Dry January Debt Challenge - Week 2

Did you do your homework? If not, check out my post from last week and get on it!

It’s week 2 of Dry January - let’s dive into it!!

One thing I forgot to mention last week...STOP ADDING MORE DEBT TO YOUR CARDS! How do you do that? By paying cash/debit, tracking your spending, and making cuts where you can. These adjustments are temporary but necessary for success. Short term pain for long-term gain! And honestly, it won’t be as painful as trying to get back in shape at the gym this winter.

We’re going to accomplish three simple things today.

1. CHOOSE THE AVALANCHE OR SNOWBALL METHOD

Take a look at the debt list you created last week. We’re going to now arrange the debts by either balance (lowest to highest) or interest rate (highest to lowest). If you haven’t heard of the snowball or avalanche methods, please watch this informative video explaining both. Once you’ve chosen your method, you may proceed.

For what it’s worth, there is no “right” choice (despite what Dave Ramsey may tell you). This is personal. Choose the method you think will fit best with your psychology and preferences. Choose the one you think you’ll be able to stick with. I don’t care, I just want you to make a decision and take immediate action! The worst thing you can do right now is overanalyze. This isn’t quantum physics. Even if you make a mistake, we can fix it. Decisions get things done!

Once you’ve chosen snowball or avalanche - START NOW!!! Do not wait. This month, pay the minimums on all but the one debt you are going to ATTACK WITH A VENGEANCE!

If you have more questions on how to implement this, please don’t hesitate to reach out to me. I coach people through debt challenges just like this, in a one-on-one format. I’m happy to give any Cents of Humor subscriber a free consultation and answer your questions!

2. START TRACKING YOUR SPENDING

We need to understand where our money is going. I just started using Monarch Money and I love it. It automatically tracks the destination of each dollar we take in and send back out, and gives you a much deeper sense of how much you’re actually spending at particular merchants or in certain categories.

Monarch also let’s me know when recurring bills are due. I love this feature! This makes cash flow planning much easier (more on cash flow management in future issues).

If you’re interested in trying out Monarch - here’s a link to a 30 day extended free trial (it’s $14.99 per month afterward). No pressure, and I’m not affiliated with them. I just think their product is great.

Tracking your spending (notice how I didn’t say budgeting) will help you identify problem areas where you can make small changes to free up extra cash.

3. PICK ONE AREA OF SPENDING TO IMPROVE UPON

We aren’t going to build Rome in a day. In fact, if we try to cold turkey or upend your entire money situation, your odds of giving up increase dramatically.

Instead, let’s focus on one area of spending to hone in on. Perhaps this means doing a subscription inventory. Through a tool like Monarch, Rocket Money, or a plethora of others - you can easily identify how many subscriptions you have active and begin cancelling them. I promise you’ll find at least one you didn’t know about or have zero use in keeping.

I recommend cancelling as many subscriptions as humanly possible for 30 days and then slowly adding back what you can’t live without one at a time. (Let me know how much money you’re able to save if you do cancel subscriptions!!)

Or perhaps this month you want to focus on preparing more meals at home and not frequenting as many restaurants. Anyone who knows me can tell you I have a guilty/shameful/disgusting love of Big Macs. I’ve sworn them off this month!

Maybe this month can be a “no clothes shopping” month or “no Uber/Lyfts” month for you.

Again, this is personal. Choose one area you can improve upon — even if it only saves you $20 this month, that’s an extra $20 you can put toward your debt. Every little bit counts.

For the one debt you are going to focus on, I want you to be aggressive. Pay your mandatory expenses, but be ruthless with discretionary spending. Those extra dollars appled to the credit cards will get you out of debt faster than you can say “Cancel my Planet Fitness membership please.”

Next week, we’ll focus on automating your finances to make this even easier!!

That’s all for now — if your goal is to get smarter about money in general, I have a few new recommendations for you:

1. This episode of Paula Pant’s Afford Anything was INCREDIBLE. So nuanced. Well researched. You will learn A TON.

2. Ramit Sethi’s new book for couples just came out. It’s called Money for Couples. His writing is great. I’m a big fan.

3. I listen to Morning Brew Daily each morning. The stories are easy to digest and help me stay current on what’s going on in the economy, stock market, personal finances. It’s geared for younger folks, so it isn’t boring lol.