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I bought a home and paid off credit card debt while making under $60,000 a year: How I got started

"When you budget, you're essentially giving your money a job ... You're staying proactive, not reactive."

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The founder of B----, I'm Budgeting!
Courtesy of B of B----, I'm Budgeting!

In 2019, I was earning $40,000 a year, before taxes, and I was still able to invest, travel, and pay off $41,000 worth of debt in two and a half years — because I found a budget that worked for me. 

When you budget, you're essentially giving your money a job before it hits your bank account; you're staying proactive instead of reactive. Having a consistent budget has taught me a lot about my spending patterns and how to form a better relationship with my money.  

Before I started budgeting, I had no idea where my money was going, and would often use credit cards to hold me over until my next pay period. 

In November of 2018, I finally sat down and really looked at my credit card statement. I realized I'd spent $1,200 on restaurants and take out alone over the course of 30 days.

Seeing those numbers laid out like that was a turning point for me. I knew I wouldn't ever be able to achieve my goals, like getting my own place, without getting on top of my finances. 

For years I struggled to make ends meet. Now with the help of my budget, I'm in much better shape. I have paid off all my credit card debt and I recently bought an apartment while making less than $60,000 a year. And in 2021, I increased my net worth by $25,000. 

Here's how I got started. 

I found the budgeting method that worked for me

Your budgeting method can change based on your plans or personal preferences, and you can use a combination of multiple methods, which is what I do. The idea through this process isn't only to meet money milestones but to learn about yourself, and who you want to be financially. 

My favorite method is zero-based budgeting, which essentially means making sure that your income minus your expenses totals zero at the end of each month or pay period. The goal is to give every single dollar a job. 

One of my biggest tips for zero-based budgeting is to track your expenses for a month or two. This will give you a realistic idea of how much you spend in each category and how much you should budget so you have enough money.

As much as I love zero-based budgeting, I know it can get tedious, since you must track every single dollar.  

So another way to budget is using the 50/30/20 method. This breakdown is 50% needs, which can include things like rent and utilities or groceries, 30% to wants, which could be anything from a new gadget to some candles, whatever your heart desires. Then 20% goes to saving or investing.

My biggest tip when using the 50/30/20 method is to separate all three categories into three different accounts to avoid overspending from one of the other categories. This budgeting method is great for people who don't want to track every dollar of their spending. 

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One method that can be really helpful if you need something tangible to keep you from overspending is the cash envelope method. Each envelope is labeled with a different category and that money should only remain in that envelope. For many of us, these categories can include grocery shopping, dining out, entertainment, gifts, personal care and car maintenance. 

A helpful step is to track what your spending is like before starting this system. The idea is that once you run out of money, that's it for the month.

I've found that this method can inspire you to become more disciplined with your cash overall. And even though I've been budgeting consistently for a few years now, I still set aside cash to purchase groceries

I used my budget to help manage my debt-free journey 

When I first started budgeting, I was making $40,000 a year as a teacher's assistant. (I became a teacher at the start of 2021.) I had to be very strategic with my money. So before I did anything, I figured out the minimum I could comfortably spend in every category each month and planned accordingly. 

When I focused on paying off my $41,000 of credit card and auto debt, I budgeted for making as many extra debt payments to my credit cards as possible throughout the month. I was able to do this by making sure I planned all my expenses down to the dollar, and used the cash envelope method in categories where I knew I had a tendency to overspend. 

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My credit cards also received the minimum payments, and then I paid extra to the credit card that I chose to pay off first. Once that credit card was paid off, I then moved the extra lump sum payments to the next card.

I used the snowball method to tackle my debt, which meant I was paying off my debt from the lowest amount to the highest because all my interest rates were about the same.  

I learned that budgeting doesn't mean the end of fun 

For some time, I subscribed to the notion that I shouldn't be treating myself to anything "fun" as a punishment for getting myself into debt. This strategy made me feel depressed, and at least once a month I considered giving up on my debt-free journey.

I would go most of the year not treating myself, then find myself spending $2,000 in a day. 

This method became detrimental to my mental health, as well as my financial journey. I had to do a lot of self reflection to realize this deprivation method was not sustainable for me.

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So two years into my debt-free journey, at the beginning of 2021, I shifted to including a section for "fun money" in my budget. I haven't looked back since.

Now, each month, I set aside a certain percentage of my monthly income, after taxes, usually between 3% and 5%, to do what I please. Fun can look different for everyone, but for me it's usually going to a restaurant, buying my favorite candles, or treating myself to a spa day.

When you prepare your fun money in advance, you allow yourself to have a guilt-free experience, without the worry of going over your budget.  

I keep track of my budget with every paycheck

I've found that the best way to stick to my budget is by revisiting it every payday. I like to break down my monthly budget by what will be coming out each paycheck. 

When my paycheck hits my bank account, I'll look at the checklist of items I have budgeted for and check them off as I pay for them. Your checklist doesn't need to be anything fancy; it can be a note in your phone or even just pen and paper. 

As our lives change, so will the categories in our budget. In December of 2021, I hit something of a budget milestone. For the first time in five years, I added some new major categories to accommodate my new mortgage, HOA fees, and utilities. 

I prepared my December budget two months in advance to allow room for adjustments. Money that was previously allocated for my big debt payments, for example, now goes to paying for my apartment.

I'm a numbers girl and love to show others how I allocate my funds, even on a moderate salary. I want to be transparent so others can see how these plans can evolve over time. The best budget will be simple, effective and work for you. 

I'm B of B----, I'm Budgeting! I am your financial best friend here to give you tips on how to become financially independent. I am big on budgeting, as well as side hustling, to increase your streams of income. I paid off $41,000 of debt in 2.5 years on a $40,000 salary by leveraging different side hustles. I have also helped over 50 women start investing.

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