Friday, December 28, 2007

Debt Reduction Redux: What Didn't Work

One commenter asked what worked and what didn't. I've outlined several actions that worked for me.

Something I regret, which is (to me) something that didn't work, is that I didn't get to travel this year. I made a 2-night trip to Portland earlier this year, but that was the only time I "travelled" this year. I didn't even make it to Vancouver B.C....

Now, some may say that not travelling is necessary. Yet for me, I've travelled a great deal and it's one of my top passions. I've realized that this is something I need to plan and save for, separately. One thing I've learned myself, is that you must have certain indulgences periodically. Otherwise, you'll become the dieter who abstains from sweets for two weeks, and then sits down and eats an entire chocolate cake in one day. For someone like me, a total abstinence of travelling could result in me spontaneously buying a ticket to Europe and spending a month visiting friends and finally going to Iceland. However, I know that is a bad idea, as it would either decimate my "emergency/home" savings account, or I would charge most of the trip.

The logical step is to find a balance. I have a few savings accounts through Ing, and I plan on opening up a new one that will be dedicated to saving for travel. I advocate saving up for purchases -- especially when you're on a budget of any kind -- and working your way towards the purchase. I did this when I bought my iPod, and I did this for my last trip to Argentina (instead of paying down my debt I saved money to travel...), and it's a very, very satisfying feeling when you reach a very tangible goal like this.

Another point on which my strayed was in not budgeting for shopping for new clothes. I've spent nearly half of the last three years travelling, and my wardrobe reflects that. Instead of regularly buying a few pieces of clothing, I was instead wearing the same clothes over and over and wearing them out. This year, I've been slowly rebuilding my wardrobe -- from basics to nicer clothes, and periodically I blew my alloted weekly budget by buying clothes. I tend to work from the 'I can buy what I want as long as it keep me within my weekly pocket money budget' school of finance. I'm still searching for a better pair of winter shoes that I can wear with skirts, and I need to get some more shirts that are better for winter. When I was travelling, I was often in warm climates, and I have plenty of warm weather clothes. In addition, I've also been losing weight this year (intentionally), and that is affecting my wardrobe. I'm at a point now that I've lost about 1-1.5 sizes, and I've gotten rid of some clothes which no longer fit well (e.g. the jeans I could take off without unbuttoning). Part of my solution to this is to buy most of my clothes in stores like Goodwill and Value Village, and it generally works quite well. I still have some clothes from when I wore a smaller size, but they don't yet fit. I'm also working on buying nicer clothes that will last longer, and I'm avoiding buying "disposable" clothes.

I'm once again budgeting for is dance classes. I love to dance, and after a few years of not regularly taking classes, I'm dancing again. This means I will put that much money less towards my debt and savings -- though it's really not very much. The classes keep me happy, and also keep me active in the colder months.

So, while this is a longer post than I planned on, the lesson is this: allow yourself to keep some things in your budget that may be seen as frivolous by others. For me, it's travelling, dance classes and (temporarily) re-building my wardrobe. For you, it might be eating in nice restaurants, music, electronics, or your personal hobby. The point is to not completely excise everything enjoyable [that costs money] from your budget or your life. Maintaining this kind of balance while you have debt is a valuable skill, as it will be something that specifically translates once the debt is gone. Instead of going from a no-frills life to a life without debt (and perhaps far too many frills), the newly debt-free person will already be budgeting for the things they want and will be less likely to overspend on those things [because they were not available during the debt reduction cycle].

The better the balance you can strike for budgeting and debt reduction, the less you will resent the sacrifices you're making, and the happier you'll be.

1 comment:

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