Walk This Way

She told me to walk this way! Talk this way! Walk this way! Talk this way, just gimme a kiss...like this - Walk This Way, Run D.M.C. and Aerosmith

How sobering was that (calculating your monthly surplus or deficit)? Now that I know exactly what I'm working with I realize I have work to do. But where in the world do I start? Well being that I don't believe anyone is the end-all be-all on any subject I decided to read as much as I could from many different sources. My goal is to be financially independent and right now, at the rate that I'm going, it will take me decades to reach this goal. I'm at a small surplus. No bueno. Below are a few sources that resonated with me once I started my research to determine the path to get me where I want to go:

• Dave Ramsey - I listened to his youtube videos and figured out his 7 baby step program (https://www.youtube.com/user/DaveRamseyShow)
• Mr. Money Mustache - This very informative website was shared with me by a colleague who is also on the road to financial independence. This blog is by a guy who retired from his job at the age of 30. (www.mrmoneymustache.com)
• Radical Personal Finance - Another youtube channel that I found very informative, he interviews a lot of people who have mastered the art of personal finance, he even has an interview with Mr. Money Mustache (https://www.youtube.com/channel/UCifiRyWskTPUB5i9f1IlabQ)

I discovered there is a LOT of great information out there waiting for us to grasp. Despite every journey being different, each individual has nuggets of wisdom I can apply to my life and situation. Dave Ramsey will help you organize a plan on how to attack your debt by using his 7 baby step program. Mr. Money Mustache will help you realize how much money you waste each and every day.

Looking at my budget I calculated how much money I put into monthly debt payments. I felt so dumb when I thought about how I could be saving that money or investing into mutual funds. What is worse is when I calculated the interest I had been paying and will continue to pay if I don't make some changes. I have so much I want to share with you but I will take it step by step. Step 1 was to calculate your net income and monthly "out-go" and determine if you have a surplus or deficit. Step 2 is to calculate how much of your monthly expenses is debt payments. Now look at that number and think about what you could be doing with that money instead.

Step 3 is to formulate a plan to attack this debt in a reasonable amount of time. There are several ways you can do this, below are a few noted from my research:

• Reduce your bills. You can find a cheaper alternative to that $200 cable bill. Reduce your plan down to basic cable or no cable at all. Reduce your power bill by finding ways to be more energy efficient. Take public transportation instead of driving everywhere. Stop eating out and cook more. Remember this is only temporary until you are out of debt, not forever.
• Increase your income. This can be done by working overtime, if your job allows it, or by getting a part-time job. You can even start your own business. An unconventional way of increasing your income would be if you stop investing temporarily and/or by claiming the appropriate allowances to pay your exact tax bill instead of overpaying and receiving a refund.
• Sell something. Look around your house, there maybe gold in there that you haven't unmasked.

What I learned is that those who have successfully mastered financial independence found many different ways to accomplish the same goal. For example, Mr. Money Mustache is a huge advocate for riding bikes. It's actually a great way to stay healthy while reducing your expenses. He encourages people to ride bikes everywhere, including to and from work. While Dave Ramsey encourages you to stop investing temporarily, until you are out of debt. He also advocates looking at your tax bracket and claiming the allowances that will ensure you do not get a refund check. In other words, you pay exactly the taxes that you owe for your salary range. This was a huge eye-opener for me as I always looked forward to my refund check. But I realized that I could be using that money to pay down debt each month. Just to give you an example, if you get back a refund of $6,000, that means you are overpaying the government. That is an extra $500 per month that you could be using to pay-down debt ($6000/12 months = $500 per month)

Here are the things I did to work on Step 3:

1. I have been taking Marta since I started working at my current office. ​I fill my gas tank up every 3-4 weeks since I started taking public transportation.
2. I reduced my cable, internet and power bills.
3. I claimed the appropriate allowances so I will not receive a refund next year, I will discuss this in another post.
4. I am starting to list items on Craig'slist to sell

Now that I have made these tweaks, I have a LOT more money to attack my debt. My goal is to be debt free, except for my mortgage, in 3 years or less. If I get rid of all my monthly debt except my mortgage, I would only need a net yearly salary of $30,000 to live on very comfortably. Looking at these numbers made me want to take a shot of hard liquor. I wish I came to this realization when I was in college.

Your next homework assignment is to calculate your total amount of debt, minus your mortgage. Now set a goal date to eliminate this debt. Mine is 36 months (3 years) from now. I'm willing to make sacrifices now to reach this goal as quickly as I can. The question is how bad do I want it? It is always a question of will I, not can I.

I will admit, this is the point where Dave Ramsey and I differ. Baby step 1 of his plan states to have a $1000 emergency fund before you move to baby step 2 (eliminating debt). Let me have a moment of transparency with you. I have more than $1000 saved up and I am unwilling to part with that money because I am traumatized from my divorce. I am also still investing 6% of my income to take advantage of my employer match on my 401K. I realize that anything, I mean anything, can happen and cash is king. I'm terrified of being in survival mode again. If I can help it, I will make sure that I will never be in survival mode again in my life. So, yes, I'm willing to make sacrifices up to a point; you have to do what gives you peace. This may change in the future but it hasn't right now. I know that the faster I get rid of my debt the faster I can start back saving and investing. But right now, I'm not ready to make those two changes. However, I am a numbers person so I will calculate the mathematical differences of me applying my savings to my debt and pausing my 401K investment to make my final decision. So, this is to be continued...

In the meantime, I'll check back with you to see if you have completed your homework. In case you were wondering, below are Dave Ramsey's 7 Baby Steps. His program is designed to be done in the order listed. Baby steps 4, 5 and 6 are supposed to be simultaneous.

*Dave Ramsey's 7 Baby Steps:

1. Save money to establish a $1000 starter emergency fund
2. Pay off all your debt, except your mortgage, using the debt snowball
3. Build up 3-6 months of expenses in savings (ex: If your total expenses are $3000/month you need to save $9000 - $18,000)
4. Invest 15% of your income towards retirement (ex: a Roth 401K)
5. Save for your kids' college fund
6. Pay off your house in 15 years
7. Build wealth and give