The Seven Baby Steps

As some of you may know, I have been focused on getting my financial life in order so I can then achieve my other goals. My goals are:

1. To pay off all my credit cards
2. Buy a house
3. Start having babies (LOL)
4. Own a business
5. Retire in style

Yes, Goal # 3 sounds funny coming from me, but eventually I do want kids. I say "eventually" because I want to own a house first before I start popping them out. I want to be financially in control because having a baby is expensive. Imagine the expenses involved in buying/owning a house (utilities, mortgage, TAXES, repairs, to name a few), then you add a baby to the list.

Owning a house will always come with financial burden (for lack of a better word), but that's the thing... I don't want it to be a burden. Realistically, having a baby first then buying a house, or having a baby and buying a house at the same time, can be done... And I'm sure it has been done this way more times than not... But wouldn't it be better if my husband and I are financially stable before we have a baby?

I've heard different things from different people. One, told me that it was just another (about) $100 extra monthly expense. I don't believe her. LOL. Maybe for the diapers and food... but in the long run (*ahem* college), it'll be much more. Plus, I want to be able to provide comfortably for my future children. I want to be able to buy every single one of them the latest in toys, gadgets, etc... if I want to. Yes, if I want to. It doesn't mean I will. I don't want to super spoil them, but I want to know that I could.

With these (long term) goals in mind, I have been reading and researching a lot about budgeting, paying off debts, and eventually living debt-free. One financial "guru" really made an impact on me- Dave Ramsey from www.daveramsey.com. Granted, he's selling books and software to help you "change your life," but his website is still full of information on how to get to your financial goals, and how to secure your financial future. I have never read any of his books, nor have I tried his software, but what I love about his website is the fact that someone like me, who knows pretty much nothing about finances, is not overwhelmed by all the information. He (or his people) had listed things in steps, and had explained everything in layman's terms.

One of the things that really got my attention is The Seven Baby Steps.

Baby Step 1 - $1000 to start an Emergency Fund
From what I understand, this is different from a Savings Fund/Account. This is strictly for emergencies, such as unplanned car or house repairs, or hospital bills. I say "unplanned" because if you can somehow plan for it, factor it in your budget without having the need to dip in this fund, then I guess it's not really an emergency. The money in this fund cannot be touched unless it's an emergency. I believe a Savings Fund is for your future and, I guess, for super-emergencies only...

 Baby Step 2 - Pay off all debt using the Debt Snowball
I especially love and agree with this one! You pay off the smaller debts (balances) first, then work yourself up to the big stuff. In this method, the interest rate doesn't matter unless you come across a debt that it pretty much around the same amount. When you do, you pay off the one with the higher interest rate first, obviously. You pretty much pay the monthly minimum for the other bills, concentrating/paying more towards the smallest bill. Once you pay off that debt, you then put whatever dollar amount you were using to pay for it monthly towards the next smaller debt. You keep doing this until all your debts are paid. I love it and its concept! Once you pay off a debt, no matter how small, it gives you this feeling of accomplishment and keeps you motivated. It's like losing weight... Once you see the numbers on the scale going down, it keeps you motivated to stick to your diet!

Baby Step 3 - Three to Six months of expenses in savings
The goal here is to have enough money in your savings to support you and your family for three to six months should you lose your job. First, you need to calculate how much you need/spend monthly, multiply it by three or six. The dollar amount you come up with is your minimum goal to have in your savings.

Baby Step 4 - Invest 15% of household income into Roth IRAs and pre-tax retirement
Once you've accomplished Steps 1 to 3, meaning you have no debt, then you can start investing. I am already doing this (although not 15%) through my 401K. I guess once I reach this step, I should really be investing 15%, and hopefully, I would be more stock market "savvy," that way I would be investing in areas where I can get the maximum rewards.

Baby Step 5 - College funding for children
I didn't really research this area that much, but apparently, you have to figure out how much you should be saving at 12% interest in order to have enough for college. I'm assuming this is per kid. Need I say more? If I choose not to have kids, can I skip this step? LOL.

