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[This post is written and copyrighted by FIRE Finance (http://firefinance.blogspot.com).]
At present we are debt free. Its a great feeling to have no financial debts. In fact it is said that the first step to save is to get rid of our debts. We agree.
Our lifestyle can siphon off our cash faster than the rate at which we earn it. More so if we lead a fast life where we are conscious of status symbols, our images and can spare no time to manage our finances. Such a life puts us in a perennial race to update stuff to keep up with the latest trends. The result is debt, debt and more debt. Credit card debt, car payments, housing mortgage, student loan debt, insurance payments and more. Consequently we are weighed down by mountains of debt which suck the fun out of our lives.
Experience has taught us that it is possible to escape the debt stranglehold. The answer is commitment. We were determined to get out of debt and we stayed on course till we were debt free. There were difficulties but we made no compromises and surged ahead. In the process we developed a simple strategy to a debt free life. We call it TCT - Track Compare Trim.
And we did not have to give up all our pleasures and become hermits to do so. All we did was to identify where the money was going (Track), analyze the inflow and outflow (Compare) and cut down our expenses by identifying our needs and eliminating our wants (Trim). In a nutshell, we paid careful attention to how we were spending our hard earned dollars.
TCT has helped us to gear up towards FIRE (Financial Independence Retire Early). It really does not matter that we don't possess an iPhone or some of the latest electronic gadgets, the trendiest car, a fancy home, and expensive clothes. In the long run, we felt we'd be happier if we had a worry free life replete with simple inexpensive pleasures rather than a mountain of unpaid debt. Being debt free is truly wonderful and we can vouch for it!
We are looking forward towards hearing your creative ways and experiences towards debt reduction. Please feel free to drop a comment.
Image Source(s): iStockPhoto
Our lifestyle can siphon off our cash faster than the rate at which we earn it. More so if we lead a fast life where we are conscious of status symbols, our images and can spare no time to manage our finances. Such a life puts us in a perennial race to update stuff to keep up with the latest trends. The result is debt, debt and more debt. Credit card debt, car payments, housing mortgage, student loan debt, insurance payments and more. Consequently we are weighed down by mountains of debt which suck the fun out of our lives.Experience has taught us that it is possible to escape the debt stranglehold. The answer is commitment. We were determined to get out of debt and we stayed on course till we were debt free. There were difficulties but we made no compromises and surged ahead. In the process we developed a simple strategy to a debt free life. We call it TCT - Track Compare Trim.
Track: To keep a tab on the cash flow we recorded each and every expense (outflow) as well as income (inflow). We divided our cash outflow into three sections:- Fixed - Rent, Insurance Payments, Utilities, Phones & DSL, Loan Payments
- Variable - Food, Car maintenance & Gas, Household, Medicines, Travel, Charity
- Miscellaneous - Entertainment, Memberships, Hobbies, Gifts
Compare: Once we started recording our cash flow, every week we added up our expenses and compared it with our weekly cash inflow. In the beginning we were shocked to see the huge difference between our cash outflow and inflow. Our expenses greatly outweighed our income. But since we started tracking and comparing the cash flow we could see where we were at the end of each week. Earlier we'd be clueless about where our money went!
Trim: The final and most difficult step towards becoming debt free is to trim our expenses. Since we'd implemented the features for tracking and comparing our cash flows we knew where our money was going. Now all we had to do was to eliminate unnecessary expenses and optimize the necessary ones. We figured ways to cut down expenses on dining, gas, and groceries. We sold old electronic gadgets, reused mailers, car pooled whenever possible, had haircuts at home, and tried many more frugal hacks. We constantly looked for new ways of trimming our needs creatively and it led to thousands of dollars in annual savings.
When we started out, we used Excel sheets to track our cash flow. Now a days we use Microsoft's Money. Quicken Online is a completely FREE server based personal finance management software. Its ideal for beginners wanting to track their cash flow.
However, its not necessary to use a software to record cash flow, we can do so using an inexpensive paper notebook. We love small ruled moleskine notebooks and use them to record our daily expenses. But a software is definitely more powerful and empowers us with the capability to generate a lot of useful reports and views.
And we did not have to give up all our pleasures and become hermits to do so. All we did was to identify where the money was going (Track), analyze the inflow and outflow (Compare) and cut down our expenses by identifying our needs and eliminating our wants (Trim). In a nutshell, we paid careful attention to how we were spending our hard earned dollars.
TCT has helped us to gear up towards FIRE (Financial Independence Retire Early). It really does not matter that we don't possess an iPhone or some of the latest electronic gadgets, the trendiest car, a fancy home, and expensive clothes. In the long run, we felt we'd be happier if we had a worry free life replete with simple inexpensive pleasures rather than a mountain of unpaid debt. Being debt free is truly wonderful and we can vouch for it!We are looking forward towards hearing your creative ways and experiences towards debt reduction. Please feel free to drop a comment.
Image Source(s): iStockPhoto
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