Over several years it has been a goal to get rid of all debt and have financial freedom. This has been a dream that seems to always be so far out of reach. Financial freedom is not just going to be a dream anymore. My family has worked hard and we are currently very close to being debt free, other than our mortgage. There are eight big mistakes that I made on the road to financial freedom. Hopefully, by listing my mistakes, your journey to being debt free will be much quicker.
Financial freedom is not an unreachable dream, it is your reality if you are willing to take the reins!
1. Accumulating more debt
During the time I started paying off debt, I was still using credit cards and decided to upgrade my car. This is one of the biggest mistakes. Do not accumulate more debt!! Cut up all your credit cards, be grateful for what you have, and do not open new accounts.
2. Not following the debt snowball
The traditional debt snowball starts with paying down the smallest debt first and then applying that amount to the next debt and so on. As we started paying off our smallest accounts, I did not put all that money on the next debt. Instead I would increase my payment but not fully commit to the debt snowball. I should have lived like that money did not exist and continue throwing it at other debts. Yet, I decided that my lifestyle was more important. My husband and I make good money we should be able to live like we do. Right?
3. Not sticking to a budget
A budget is important to stick to. Budgets need to encompass all expenses. Budgets are only as good as the commitment from the person making the budget. I left out expenses like fun money, car repairs, vet bills, medical expenses, and etc.
4. Meal plan
Meal planning is huge! With both of us work full-time jobs, and when we get home we do not want to have to think too hard about what to make for dinner. We would go through the cupboards and always ALWAYS be missing 1 or 2 ingredients. Then we would make small trips to the grocery store during the week or we would order take out. The weeks we actually plan our meals and have all the ingredients are the weeks that we come in below budget on food expenses!
5. Not cutting back on lifestyle
This is a difficult thing to comprehend. My husband and I feel that we have worked hard to get to where we are in our careers. We both have good incomes, so we should be able to enjoy nice things. These nice things are new cells phones, new appliances, new car, eating out, going to the movies, and etc. Basically that term “keeping up with the Jones,” applied to us. The funny thing was that we did not even realize that we were just creating a mountain of debt that would take us years to climb over.
6. Work together
My husband and I have never sat down together to thoroughly go over finances. My husband honestly doesn’t even know how to log in to our bank account online. I have always been the money manager of our relationship. This in retrospect may not have been the best situation. I feel that there needs to be at least one strict money manager in a relationship, but both partners need to understand the finances and agree on a budget.
7. Use wage increases to apply to debt
Again this is another key factor on how we got into our mountain of debt. We have always been able to pay our bills and never miss payments. However, as our income has gone up over the years, so has our lifestyle. This is something I wish I would have done from the beginning. When we were young and in college, we lived like we had no money. If I would have continued that for the first few years out of college, it would not have taken me 10 years to pay off student loans! I would have always lived like we had one income and saved/invested the other.
8. Have a clear future plan, understand the WHY?
Mistake #8 is by far the biggest mistake I made throughout my entire journey to be debt free. I did not completely understand the WHY? This is the single most important thing everyone needs to determine for themselves. The WHY? is the reason to stay committed to the debt snowball, the budgets, the lifestyle restrictions, the old car that you drive and the journey to financial freedom. This can be different things for everyone. Could be you want to plan to retire early, show financial leadership for your children, reduce stress, travel or something else. For me, it was each of these things as follows and more. I want to retire before I can’t enjoy life. Be able to teach my children the right way to manage money. Not stress over bills, and be able to travel with my family without putting it on credit. Once I fully understood my future and had a clear vision of what I wanted. The budgeting and lifestyle restrictions were easy.
The American way does not mean that every family has to have credit card debt, a car loan, and live beyond their means.
The 8 mistakes that I made does not need to be the same mistakes that you make. The biggest thing that everyone needs to decide is what is right for themselves and their family. Mistake #8 is the single most important thing to stay fully committed to becoming financially free!