Last Updated on
9 Week Financial Challenge – Week 2
This week let’s jump start paying off that annoying debt and saving money! We will focus on debt reduction, 10 Stop Spending ideas, budgeting, and where to put all that saved money. It is a lot to cover, but we want to kick start our way to financial independence.
This article is part of our 9 Week Financial Challenge Series. The challenge is not a one-week boot camp that “fixes” all our problems. No, we know that does not work. This is about long-term financial wellness. The 9 Week Financial Challenge Series covers:
|1||ACHIEVING YOUR FINANCIAL BUCKET LIST|
|2||START PAYING OFF DEBT and SAVING MONEY|
|3||DECLUTTER and MAKE MONEY|
|4||CUT THOSE MONTHLY EXPENSES|
|5||HOW TO REDUCE SPENDING ON FOOD|
|6||ACHIEVING YOUR FINANCIAL GOALS|
|7||MAKING MONEY by INVESTING in YOU|
|8||INVESTING TIPS for BEGINNERS|
|9||DREAMS, GOALS and FINANCIAL NEXT STEPS|
During Week 1, we create a financial bucket list and plans to achieve our bucket list of dreams. We recommend starting the series at Week 1: Achieving Your Financial Bucket List.
There is a free workbook to assist you during this challenge (almost 30 pages of goodness). Please sign up via email to receive the 9 Week Financial Challenge Workbook. Do not worry. No spamming of emails from us. Promise. Remember the workbook is free and it really helps.
Week 2 Challenge: Paying Off Debt and Saving Money
The average student loan debt is over $32,000 according to Value Penguin. This is crazy! Now add on car loans, credit card debt, and house loans. It is hard to consider financial independence with that debt, so let’s talk about strategies to reduce debt and increase savings.
This challenge will cover four key topics: Debt Reduction, Stop Spending Ideas, Budgeting, and Savings Accounts.
Use the Debt Worksheet in the 9 Week Financial Challenge Workbook to categorize your debt. High school finance teaches us there is good and bad debt. We don’t like parsing debt. Debt is debt. A few thoughts on debt refinancing and paying down debt:
- Transferring credit card debt to an introductory no interest credit card is smart. However, changing credit cards frequently to keep the low-interest rate is a game that most people fail at long-term.
- Consolidating multiple loans to a single loan with a lower interest rate is sometimes possible.
- Changing the monthly payment date can help balance out payments throughout the month and help improve cash flow.
- Improving your credit score will allow you to obtain a lower interest rate for your loan.
- Refinancing your loan to a shorter loan term may pay off big. Refinancing to a short-term loan will increase the monthly payment, but sometimes not as much as you think. It should also reduce the interest rate and reduce the total interest payments to the bank, which will save you money.
Debt Pay Down
- Pay down the highest risk and highest interest rate debt first. Title loan type debt is the first type of debt that needs to be addressed.
- Remember to check the loan structure to make sure your extra payments are going towards principle. Paying down principle will save the most in the long term.
- Also, consider making additional car/house payments as part of your emergency plan in case someone loses his/her job.
- The last idea might not be the most financially sound, but sometimes it is just nice to have one less bill. Paying off any loan is a great accomplishment regardless of the interest rate.
10 Stop Spending Ideas
To kick start paying off debt and boost saving money go dramatic for two weeks or longer! It will likely not be sustainable, but it will get you started on the right foot. Start now!
5 Easy Stop Spending Ideas
- Select free outings to do with friends. This takes a little planning. Recommend free options like a concert in the park before someone recommends a movie and dinner, which puts you back $50.
- Volunteer and bring friends. This is a free outing where you are doing good. Go you!
- Use the library. Seriously, libraries are interesting again. New books, new DVDs, and new music are all available. Most material can be accessed electronically. Additionally, there are eclectic hangout spots with some unique characters at the library.
- Find the Great Outdoors. It is amazing how many parks are free and how the trip can consume your entire day. Also, the parks usually have some activity to complete like a nature trail or scavenger hunt.
