Debt has become an insidious part of many of our lives. I’m going to share with you a process for becoming debt free using goals-based-budgeting so you can start living the life you truly want.
There are many reasons why people fall into debt. There are many reasons why it’s hard to get out of debt.
For me, it was a combination of overspending, not paying close enough attention to my finances, not budgeting, and not thinking about my future. So, pretty much all the dumb stuff you can do with money.
Fortunately for me, I pulled my head out of the sand and got my act together in my late 20’s. Fast forward to today, I’ve been helping others use goals-based-budgeting to become debt free for over a decade with great results.
I hope to do the same for you.
What is goals-based-budgeting? It’s an integrated approach designed to create transformational and sustainable change. More simply put, it can help you think about what you want for your life, make any needed adjustments, and get on track to make it happen.
Here’s what I’ll cover:
- Decide on a budgeting method and create your personal budget
- Examine your existing beliefs and emotions around money
- Decide how you’d like to feel and think about money
- Becoming debt free and creating the financial life you want
- Making it real and sustainable in your life
Let’s get started
Decide on a budgeting method and create your personal budget
This post isn’t intended to help you create your personal budget (you can find information on setting one up here), it’s designed to help you successfully use whichever budgeting method you prefer.
Any method, spreadsheets, apps, etc. will work as long as you follow them.
- You can simply and effectively use an Excel spreadsheet or a Google Drive document to keep your personal budget (here’s a template).
- If you’d like to use spreadsheets, but desire more customization and features, Tiller Money is a Partner and has great resources.
- There are also a lot of great apps like Simplifi from Quicken that automate budgeting.
The most important thing to keep in mind when deciding how you’ll track your budget is whether or not you’re going to use it. If the answer is a simple document, perfect. If it’s an app on your phone, I’m all for it.
Examine your existing beliefs and emotions around money
We all have core beliefs about money, whether we’re aware of them or not. Much like your phone has an operating system that’s always running in the background, our core beliefs are always guiding our decision making.
Some of these beliefs we’re given to us at birth, many we’re installed when we were very little, and some have been downloaded along the way.
When you start thinking about yours, you’ll begin to recognize what your current version is. To help this along, go through the following prompts and write down the first thing that comes to mind; this will be your core belief.
For example, when you read “people with money are” your first response could be “evil,” or it could be “generous.” Don’t judge your answers or overthink them. Just write down what comes to mind.
- People with money are
- Money makes people
- I’d have more money if
- My parents thought money would
- In my family, money caused
- Money equals
- If I had money, I’d
- If I could afford it, I’d
- Money is
- Money causes
- Having money is not
- In order to have more money, I’d need to
- When I have money, I usually
- I think money
- People think money
Next, I want you to think deeply about your spending behaviors over the next week. When you find yourself shopping online or having the impulse to spend money, think about what could have triggered the behavior.
For example, perhaps you got bad news and it triggered some form of “retail therapy” where you bought something online. Reflecting on what triggered a behavior will help you to gain a better understanding of your emotions and feelings around money.
At the end of the week, I want to reflect back. If you’re happy with your beliefs, feelings and behaviors around money, excellent. If you’re not, I’ve got good news; you can change them.
Decide how you’d like to feel and think about money
Once I get a promotion, then I’ll be happy. Once I get that house then I’ll be happy. Once I
I’m debt free, then I’ll be happy. Does any of that sound familiar?
We have an odd relationship with goals and happiness, and too often, we think about them
the wrong way. So, instead of thinking “once I get X, then I’ll be happy,” decide how you
want to feel, then think about why you want what you want.
I’ve found word association helps me to get clear on how I want to feel. For example, when I hear debt free, I feel relieved and happy. I have really good and strong feelings around being debt free, so this is a clear priority for me.
Just as with the beliefs from earlier, go through the following prompts and write down the first thing that comes to mind. Don’t judge your answers or overthink them. Just write down what comes to mind.
- Financial success
- Debt free
- Good with money
- A career you love
- Dream job
- Love you work
If the idea of being debt free makes you as happy and relieved as it makes me, it’s probably a top priority for you (which is why you’re reading this in the first place). So, we know how you want to feel, let’s create a plan for making that desired future your current reality.
Becoming debt free and creating the financial life you want
The real value in goals based budgeting is creating an emotional connection with any difficult decisions and or actions. The emotional connection will help make those decisions and actions easier to make and do.
Becoming debt free will require you to make more money, live on less, or a combination of the two.
How could you make more money? Could you get a promotion at your current employer? Is there training you could get or a certification that would allow you to earn more? Perhaps it will be necessary for you to get a new job?
Do you have the time, attention and energy to take on a secondary job? If you do, there are a lot of opportunities to earn extra money, check out SideHusl.com for more information about good opportunities.
Having additional money coming in can make it easier to pay debts and become debt free.
If becoming debt free at your current income level is your best option, there are three key areas to focus on
- Food away from home. Pre-pandemic, Americans had begun eating over half of their meals out of the house. This can be an excellent and immediate way to cut down expenses and to start saving a meaningful amount. This was an area I personally spent way too much money on. If you’re in the habit of eating out purely out of convenience, this is an obvious area to focus on.
- Transportation. We, myself included for years, spend way too much money on cars. Is there an opportunity for you to downsize to save money?
- Housing. Our homes are often the largest purchase of our lives. Making a bad decision and becoming “house poor” can have far reaching negative impacts on every aspect of our financial lives. Is there an opportunity for you to downsize your living arrangement?
I know. The thought of cutting down on eating out, and downsizing your car and house is a lousy one. But keep this in mind; these changes are temporary.
I’m talking about taking a momentary step back so you can begin taking important steps forward.
Becoming debt free will provide you peace of mind. It will allow you to get on track with your other financial goals and objectives. It will set you up for long term financial success. Which is something we all want, and something I want for you.
Finding the money to pay off your debts is a key step in your debt free journey. You can access our Get Out of Debt course at no charge here.
From there, when you complete it, reach out to us and we’ll give you access to our Saving and Investing course at no cost which will help you map out your financial future.
Making it real and sustainable in your life
Fewer things are more integral to your financial future than becoming debt free. Once you do it, you’ll have changed the course of your financial future and potentially the financial futures of the people you care most about.
As you’re beginning your debt free journey, it’s important to review your spending and budgeting on a monthly basis. After one year (or once you’re debt free), you can shift to quarterly reviews.
It’s a best practice to schedule this review on the same day and time each month. For example, the first Saturday of the month at 9am. Scheduling this meeting with yourself (and your loved ones) will protect the time from being interrupted by some other event.
Eventually, you may find you enjoy going through your budgeting process. Once you break free of debt and you start accumulating assets and investments, it will become a much more fun exercise.
If you’re ready to take control of your financial life, check out our DIY Financial Plan course.
Connect with one of our Certified Partners to get any question answered.
If you’d like help getting on the same page with your partner, check out our Same $ Page Course.
If you’d like to help your kids get good with money, check out our Teaching Kids about Money course.
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Here are some applicable episodes of the LifeBlood podcast
Good luck on your journey!
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