2660: [Part 2] The Stages Of Financial Management by Andrea Joy of Saving Joyfully on Paying Down Debt

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[00:01:00] This is Optimal Finance Daily, Episode 2660. The stages of financial management, Part 2, by Andrea Joy of SavingJoyfully.com. And I'm your host and personal finance enthusiast, Diania Merriam.

[00:01:16] This is the show where I read to you and to myself, frankly, from some of the best personal finance blogs on the planet.

[00:01:23] Today's post is actually a continuation from yesterday. So if you're new here, it'd be best to listen to yesterday's episode first. But if you're all caught up, let's hear Part 2 and continue optimizing your life.

[00:01:36] The stages of financial management, Part 2, by Andrea Joy of SavingJoyfully.com.

[00:01:46] Sacrifice versus making the right financial choices continue. At this time, I entered a period of knowing what was best but often choosing to do what I pleased.

[00:01:59] Just like many teenagers often choose to make decisions based on feelings instead of reality. I would spend years taking two steps forward and one step back as I tried to have heartedly do the right thing financially.

[00:02:13] While in my mid-20s after struggling for so long to finally get my finances under control, I finally began to make the right choices.

[00:02:22] I was finally tired of the lack of progress, the accumulating debt and no money at the end of the month.

[00:02:29] I made multiple changes that year to my life which included focusing on repairing my debt and beginning to save.

[00:02:36] What did I do to finally break the cycle and progress to the adulting stage?

[00:02:42] One, I created a 401k which I had put off for years because I never thought I'd have enough money to invest even a little each paycheck.

[00:02:51] Years later as I began to do better, I also created a stash account where I'd invest on a small scale with some individual stocks.

[00:02:59] I had always wanted to understand how investing works and I'm so proud of all that I've learned since I began.

[00:03:06] It's possible to begin investing with very little experience and to teach yourself how.

[00:03:11] Number two, that year I finally focused on saving more money and building an actual savings account.

[00:03:18] I finally was successful at this by completing a 52 week money challenge and slowly saving money that I did not touch all year.

[00:03:27] Number three, I progressively began to pay down debt smallest to largest.

[00:03:32] This is not always the preferred method of debt payoff but work the best for me since I was able to see more progress quicker as each debt was eliminated.

[00:03:41] Number four, I stopped using credit cards and began saying no to myself and others when I simply could not afford something.

[00:03:47] I just didn't purchase it.

[00:03:51] I started seeing small progress and began to feel excited by my progress.

[00:03:56] This fueled my drive to continue doing the right thing and walking away from the lifestyle I had once lived.

[00:04:02] Number six, soon after entering the adulting stage and moving forward,

[00:04:08] I began savingjoyfully.com as a project to help others learn as I had through my journey.

[00:04:15] I found that I gained encouragement from an interest in helping others learn to better manage their money.

[00:04:21] At that time, I also discovered a wonderful community of personal finance enthusiasts on Twitter that helped drive me to learn more about my finances and grow even more.

[00:04:31] How I finally progressed to the mature stage.

[00:04:35] Today, I believe I can confidently say that I have safely entered the mature stage.

[00:04:41] It does not come easily but has finally happened after a lot of years of poor decisions and lessons learned.

[00:04:47] I look back on the poor decisions grateful for the lessons and happy that I have finally found my way to the place that I am today.

[00:04:55] What the mature stage looks like for me.

[00:04:58] A realization of my past mistakes and a desire to overcome these.

[00:05:03] Sacrificing my desires at times to make better decisions for my future.

[00:05:08] Increasing savings, increasing investments, decreasing debt, making tough career choices to earn more money,

[00:05:16] not increasing my expenses with each pay raise received, saying no to frivolous spending and discovering new ways to be frugal.

[00:05:25] A word of warning about the stages of financial management.

[00:05:30] The stages of financial management can change based on your decisions and actions.

[00:05:34] A person can move from the mature stage backwards instead of moving forwards.

[00:05:39] They can do this quickly by altering their behaviors and by making choices of many kinds that affect their financial life.

[00:05:46] Accumulating unnecessary debt, spending more than they should, ceasing to follow a budget they've set up,

[00:05:52] taking on financial responsibilities they did not previously have, etc.

[00:05:57] Recommend taking a hard look at your financial progress monthly and re-evaluating your priorities if you see your finances begin to change.

[00:06:06] Life happens to leave us with new challenges all the time.

[00:06:10] As we learn and mature, we find innovative ways to deal with these challenges.

[00:06:15] Sometimes a challenge will bring us back a step financially through no fault of our own.

[00:06:20] How we choose to handle those situations shows the growth and true reality of where we are in these stages.

[00:06:26] You find that you've regressed, it's not too late to get back on track.

[00:06:30] Growth and maturing are a process of daily choices and a result of years of continuous learning.

[00:06:37] You were only as mature as the lessons you learned to apply and the daily decisions that you make.

[00:06:45] You just listened to part two of the post titled The Stages of Financial Management by Andrea Joy of SavingJoyfully.com

[00:06:55] and I'll be right back with my commentary.

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[00:08:37] Another paradigm shift that can be helpful in progressing to the adulting stage of financial management is recognizing the urgency here.

[00:08:47] Before I put my big girl pants on and cleaned up my financial mess,

[00:08:51] I just assumed my debt and savings would be something that I'd figure out later.

[00:08:56] At some undetermined time in the future, once my income surpassed some undetermined threshold,

[00:09:03] you've heard that when it comes to investing, time in the market is going to yield much better results than timing the market.

[00:09:11] So the key to building wealth is starting now.

[00:09:14] I've also heard that time is the biggest lever for wealth creation, even more so than your income or skills.

[00:09:22] Giving your money time to grow through investments and also treating your debt as an emergency that needs to be taken care of right now

[00:09:31] is a sign of good money management.

[00:09:34] I also found it helpful to question my beliefs about how difficult it was going to be to dig out a 30 grand of debt and stick to a budget.

[00:09:42] Most of us will need to take a hard look at our expenses and probably reduce them in order to improve our finances.

[00:09:50] Does that sound like deprivation and restriction to you?

[00:09:54] What if you could reframe it as an exploration in creativity and resourcefulness?

[00:10:00] So for example, before I buy something, I typically go through a checklist in my mind that goes like this.

[00:10:07] First I ask myself, is this really a need or more of a want?

[00:10:11] And if it is a want, is there a more frugal way to go about it?

[00:10:15] Do I own something already that could be repurposed to fit this need?

[00:10:19] Could I borrow what I need from a friend?

[00:10:22] If I absolutely need to buy something, can I get it used?

[00:10:26] This mental process stops me from falling into the trap of mindless spending and opens up some creativity in the process.

[00:10:35] And that's another episode of Optimal Finance Daily in the Books.

[00:10:39] I'll be back with more posts for you on Tuesday, so have a great rest of your day and I'll catch you tomorrow where your Optimal life awaits.