Baby Step 6 - Pay off your house early
At this point, you should have extra money (even while doing Steps 4 and 5) that you should put towards paying off your mortgage. That way, you'll truly be debt-free earlier.

Baby Step 7 - Build wealth and give
Enjoy the fruit of your success and hard work, but try to leave an inheritance for future generations. Also, don't forget to give back and help the less fortunate ones!

I can't wait to start crossing things off this list. I have definitely met the requirement for Step 1, I am currently working on Step 2, and I am sort of doing Steps 3 and 4. I am getting there... LOL.

xx,
Pamela

"Budgets are a necessary evil."

Frugal - [froo-guhl]
adjective

1. economical in use or expenditure; prudently saving or sparing; not wasteful: What your office needs is a frugal manager who can save you money without resorting to painful cutbacks. 

     Synonyms: thrifty, chary, provident, careful, prudent, penny-wise, scrimping; miserly, Scotch, penny-pinching.

     Antonyms: wasteful, extravagant, spendthrift, prodigal, profligate.

2. entailing little expense; requiring few resources; meager; scanty: a frugal meal.

     Synonyms: scant, slim, sparing, skimpy.

     Antonyms: luxurious, lavish, profuse.

(Definition courtesy of: www.dictionary.com)

 

-o-o-o-

Ever since I got my first job at the age of seventeen, I have always been financially independent from my parents. I never asked them for pocket money, or allowance. I would buy my own clothes, shoes, etc. And since it's my own money, I didn't have to explain my expenses to my parents. And maybe it's this taste of "independence" that got me where I am today- a person who needs a crash course on frugality.

I have long achieved financial independence, now I need to achieve financial freedom. In order to accomplish the long-term part of Goal # 2 from my previous post (to pay off all my debts), I need to be more careful with how, and where, I spend my hard-earned cash. I don't need to be one of those hard-core frugal people. I just need to be better in managing my finances if I were to follow through on this. With this in mind, I have decided to make a list of things I can do to help guide me.

1. No more eating out.
     Unless, of course, it's unavoidable. Let's be realistic: I am not giving up "going out," or hanging out with friends. And for most of the times, going out comes with spending. Plus, sometimes you have to eat out for special occasions. I just have to limit, set budget, and brown-bag it whenever I can. After all, I am trying to be frugal, not cheap.

2. No more unnecessary purchases.
     No doubt, I am guilty of this. However, if I come across the perfect pair of red, strap, stiletto sandals, I will buy it. I have been on the hunt since I broke my favorite pair a couple of years ago. But I will give up buying yarn and makeup (two of my many weaknesses!) I don't need. (Ugh! This means I have to give up my weekly trips to A.C. Moore, Michael's, Target, Harmon, and/or Sephora!)

3. No more new clothes.
     Key word: new. If I want to update my wardrobe, I will try to refashion what I already own, or just borrow from my sisters. That's what they are there for! LOL. Actually, this will give me the motivation to be more creative... Time to break out the sewing machine. :)
4. My savings account is OFF LIMITS!
     I have to remember that a savings account is for real emergencies only. Also, I will try to put a percentage of my paycheck every pay day.

I am also giving myself a weekly allowance, which I can either spend or save. I know it's going to be harder than it sounds but I am willing to really try. Hopefully, this guideline will make it easier. I just have to remind myself that I am doing this to reach a bigger goal- to buy a house. :)

Now since we are on the subject of being frugal, I feel the need to confess... I did just buy the Samsung Galaxy S4 this past Sunday. Did I need it? Of course not, but I wanted it. I promise that this will be my last unnecessary splurge. (I think...)