- Just say no to fancy coffee. Bring your own coffee. According to Acorns, the average American spends $1,100 annually on coffee. Fancy coffee is a treat and not a necessity. Don’t buy it for two weeks and save $40.
- Exercise…Really. We know it is good for us and it consumes time that would otherwise be used being a consumer. Just remember that handy water bottle. Buying water is an unnecessary expense.
5 More Challenging Stop Spending Ideas
- No takeout lunch. Bag it and save about $10/lunch or $100 in 2 weeks.
- Make gifts. Homemade gifts are more appreciated. Additionally, a plate of cookies is much cheaper than bringing wine to a gathering. There is really no excuse, especially if you are on Pinterest.
- Learn to Cook. It is much cheaper than ordering in dinner. It might not taste great in the beginning. Just remember that in two weeks you could have $100 or more in your pocket. The food will taste much better with that thought in mind!
- Give up Your Vice. Is it buying clothes? On-line shopping? Eating out? Liquor? A needy boyfriend/girlfriend? Quit that nasty vice for two weeks.
If you did not find a challenge that twirled your socks, we got you covered. Here are 100+ more money saving ideas. No excuses!
There are as many opinions on how to budget as there are financial websites. Whippersnapper Finance is not in love with any of the cute systems. The old-fashioned paper and pencil budget works just fine.
If you need to trick yourself into discipline using envelopes and multiple bank accounts, do it. It just seems like more work.
It is important to have a budget to obtain those important financial dreams. A budget keeps you honest. Think of it as a scorecard to determine who is winning. There is an Old-Fashion Budget Worksheet in the 9 Week Financial Challenge Workbook.
Budget Worksheet Tips
Creating a good budget takes multiple days and many tweaks. Start completing the budget worksheet now, but consider the following:
- A budget is only as good as the data entered. Bad data in = Bad data out.
- Be realistic about spending. Use credit card and bank statements to validate your spend. Be on the watch for those sneaky charges (monthly subscription fees).
- Cash = honesty. If the debt problem stems from credit cards, move to a cash-only system. When the cash runs out, eat noodles for the rest of the week. Cash forces honesty, which will force discipline.
- Budget to $0. What does that mean? All income and spend are accounted for in that spectacular budget. Be honest about where your money is going. The more granular you are regarding the spend, the more control you have over your budget.
- Just remember to leave some flexibility as a tight budget can lead to cheating and guilt and continuing the debt cycle.
High-Interest Savings Account
As the savings start piling up, make sure that pile of dough is working for you. Keep a separate bank account, preferably one that offers an excellent interest rate.
Many find joy and accomplishment in transferring money to their high-interest account every week. It helps valid the budget and actions to save money. Congratulations!
Depending on your discipline and time commitment, it might be easier to just have a direct deposit occur upon receiving your paycheck.
Once a month, pay down that debt. Feel the weight starting to ease off your shoulders. Congratulations! High five with a fist pump. Now back to work!
In order to reach financial independence, it is critical to start paying off debt and to start saving money.
- Pay down high-interest rates first.
- Look to pay down principle with extra cash.
- Refinance to reduce the interest rate.
10 Stop Spending Ideas
- Use dramatic spending cuts to kickstart your debt reduction or boost your savings plan.
- Giving up a vice or expensive hobby is a good way to jumpstart those savings.
- Dramatic spend cuts are not usually sustainable for more than a couple weeks.
- Budget to $0.
- Be realistic about spending.
- Stick to the budget.
High-Interest Savings Account
- Key those hard-earned savings in a separate bank account.
- Open a high-interest savings account (shop around for higher interest rates).
Keep focused on achieving the goals created in Week 1 and executing the action plans. Post your goals on your bathroom mirror to keep focused. It is not going to be easy to achieve financial independence, but it is worth it. You are doing great! Get ready for Challenge 3, Declutter and Make Money.
Below are several good saving articles to continue your journey. Please pin this article for reference and don’t forget to sign up for our newsletter!
You got this!