Monday, 3 February 2014

January Frugal Fourteen Update

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The main reason for starting this blog is to track my year of paying off my debts. So each month I will update how much I have paid off, and what I have done that month to save money. 

Just before Christmas I got a large, unexpected bonus. For some reason unknown to me, instead of thinking about how I could spend it, I immediately transferred every cent onto my credit card. Instantly a large chunk of that debt was erased (I haven't included it in this update as was prior to January). It was at that point that the idea of Frugal Fourteen began to form. 

At the beginning of the month, through my research, I discovered Dave Ramsey, and read testimony after testimony of people who had followed his Baby Steps to get out of debt - and the massive amounts of money they had been able to 'find' in their budgets to pay down their debts. I was a bit jealous of their successes as I knew there was no way I'd be able to achieve anywhere near what they had on my single income with my outgoings.

Fast-forward to the end of January, and I now see ANYBODY can do it. It is absolutely amazing the amount of money you can 'find' if you stop spending it! It really is as simple as that. There are no magic tricks, no secret formulas. Just stop spending money! 

What I like about Dave Ramsey's plan is the suggestion of establishing a $1,000 emergency fund. At first it was tempting to not set up this fund and to instead pay more on my credit card, but I believe in the principle behind it. There are always financial emergencies that will crop up - 'Murphies' as Dave calls them. Once you have the fund established, you can deal with emergencies without having to take any money away from your debt payments. There won't be that sense of 'one step forward, two steps backwards', as you have a small buffer there to utilise. The second principle of Dave's I like is to pay off your debts smallest to largest. The feeling of satisfaction of making progress helps keep you on track, and if you're on track you're in a stronger position than if you were paying off your debts based on the highest interest rate, and starting to despair of ever actually paying anything off.

So back to me. In the month of January I paid $2,100 off my credit card, and put $1,000 into my emergency fund - a total of $3,100 for January. This figure blows my mind. How on earth did I find three thousand dollars in one month when I've only managed to tread water for such a long time?! And I haven't done it because I had plenty of money in the first place. I earn an average salary, I'm a single parent, and my rent alone is $390 per week!

But what I have done is develop gazelle intensity. Everything revolves around Frugal Fourteen. While other people are going out for coffee, buying lunch and shopping in the summer sales, I'm at home writing budgets and looking for rockbottom recipes. I write down every day what I spend and get excited when the 'No Spend Days' start to rack up. Every time something costs slightly less than budgeted for, the remainder gets transferred to my credit card. When a little extra money than expected comes in, it's immediately transferred. Literally every spare cent goes on my debts. Food represents money so nothing goes to waste and if my colleague brings me her leftovers, then that's what I'm having for dinner. When I'm watching tv in the dark at night, I'm thinking of ways of saving money that I might not have considered before. When I'm eating beans and rice for dinner, I'm thinking about how far I'll be able to stretch what's left. Gazelle intensity

My standard expenses each week/month are rent, food, power/water, petrol/car, phone/Internet/mobile, insurances, school bus and debts. I've cut everything else out. I have no 'allowance' nor any categories for eating out, clothing, etc. In the month of January, outside of these standard expenses, I spent a grand total of $32. Thats less than $8 a week in miscellaneous items!!! And I plan to spend even less in February. THAT is how you 'find' extra money.

In addition to cutting back, I also set a goal to make some extra money. I sold several items on trademe that brought in $150. I did some extra work via my website business too. If I didn't have my own side business I would have channelled my energy into looking for other ways to make money - babysitting, mystery shopping and onselling just to name a few. I won't have the ability to make extra side income like that every month, so I will still investigate all of these options.

Ways I was frugal in January:

~ 25/31 days were No Spend Days!

~ No takeaways, alcohol, grabone vouchers, new clothes, shopping, eating out - things that used to cost me a lot of money each month.

~ My colleague brought in leftovers for me that her family weren't interested in, several times, and I gratefully received these.

~ I made a watering can.

~ I used paper towels instead of toilet paper for one day rather than go to the supermarket, as I would no doubt have wanted to buy more than just toilet paper. When the paper towels have run out, I won't be replacing them, I'll be using cloths instead.

~ I didn't use any lighting at nighttime except for when in bathrooms/bedrooms.

~ I didn't use the dryer.

~ I only used the oven when I had multiple things to cook.

~ I made my own bread.

~ I made the most of free, stale buns.

~ I 'made do' more times than I can remember, rather than spent money.

~ I put all leftover money on my credit card, rather than considering it 'leftover money'.

I couldn't be happier with my efforts so far!

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