We’ve established the why and some of the attitudes and beliefs that I’ve held over the past couple years or so in order to make actual progress. Let’s call those the first 2 steps of my financial aid repayment journey. I just pulled up my 1098-E forms for 2014 taxes, and I paid nearly $6,200 in interest last year (almost $11,500 in 2013). According to Mint, I paid just over $27,000 towards loans in 2014. Boom. Let’s get to some of things that I have done to make that sort of insane progress.
Tax tip: You cannot take a student loan interest deduction if your modified adjusted gross income (MAGI) is $75,000 or more ($155,000 or more if you file a joint return). More info at IRS.
Assess the damage. Step 3. Money in. Money out. Simple, right? I felt no control over money. I didn’t think I was spending that much money outside of my monthly expenses, but at the same time, I did not have a good idea of where all my money was going at the time. I was making good money but still felt like I was living paycheck to paycheck. Mint.com has been my savior. For those of you who aren’t familiar, it is a website that you can sync with all your financial accounts (e.g. checking, savings, 401(k), credit cards). Based on the types of transactions in those accounts, Mint will categorize them. You can customize categories, set goals, and my favorite feature is that you can setup text messages and other types of alerts when you get close to your budget for the month. It recognizes patterns of spending too, so I have it text me for unusual spending, which is a great safeguard for theft.
After I set up my Mint account, I quickly discovered where I was financially bleeding the most. Food! I love food, but I had no idea how much I was spending on eating out. I lived alone in a 2 bedroom apartment at the time and cooking for one is kind of a pain, so going out to eat was both convenient and a social event for me. We’re not just talking about an extra $50 each month going to food, we are talking hundreds of dollars going to eating out every month. Insanity. Working in downtown Minneapolis, I was grabbing lunch every single day and most nights was eating out. I also realized how much I was spending on little things here and there online that I didn’t really need.
Another moment of anger. I felt like a victim again to my own habits. I heard a powerful phrase this week, which is “patterns are our prison.” It’s true. Behavior is a bitch. Let’s say you could cut back $100 per month on eating out. That’s $1,200 extra to put towards anything. That’s an awesome vacation, a new television, some bling bling for your honey, or of course, extra each month to pay off some debt.
While I have made progress on this one category, I still have weeks here and there where I am terrible. I slipped and fell back into bad habits for a while and just over a month ago, I started focusing on this category again. I created the following rules for myself to guide my decisions and behavior.
- Eat breakfast at home.
- During the work week, I am allowed to eat out for one lunch per week.
- I can go out for dinner up to 2 nights per week, and if it’s with my fiancée, we try to use gift cards that we received over the holidays or coupons.
- Have only one drink at happy hour.
Rules have helped me. Since I have re-committed to this aspect of my financial wellness, I have saved a lot of money to put towards school, and I lost 7 pounds. If you focus on one goal, you might find ripple effects in other areas of your life. I’ve also coined January as Introvert January. Winter sucks in Minnesota, so I’m hibernating and saving a bunch of money. Food is just one category I changed my spending in and I’ll talk about other categories (some are very embarrassing) in my next post.