$50,000. My magic number. If you had told me ten years ago that I would one day have (more than) $50,000 to my name I would have laughed in your face. ‘Yeah right’. I was terrible with money. I paid for everything with credit cards or personal loans, saved nothing and spent huge amounts on my social life. I accepted that I would always live week to week, hand to mouth. I never believed I would one day be good with money, able to save thousands of dollars to travel the world, and build a rental property portfolio.
How I Learned to Pay Myself First
So what happened to the girl who couldn’t put aside anything on payday? How did she get to the position where she could save thousands of dollars to travel the world?
It’s really simple – I made the decision to change.
Why? I was working an office job which paid OK, enough to indulge my handbag addiction and pay my bills. I was also living in Sydney, one of the most expensive cities in the world. All I could see in my future was an endless cycle of working to pay bills.
I wanted to travel. But I had no savings and travelling seemed like an unattainable dream.
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I hit rock-bottom (forgive the addiction reference but I truly think bad money management is as dangerous as drugs or alcohol) when I had to take out an unsecured personal loan to pay a tax bill I had been avoiding.
Filling out all the income and expense details in the loan application form was the kick in the arse I needed. That was the first time I had actually written out my entire financial position. I had always written budgets for weekly expenses (which never included a saving component) but I had never taken it that one step further.
The reality was soul-destroying. I was 23 and in debt up to my eyeballs. Hardly the bright future I had planned for myself when I emigrated to Australia two years prior.
The loan tied me to a job I hated. I wanted to travel. Things had to change.
An Action Plan
To make the new loan repayments I had to write a proper budget, with categories for debt repayment. I also wanted to have a little in savings, just in case. As well as my personal loan I had credit card debt. Paying that was my primary focus. The debt was $3000 at around 20% interest. I lived in a shared house so my rent wasn’t much and I was able to jiggle extra money from some clever reworking.
I registered with an agency for casual weekend work at events and I babysat for parents from my office. Everything I received from my extra jobs went towards my credit card debt. I was also paying myself $10 per week. That money was going straight into a savings account. I needed to have that little something there, just to feel like I was advancing my financial future; debt repayment alone wasn’t enough motivation.
To physically atone for my debt sin I would pay the extra credit card repayments in cash at the branch. Sometimes I would stand in line for 25 minutes holding hundreds of dollars, dreading being called to the teller to hand it over. It felt like I was giving the bank money for nothing. I knew I’d spent it, but somehow it didn’t feel like I’d spent this much. The irony was not lost on me – had I used cash for purchases I wouldn’t be wasting half of my lunch break in a queue lamenting my wasteful ways.
Related Post: The Mind Trick I Used to Cure My Credit Card Habit
After a year I had paid off the credit card. I also had over $500 in a savings account. It wasn’t much but it was all mine. That was the turning point for me, I knew I could do anything. I began to get educated in money management from library books and websites. For the first time in my life, the future looked exactly like I’d pictured.