1% rule update: Is it working?

So I’ve been doing really well with paying everything on time since I unloaded the unnecessary credit card and car debt – THANK GOODNESS!  I’m actually getting excited about checking my credit score in a few months – I’m expecting big things!

I previously mentioned that what I now needed to do was to work on my savings and paying off my student loans. It’s been almost a month since I wrote that post so I decided I would check my balance to see if a 1% weekly payment would make a difference in the total balance.

  • Has it made a difference?  Yes.
  • Has it made a huge difference?  No.

While my balance is still less than the previous month, it’s only just barely. Looks like I’m just squeaking by on the minimum to cover the interest. Progress is progress, right?

So what are my choices? Well, I really want to try and create an emergency savings fund first so I’m going to have to be okay with this minimal progress.  I’m slowly creating a savings pot by simultaneously adding 1% of my gross pay to my savings account each week.  So 2% of my weekly gross pay is being paid out to two funds – savings and student loans.

When I finally reach a 3 month salary pot, I’ll make the decision to focus on putting more money in the student loan repayment.  I need to be less scared that a huge emergency will happen and that I won’t have the funds to help myself out.

I’m liking the freedom of not worrying about funds each month, but I know I would feel even better if I had a great emergency reserve.

It’s nice to have finally gotten serious about this and to see the impact…even it’s minimal!

The 1% Plan: Tackling my Student Loan Debt

So I recently had a visit to my silly little blog from the author of How to Stuff Your Pig Blog. I was so intrigued by their blog’s name that I had to go check it out. I can’t use any identifying pronouns because I actually don’t know if this blog is written by one person or group.  What I do know is that I liked this week’s blog post!

It was a great post on the current state that most people in the US live in…the inability to cover a $400 emergency without selling or borrowing money.  I can definitely attest to the fact that I was one of those people a few months back. I lived paycheck to paycheck and didn’t have the savings in the place to cover the unexpected on many occasions. My solution was always to send a bill late or skip it…which of course added to my balances and affected my credit score.

I still need to work on creating a savings pool for big emergencies, but I’m in a good place to try and tackle two things – whittle down the student loans and start saving (even if it’s a small start).

So I’m going to try out this one percent idea….the concept that every week you put away 1% of your gross pay in to your savings account.  It’s not a huge percentage weekly. For many people cutting out one day of eating out or a few coffee runs will do it.  I decided I would go ahead and try to do both 1% to my savings and 1% to my student loans every Monday.

That 1% weekly payment to my student loans doesn’t seem like a lot on a monthly basis but when I multiplied it by 52 weeks, I was pleasantly surprised to see the total. That would be a huge impact to bringing that balance down.

So here goes nothing.  It seems to be a very good place to start!

Financial Fridays: the last big DEBT

This is a terrifying number to put out there, but I have one last debt to resolve…my STUDENT LOANS!

Thankfully, I worked hard and paid off the rest of my debt, but this one seems to be never ending.  It almost gives you stomach pains to see the due balance, but it’s amazing to see that the amount due is ZERO because I’ve finally learned to manage my bills.

So let’s start with the scary current total: $54,925.34

The balance used to be much higher, but I have no regrets to having borrowed the funds. The educational opportunities I received from being able to borrow money has afforded me some incredible experiences. Making the investment in me has proven to be a good thing (ha!).

I thankfully don’t own property so I don’t have an additional huge debt at the moment. Yes, I understand that assets might give me a tax break, but being tied to one geographic location and the implications of rising property taxes is not something I need to also worry about right now. I have freedom to explore new opportunities and change my scenery at an instant.

I would, however, like to create a plan to whittle this down significantly. Ideally, I’d like to finally pay off this debt in 10 years or less.

Yes, I just put it in writing….this debt will be gone in TEN YEARS.

So, now to create a plan!  I welcome your thoughts and suggestions to make this happen on a non-profit salary.

Goal #2 and #3 met: Pay off my last credit card & suprise parents with a paid mortgage payment

Two weeks ago, I did something I never thought would be possible this year….I paid off my last credit card!

How did I do this? Well, I got serious about my budget and started to look into what options were available in my current world. I don’t have the best credit so I couldn’t open a new credit card to transfer balances and I was a tad scared to take that route as my goal was eliminate my credit card.

I eliminated payments by unsubscribing from frivolous monthly costs.  Bye bye Weight Watchers online and Freckled Fawn subscription. One I never used and the other had items collecting in my craft room – so those were easy to eliminate!

But I still didn’t see much relief and I was getting frustrated that I would make a very minimal dent in a necessary goal of mine – eliminate my debt and start cleaning up my credit score. There had to be something!

And then it hit me….the one financial area I hadn’t tapped in to for help was my 401K. I am blessed to have a solid 401K plan and I’ve been great about investing in to it despite some of my other poor choices. Like a ton of bricks, I realized that had a great pot to get me back on my feet positively. By taking out a “loan” with a very small interest rate (about 1%), I could pay off the stupid financial choices and consolidate about $500 worth of monthly payments to a single payment of $180.

Reducing my monthly expenses by $320 would have a huge impact on my savings and emergency reserve…so I did it!  I eliminated my car payment (which had an interest rate of 8%) and my last standing credit card (which had an interest rate of somewhere close to 15% because of my late payments). I then used some of the extra funds from that loan to pre-pay a couple of utilities to get me back on track. I no longer have any excuse for late payments and/or balances from month to month.

This right here has changed my financial situation so much so that I finally feel I can breathe!

After resolving all my issues, I realized that I still had a significant amount in my savings account to help me reach a second financial goal – to pay one of my parents’ mortgage payments.

I can hear some people screaming that I should have put the remainder in savings.  Yes, I could have made that choice, but this goal is one that I knew I wanted to make the savings’ pot sacrifice for….they deserved it and I could do it.  So in celebration of Father’s Day in Mexico and my dad’s 65th birthday (June 15th), I surprised them with the deposit. My dad was so overcome with the emotion of the gift that he broke in to a sweat as he chuckled and my mom started crying. The moment was unbelievable.

IMG_7073Before anyone starts panicking, please know that I still have savings in my bank account and that I went ahead an upped my 401K investment with my employer. I’ve found that the automatic deduction from my paycheck forced me to adjust my spending because I don’t even think of the 401K as something I can use freely.

I will still continue to watch my budget and plan to put away at least 10% of each paycheck in to savings to start a true savings/emergency fund. There’s a plan in motion and it all feels incredibly doable barring any major emergencies. So send me lots of prayers and well wishes. I finally feel like I’m a true grown up who can handle most emergencies on her own because I’ll be financially ready to tackle what may come — but let’s keep the emergencies away from me for now (or ever!).

Reaching these two goals has been one of the most memorable moments of my life. Now to move on to the next!