{Week 17 Update} Why This Easy Financial Move is Worth the Risk

It’s funny how children’s fables are still relevant to adults and the decisions we make.    Are you familiar with the story about the Grasshopper and the Ant?  It’s the one  that provides an oral lesson about the virtues of hard work and planning for the future.  The fable is about a grasshopper that has spent the warm months singing and dancing while the ant worked to store up food for colder months. When winter arrives, the grasshopper finds itself dying of hunger and begs the ant for food.  His lesson– it is best to prepare for the days of necessity. 

Last week was week 17 of my 52 Week Money Challenge and I am excited to announce that I am under the $1,000.00 mark for my credit card balance. This week I crossed off $51.00 on the SMC Bingo Money Sheet, which puts me at a total of $421.00 dollars in extra payments applied to my credit card balance this year. When I first made this goal a part of my financial plan, I thought that paying off this debt would take longer.  It’s not a glamorous or goal trendy. Most of my friends don’t even understand why I am making these type of financial goals for myself, but I can’t think of many things more delightful than not having to worry about massive debt.

Hare Brain Behavior

In the post, Is This Super Easy Financial Move worth the Risk?, I threw out the idea of going against Dave Ramsey’s advice to maintain a $1000.00 emergency fund.  I revealed that I was considering tapping into my emergency fund once I got my credit card balance under the $1000.00 mark. Well that moment is here and I have decided. I considered every suggestion that readers posted in the comment section of that post and on our Facebook page and I have decided to use $500.00, half of my emergency fund, to knock down my balance even faster. Not only would that put me ahead of my goal date, but I would also end up with more money back in my emergency fund AND savings because I would not be paying interest fees. That’s to say that once my emergency fund is back up to the recommended $1000.00 mark, I would continue put any extra money (up until the original goal date of August 1st) into my savings.

Slow-and-steady-moneySlow & Steady Wins the Race
Although, I have decided that tapping into the emergency fund is the best move for me. I would only do so under one condition – the results of the check engine diagnostic on my C-class Mercedes. If I can afford to pay for repairs to my car and knock out my credit card debt faster, without going into the emergency fund,  then that’s what I will do. Otherwise, I would risk using credit again to take care of this unexpected expense, which is a point that many of you readers brought up when I first presented this idea, and defeats the purpose of having an emergency fund in the first place.

Does slow and steady win the race every time? I’m not sure about EVERY TIME, but I do know that it has become a well-known lesson for a reason. I’m just hoping that this time, I’m an exception to the rule. Only time will tell and I can’t wait to let you know how things turned out.  Like the ant, I am preparing for days of necessity through working hard and planning for the future.  Why not make my money work for me?

Do you consider yourself a financial grasshopper or ant?

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{Financial Cents} How To Make A Financial Plan

Sometimes I need to remind myself that a goal without a plan is just a wish. Every morning I would pray for financial blessings but somehow found myself going through the motions, which was slowing my progress to my goal of zero debt. For me, it is about finding that balance between enjoying my lifestyle and making financially sound decisions. I have been bitten by the travel bug and I can’t wait to explore the world, I live for bottomless mimosas at brunch, and I believe shoes and the right lipstick makes the outfit. However, I also believe in building hefty savings, going into marriage without bad debt (i.e. credit card and student loans), and building generational wealth. I must agree with Dave Ramsey, financial guru, who affirms, “Personal finance is 80% behavior and only 20% head knowledge”. I am working on the behavior part. I found that even though I enjoy shopping, I’m more likely to shop when I’m bored. Recently, I started filling that boredom with QT with the Mr. walking and exploring our city. I am focusing on better decisions, which will yield better behavior. Every cause has an effect and every decision has a financial consequence; that’s why coming up with a personalized financial plan has been my saving grace. Yes, I prayed for financial blessing…I still do, but I have also added the caveat that with financial blessings come financial responsibility.

Check Out My Financial Plan!

1.  Write down your debt & don’t forget to include people you owe money.    I was talking with a childhood friend who says he had zero debt.  As we got to talking it was revealed that he did not include the almost $7,000 he owed to a family member and the card he maxed out in his college days.  Out of sight, out of mind, I guess.  Once we dove deeper into our conversation, he and I started listing our debt.  My list was simple- one credit card, student loans, and mortgage.  His, well…let’s just say that I composed a very sobering list on his behalf that included all the debt that he could remember.  Seeing your debt listed makes it more real.

2.  Emergency Fund Minimum.  Baby Step One of the Total Money Makeover is to get your emergency fund to $1,000 if you have an annual income of $20,000 or more.  “Your car will need repairs and your kids will outgrow their clothes. These are not emergencies; they are items that belong in your budget. If you don’t budget for them, they will feel like emergencies”.  It was this statement from the book that caused me to stop dead in my tracks and redefine what I considered an emergency versus saving.

3.  52 Week Money Challenge- BINGO Style.  This was actually a part of my New Year’s Resolutions for 2013.  The challenge is to make a weekly deposit that reflects the number of weeks of the year. For example, on week one you deposit $1.00 and on week 27 you deposit $27.00 and so on.  I took the challenge one step further by remixing it into a BINGO style which makes it easier to be successful.  In the end, you will have saved $1378.00!  I’m using the money from the challenge to pay down the balance on my credit card, birthday, and holidays. Update: In 2016, I saved $1,900.00 doing this challenge.  Want to join in on the 2017 version, grab your FREE copy of the bingo card here.

4.  Tackle Your List.  I revealed in the post, Tackle Your Credit Card Debt Today, that as of January I started with $5300 in credit card debt.  I have reduced my debt down to $0.00  by paying a little over the minimum and applying the Bingo Style money to the balance EVERY Friday (I have yet to miss one), but that was interest is killing me.   While making additional payments to the credit card, I am making the minimum payment toward my student loans and mortgage.  Once the credit card was paid off, I will now apply that money to extra payments to my student loans and so on…this is called the Snowball Method.  Now, I will confess, if I had more debt, I would recommend switching between the Snowball Method and the Avalanche method, which we will discuss later in the Financial Cents series.

5.  Emergency & Savings.  Don’t forget to save that money you are no longer paying to others.  Use it to prepare for the future.  Emergencies will arise and more than likely something will come up that will cause you to tap into your savings….be prepared.

She Makes Cents Wants to Know If Personal FInance More Behavior or Knowledge?