K in 3 Years - It all starts with a budget

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Paying off almost $70,000 in student loan debt in just over 3 years was a tremendous feat, and I couldn’t have made it happen without a solid budget as my foundation. As much as I would love to share how we did it specifically (and I will), it is really more important that we take a look at the big picture of creating a budget and you can see what your options are. Everyone’s’ financial situation and preferences on specifics around tools to use to manage money and maintain a budget will differ.  

As it turns out, building financial fitness is a lot like building physical fitness.  It’d be downright reckless for a couch potato to start their road to physical fitness by entering the Iron Man, wouldn’t you agree? Similarly, it’d be unwise to set out toward achieving a huge financial goal like paying off enough debt to purchase a small house without any training. 

Before Patrick and I established our budget, I truly was a full-on money novice.  Avoiding looking at any of these details was how I kept calm. Avoidance is no way to tackle your finances, people.  

So where should a budget rookie begin? Start by accepting that a budget is not something you’ll build in one night, and it’s probably something you’ll need to visit and adjust routinely and as circumstances change (prime example – we are having a baby!). It’ll require taking a good hard look at assets, expenses, and all of those great… and not so great spending habits.   

I’ve laid out a few steps that should help get you started on evaluating your financial health and building a good budget framework below.

What do you have?

I think it’s best to start with something positive, so create a Word document or Excel spreadsheet and begin by taking an inventory of your financial assets. 

  • Monthly income

  • Personal savings

  • Retirement accounts

  • Investments

  • Physical assets

These are the things your financial base will be built on, and a handful of these things will be plugged into your monthly budget. 

What do you owe?

Depending on your situation, this part may be rather unpleasant, but it’s absolutely necessary. We may not talk much about it, but debt is incredibly common and it comes in many forms. If you don’t pull back that curtain and take a look, you’ll be doing yourself a huge disservice. Common types of debt include:

  • Student loans

  • Credit cards 

  • Car loans

  • Mortgages

  • Medical bills

  • Other loans

In the same document, make note of the principle amount, current balance, monthly payment, interest rate, and anticipated payoff date (if one is available) of these debts. In a future article, we’ll look at common ways to prioritize debt repayment. For now, however, we’ll just take note of our current debt obligations. 

Where does your money go?

Have you ever gotten paid on Friday only to wonder where all of your money went on Saturday? Trust me, I’ve been there, even after implementing a monthly budget! Tracking spending habits can be tricky and time-consuming, but it’s key to getting a grasp of your financial standing. Don’t think of this step as identifying problems, it’s intended to identify habits. Start by noting monthly expenses that are fixed, or relatively the same from month to month where trimming may not be possible (unless you’re open to having CPS cut your power):

  • House payment/rent

  • Other debt payments (car, credit cards, student loans, etc.)

  • Utilities (power, water, phone, cable, internet, etc.)

  • Child care

  • Insurance

  • Charitable giving

Next, take a look at a few months of your day-to-day spending. If you regularly use a debit or credit card, this is as easy as reviewing a few of your most recent statements. This is a little more challenging if you do most of your spending in cash, but it can be done. By logging 8-12 weeks of individual purchases, you can develop a spending history similar to a bank statement. Finally, group day-to-day spending into general categories like these:

  • Groceries

  • Gasoline

  • Eating out

  • Clothing

  • Household items

  • Luxuries

Your categories may be different based on your spending habits, so tailor them to fit your needs. As your fixed and flexible expenses are identified, categorized, and compared to you monthly income and assets, an overall financial picture begins to develop. 

BUDGET TRANSITION HEADER

In the previous steps, you’ve listed everything you’ll need to plug into your monthly budget, plus a little more. Now here’s where they go as they become your budget:

Net (after tax) income - $

Fixed monthly expenses

  • House payment/rent – ($)

  • Monthly debt payment(s) – ($)

  • Utilities – ($)

  • Insurance - ($)

  • Other fixed monthly payments – ($)

Flexible monthly expense categories

  • Groceries – ($)

  • Gasoline – ($)

  • Eating out – ($)

  • Other flexible monthly expense categories – ($)

Monthly saving/overage - $/($)

As you begin deducting your fixed and flexible monthly costs from your net income, you’ll hopefully find that you have a little money left over.  It’d be even better if you found you have a lot left over, am I right? Don’t worry, we’ll get there, it’s a process. If you tend to spend more than your net income, then you’ll want to adjust your spending habits to prevent building more debt.

After a few months of using this budget, you may find it’s time to make some adjustments, both to the budget and your spending habits. I found my spending habits changed significantly once I become more intentional about how I was using my money. Ideally, you’ll find your leftover funds are beginning to pile up. These funds are great for paying down debt once you have a little savings account set aside. 

When it comes to monitoring your progress, there are countless budget tracking apps available and seemingly everyone has their favorite. Patrick and I got started with GoodBudget and have never looked back, but we have plenty of friends who swear by Mint or YouNeedABudget. In all likelihood, the best budgeting app is the budgeting app you don’t quit using.  Just a note on GoodBudget – it may sound extreme, but every single purchase we make is logged in this app.  It took ~6 months to really make it a habit, but for me personally, logging every purchase vs. having an app that knows and logs every swipe you make helped me tremendously with staying on top of how well I was doing on spending for the month.  We have “envelopes” with names like “gas”, “groceries”, “date nights”, “Chrissy’s Pocket”, “Patrick’s Pocket”, etc.  

Patrick and I reworked our budget for around 6 months before we began thinking about trying to conquer my student loans, and we haven’t stopped budgeting now that the loans are gone. We’ve been budgeting together now for nearly 6 years, and we rework things any time circumstances change. 

In my next post, I’ll break down how we tackled my student loans specifically, but please reach out with any budgeting questions you might have in the meantime! Somehow this right-brain, enneagram type 7 creative has come to enjoy this stuff.  

You can, too!


Make sure you check out Part I of this series if you haven’t done so already!


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Meet the author

Chrissy is a marketer, artist, foodie, and transplant to Texas, originally from Las Vegas, NV.

She graduated from DePaul University’s Driehaus School of Business with a bachelors degree in Marketing. She’s currently finishing her Master of Business Administration through the University of Illinois at Urbana Champaign’s iMBA program (ask her about it - it's an awesome program!). Chrissy currently manages integrated marketing projects for a global food manufacturer based in San Antonio and loves working in the food industry.

In her spare time, Chrissy runs a small calligraphy business, restores vintage furniture for her 1950s ranch-style house, and loves on her husband and dog.

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