It occurred to me the other day that many of you may be getting irritated with my emergency fund updates. Particularly if you’re new here, you may be wondering where the heck I’m getting an extra $2,000 each month to contribute to this account.
I wish I could say that I just woke up one morning and an extra $2,000 was sitting in my account. And then the next month I woke up on the same day and…what do you know! Another $2,000 was sitting there just asking to be saved.
The reality of how Kirk and I freed up an extra $2,000 each month is much different.
The truth is, just four years ago Kirk and I were short several hundred dollars each month — without contributing a dime to savings!
We decided to make some big changes. For starters, we both switched career fields. The transition period for making this change was scary and tight financially, but being on the other side of it I can say with confidence that we made the right move.
While I accepted a position making well under the industry average for the type of work I do (front-end Web development), I’m able to work from home four out of five days each week and am given LOTS of flexibility. As a parent to two young kids, the trade off is not only worth it, but welcomed.
When it was all said and done, Kirk and I ended up with a little over 30% in increased annual income. This doesn’t account for inflation over the past four years.
Even though our income was slightly higher, the real change came in how we decided to think about our money. We decided to create a new monthly budget, allotting less for food and entertainment and more for debt payoff. And that’s when things really started to change for us financially.
Once we started looking at how much income we would have left over if we didn’t have ANY debt payments, it became clear. For us, the key to financial freedom was going to start with eliminating the debts that were eating up so much of our monthly income.
The realization that we needed to get rid of our debts to increase our positive cash flow left us with one tiny problem: where would we find the extra money to pay off our consumer debts? Of course, lowering our food and entertainment budget by a couple hundred bucks helped, but we needed more money to throw at these debts if we wanted to make headway fast.
To free up extra cash, I started going through our budget and seeing what expenses I could get lowered. For example:
- Cable (gone)
- Car Insurance (lowered)
- Landline (gone)
- Cell Phone (lowered data plans)
- Electric (did some simple energy saving things around the house)
- Gas (insulated our water heater)
- Water (installed a water-saver shower head)
All together, I would say it took about a month before I was able to lower or eliminate each of the above expenses. The result was that we freed up another several hundred dollars each month to put towards our debts.
Now things were starting to shape up!
The more progress we made, the more motivated I felt. I started looking around and deciding what I might be able to sell. As it turned out, there was a lot of useless stuff laying around that I no longer needed or wanted.
By utilizing eBay, Craig’s List and holding a few garage sales and selling unwanted jewelry, we were able to accelerate our debt payoff even more.
And then it happened.
Last August we made our last consumer debt payment. And just like that, we freed up $2,000 each month to build our emergency savings.
We still live below our means and love it. We still enjoy our lives and the freedom that less debt brings. But we still have financial goals we’re working towards — and we have lots more mountain to climb until we reach those goals.
So, that’s where we get an extra $2,000 to contribute to our emergency fund each month. Was it easy? No. Was it worth it? Hell yes.
I still want things that I don’t buy (like organic cotton mattresses and reverse osmosis water filtration systems), but I wouldn’t change a single thing. I’m pleased with our current financial status and feel happier than I’ve ever been.
And I hope with all my heart that reading my story gives you the faith and inspiration you need to free yourself from the financial burdens you’re currently facing.
Is 2012 the year you’ve resolved to start digging yourself out of consumer debt? What’s been going well? Where are you facing challenges?
I recently came across a newer blog called This Minimalist Life written by a man named Mike. He describes himself as a simple guy and has decided to buckle down and pay off $42,000 in debt in the next year and a half. He has a solid plan in place and an interesting, inspiring story. I would encourage you to check out what he’s doing and tell him hello!
Did you like this post? If so, please consider leaving a comment, and signing up to receive updates by email or RSS feed from Ex-Consumer. It’s completely free and I never spam! You can also follow me on Twitter and Facebook.
Related posts:
How exciting!! We were very fortunate to get a hefty tax refund this year, which already put us above my end of the year savings goal. We may end up having to go back to two cars if The Hubs’ schedule changes, but for now I’m still in shock over our savings as we would never have that amount with putting the little bit into savings we can every month. It’s also allowing us to get some house stuff done, like re-landscaping (which will save us money on water with less grass…and work).
That’s great Megyn. Those unexpected windfalls are always a huge help!
It sounds like you have some big expenses coming up, so saving as much as you have will be such a comfort.
This is very inspirational! Do you ever feel like you are missing out or that you don’t need to be as frugal?
Hi Grace!
I really never feel like I’m missing out. In fact, I feel more engaged and happy with my life than I was when we on a different (spendier) path.
And the frugal habits we’ve adopted over the past year are just second nature now. I actually feel a little embarrassed when I think back to how much more wasteful we were before. We’re still not where I would like us to be as far as reduced waste goes, but we’re so much closer than we were this time last year.
Please keep sharing your story so others will get motivated and stay motivated. It is so true that you can do almost anything you want when you don’t have any payments. You are doing a great job.
Grace: It is important to keep your goals in front of you at all times. When you see you are accomplishing what is really important to you in life, you begin having a peace and contentment that is hard to explain.
Thanks so much Bryan. It’s my hope that by sharing our story others will be inspired to seek out a path they may have seen as impossible before.
And you’re right, keeping our goals in front of us has been a huge motivator. Every few days I pull up our plan that details each phase of our financial goals. Each time we graduate into a new phase of the plan, I feel such a sense of relief. I’m so thankful that we decided to set down this path a little over a year ago. I never imagined we would be in the position we are today this time last year.
You’re doing very well to be able to save $2000 each month, when you consider that over 25% of US households must live on less than what you save.
Good point Mike. Although I would encourage people not to get stuck on a number, and instead look at how cutting costs, paying off debts and attempting to increase their income will free up money that would have previously been directed to debt payoff.
This is especially true since we never know what life will throw at us. Kirk and I had a good year last year financially, but we don’t know what will happen this year or next. That’s why we’re saving the extra money we freed up.
With our lowered living expenses and larger savings, we’re hoping to self-insure our family from some of what life may surprise us with.
This is a very interesting article. It would be great to save that extra $2000 every month. I’ll try & follow your procedure and see how much I can save.
Thanks for sharing.
-Neil
Pingback: Spavings: Being mindful of marketing traps | Josh Martin Ink