And speaking of unnecessary spending. I had to go to on an unscheduled visit to my doctor yesterday, which led to me paying a $50 co-pay. It was all because I have a soft spot for spiders. I wouldn't let my co-worker kill a spider yesterday. In fact, I tried to save it. And since I have no fear of them, I decided to bring/carry the little guy outside with my bare hands. Of course, the spider, not knowing what I was up to, decided to bite me in defense. (Oh yes, the irony...)

At first, it wasn't a big deal, but then I started to experience a slight tingling, which then proceeded to slowly spread up my arm. Apparently, that was the spider's venom slowly spreading through. I had to go to my doctor to get medication, which was administered by injection in my uh... gluteal region. Now a day later, the tingling is gone and my arm feels better. All that is left of my experience is a tiny spider bite on my left palm (which now looks like a mosquito bite), a (still) sore butt cheek, and a $50 hole in my wallet. Lesson learned. LOL.

xx,
Pamela

Motivated...

With summer fast approaching, people have been posting before and after losing weight photos of themselves. If I did that, it'll be the opposite. I came across old pictures of myself, and I am now motivated to lose the 15 "happy" lbs. that I have gained since being with the man. LOL. Yes... ever the procrastinator that I am, leave it to me to wait one month before summer to actually think about losing weight. I'll even be satisfied if I lose just 10 lbs since I don't want to be too skinny anyway. I saw pictures when I weighed around 105 lbs, and I did not like how skinny my face looked. I just want to fit into my old clothes damn it! LOL.

So here are the goals:

1. Go back to the gym - I actually miss going to the gym. I know this is going to be challenging time-wise, since I'm usually knitting (filling orders) as soon as I get home from work until I go to bed. But I am motivated now... I just need to convince one, or both, of my sisters (or my best friend) to be my gym partner. The husband is so diligent about going that it makes me feel like a complete fat ass. Who wouldn't? He goes to the gym at least 3 times per week while I sit on my ass, catch up on my shows, knit, and snack! Which brings me to goal # 2...

2. Cut out junk food -  I love to snack, and I do mean I love to snack! And it's usually not the healthy kind... Chocolates, donuts, danishes, cake, ice cream,  gummy candies just to mention a few... I need to either cut way back on those, or at least, replace my snacks with healthier, less fattening options. I need to seriously control my cravings... I am a bit of a control freak so there should be no problem with that... right?

3. Drink plenty of water -  More water in your belly means less room for junk food to fit... and you'll feel full faster when eating. I definitely do not drink the required amount per day. Now is a good time to start... :)

4. Eat in moderation - YES! The way I eat you'd think that it was my last meal! I need to learn to stop eating when I am full. Before I start to feel full would be better! LOL. I read somewhere that multitasking while eating is a big no-no since your brain doesn't register that you're full right away... Your brain, I guess, is too busy doing other stuff that... and maybe it's a prioritizing thing on how important the things you are doing are... but it ignores your stomach until the last possible second. Plus, if you're not doing other stuff while eating, you're able to savor and enjoy the meal better, which means the meal will leave you and your stomach more satisfied, which means less snacking later...? (Something like that... It's all science, really... LOL.) Anyway, I am very guilty of this. I almost always multitask when eating. I hate the feeling that I am wasting time, and that's how I feel when I'm eating and not doing something else, like reading or watching t.v. I find it funny that I feel that way since I am a self proclaimed procrastinator... Maybe I just need to...

5. Manage my time better - Another YES! If I get a handle on this, I'd be able to go to the gym everyday (right...) and still have time to do my knitting. Plus, I'd have time to do my other crafts, read, clean, and go out and chill! Think of the endless possibilities! LOL. But seriously, I do need to manage
my time better. First step: buy a planner! Or just take advantage of  the calendar feature on my phone...

I am so excited! And now that I have written this down, it makes it almost official. Like I need to follow through with this, or the blogging community will come after me and tie me to a stake. Who wants that? LOL.

Well, today is Thursday, May 17, 2012... Day 1 starts now... let's see what I can accomplish today... Wish me luck!

xoxo,
Pamela