|Posted by: HoboSylvain | 2012-02-04 07:43:32 | Dorval, Quebec, Canada|
Keywords: budget, finances, money
|In order to reach a goal, you need to have a way to measure your progress towards that goal. The more objective the measure is, the better: you canít measure your progress on subjective terms (like ďAh! I feel better today!Ē). When talking about money, itís easy to measure progress since itís easily quantifiable, you can count the dollars and it doesnít matter where those dollars are (in your pocket, under your mattress, at the bank, on your credit card statement, etc).|
First month cycle to erase my debts is now complete. For the first time in my life, I have a month-over-month view of my finances. That alone is a stunning fact to me. But itís also a great tool to realize the progress Iíve done. Just applying our mindset to the right goal is a very powerful thing. Iím no longer saying ďI want to get rid of my debt, then save and go travelĒ, Iím now saying ďI have to get rid of X dollars of debt then save Y dollars in order to go travelĒ. The different is important... because in the new attitude, I can measure not only my progress but also set expectations and plans. Itís the difference between ďI want to be debt-freeĒ and ďIf I continue at this pace, Iíll be debt free in 5 monthsĒ.
All this power comes from a simple process of being able to assess a situation and measure progress. Most advisors will recommend building a detailed budget breaking down all your expenses into different categories then sees how much youíre spending in restaurants, movies, etc. Most people knowing me would expect me to jump that train, since Iím so into details. In fact, those people would assume I would have been doing that for years, created a full-featured program of my own with colors and custom graphs.
But I never did a budget, never planned anything on the financial aspects of my life. Going from that state to a fully detailed budget would be a huge jump Iím not ready to do. It might come to that later down the road, but for now Iím not comfortable doing so... so I wonít. The most important thing is to be able to track on a regular basis your progress in a way that suits you... in a conventional way or not. If youíre doing it in a way youíre not comfortable, chances are you wonít do it properly or on the long run.
What I did was create a simple spreadsheet. Iím a programmer, so computers are my favorite tool to work with. But for other people it could be a simple sheet of paper, their bedroom wall or a video recording. My spreadsheet is very simple and goes something like this:
I donít have a mortgage or any other form of debt outside credit card ones. I also chose not to list my investments because I donít want to take them out for now. Technically, I could withdraw all my investments and become debt-free overnight. But even if the short-time goal is to be debt-free, the long-term one is to finance a long trip... so investments will be factored it then.
I rounded the figures to the nearest dollar. The goal is to get a picture of my financial situation: it doesnít matter if Iím not precise to the exact cent. Overall, being off by $2 over a $10 000 estimation isnít important. I created that template and I just add the new months to the right to be able to see side-by-side the fluctuations. The important is the very last line... showing the variation Month-Over-Month (MOM).
After my first month of monitoring, just paying attention to my expenses but without changing anything in my lifestyle or habits, I erased over $1 100 of debts. Having that documented is incredible in terms of empowering the long-term vision.
I began selling my stamps collection on eBay. Iím beginning with my spares. I have accumulated lots of stamps I used for trades with people all around the world to increase my collection. My thematic stamp collection is about famous people and their achievements. I begin with my spares because itís the easiest to do sentimentally... but also because itís the easiest to list, most of them being Canadian stamps. Once the spares are gone, I will begin selling my collection stamps. I also have a large records collection to sell, plus a few furniture pieces.
I think I could get about $4 000 out of those sales to further reduce my debts and to get closer to my goal.
Considering a few new factors like my year-end bonus (coming in this month), months with 3 paychecks (March and August) and my sales on eBay, I can bring forward my debt-free date from September to July. I hope to be able to bring that forward. Then it will be pure savings for my trip.
Itinerary and finances
First year of savings
Spent more, produced less
Totally debt free!
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