#BudgetMom – Debt Free and Investing

I will admit, it’s an odd time of year to suddenly jump on the ‘debt free/saving all my moola’ train… Christmas is a few weeks away, and brokeass-January follows hot on its tail, but hey, if not now, then when…right?

Let’s start with my weekly savings plan… For the next 52weeks (1 year), I will be putting away a certain amount each week. I read about this savings plan in a book once, and it stuck with me. The formula is pretty simple to follow – you start with R10, then add another R10 to the previous week’s total, and follow that formula for 52 weeks. So eventually, in your last week,you would be saving R520 when you started by saving R10. Below is a preview to outline it, in case my explanation doesn’t make sense:

Week 1 = R10

Week 2 = R20 (adding R10 to last week’s total)

Week 3 = R30 (Adding R10 to last weeks total)

Week 4 = R40 (and so it goes)

After 52 weeks, I should have R12,990 saved, excluding interest. Awesome, right? I will keep an update every so often on my Instagram as to where I am with the plan, etc.

Now, on to my “Debt Free” discussion.

Firstly, I prefer to use the word “Investing”, as I don’t see all debt as ‘bad debt’, and the word debt has such negative connotations to it. Who needs those negative vibes in their life, right? Secondly, I believe there is such a thing as ‘good debt’ (not that I am advocating debt in any way) but when you have debt which was used to buy a house, for example, then that’s investing into your future, wouldn’t you say? Or if you took a loan to pay for education, or for health reasons… then you get the bad debt, like those pesky clothing accounts where you’re still paying off clothes you bought in 2015.

I have a mix of both, with a clothing account being one of them.

I drew up my goals, with my smallest debt as my first focus, and the largest as my last. It’s a five year plan (without sounding cliched). I’m a visual person, and prefer to have things in front of me, so I physically drew up a funnel with my debt scaling accordingly.

I decided to phase it into 3 parts:

Short Term (less than a year to payoff)

Medium Term (18 months to pay off)

Long Term (5 years to pay off)

Out of my total debt, the ‘short term’ is my version of Bad Debt, whereas my medium and long term is my version of Good Debt. The way I plan to pay off my 20 year bond in 5 years is detailed below.

I focus on paying off the smallest debt first, and then move onto the next item on my list once that debt is paid. However, instead of thinking like I have before that I have ‘extra money’ after Item A is paid, I will put the cash paid for Item A into Item B, whilst keeping my monthly payments for Item B as is. Once Item B is paid, I take the money I paid for Item A & B and put that towards Item C. Make sense? This expediates the rate at which your debt will be paid off.

To help illustrate, below is an example of what I mean:

Item A – R500 p/m (once paid off, add this amount to Item B)

Item B – R1,000 p/m + R500 from Item A = R1,500 p/m (once paid off, add this to Item C)

Item C – R2,000 p/m + R1,500 from Item B = R3,500 p/m

Remember that most of the monthly repayments are geared towards paying the interest, and not the actual amount owed, so you want to break that barrier and pay it quicker to avoid paying the large amounts of interest accumulated over the full loan term.

After I drew the above formula up with all my debt listed, I was able to create a plan that would feed from one ‘Debt item’ into the next, and thus speed the process up of me not only being debt free, but of being mortgage free after 5 years.

Of course, I must actually get to that point, and we all know ‘things happen’, but I am a firm believer that by drawing it up and physically seeing it each day, by living it each day, and by approaching it differently than I have before, that I will get to my mark within its timeframe.

I see this as investing into my future, and I want to encourage you to become debt free too and look at debt in a different light than we have been taught. I wonder if anyone else has been able to actually achieve such goals, and if so, what methods were taken? Let a Mom know.

As with my weekly savings plan, I will update my Instagram page every so often on my progress. Being honest is key in such thing, I believe.  

Until next time,

Pray & Slay,

#MotherMuses

Once again, I do disclaim that I am in no way advocating debt, and I am not a financial adviser of any sorts. If you decide to follow any of my plans in this blog, you do so at your own risk and I would not be accountable for any damages that you could incur. Work smart with your cash.