The Start of My Financial Freedom Journey

Sharing Financial Information

I am certainly out of my element here, but it feels with the millennial generation, finances are way more open than in the past. It might be something about the large amount of student loans or rapidly rising costs of living that make us put all these things into perspective versus pervious generations.

I am going to do my best to share some of my thoughts and processes that I am using along my journey to financial freedom.

I am financially free?

I have begun to shift my mindset from, I can never be financially free, to I want to be financially free, to being one the correct path to execute on being financially free. You see, for now this is still a question. No doubt I am on the right path, but as it stands today I still rely on my day job and regular paycheck to survive in this world. The ultimate goal is to save enough to where a regular salary job would be optional.

I picked up this mindset shift from Atomic Habits, which among a lot of other useful information the main premise is that small things that stack up over time.

This is true with investing and building a nest egg, due to the forces of compounding interest, but this is also true for paying off debt. One small payment at a time or multiple payments each month can help to reduce the amount of interest paid, thus putting more money back into your pocket. As I write this, the markets are down year to date, meaning if I would have invested the money, instead of utilized it to payoff debt, I would have lost 20-25% so far in a 5 month period.

Instead, if you choose to payoff a credit card, you are guaranteeing yourself at least the interest rate return, which currently sits at an average of 24%.

If you are in debt or have debt, I highly recommend the snowball method. This simply means, paying off the smallest balance first, then moving on to the next smallest until you knock out all of your debt.

Snowball vs Avalanche, you have options

Disclaimer while the snowball method is an amazing psychological way to amp yourself up after paying of a debt, in order to keep the ball rolling, it does not optimize for interest rates,and you will pay more interest this way than using the avalanche method. The avalanche method aims to target the highest interest rate accounts first, which will result in less interest paid and debt being paid off faster. My personal experience is that the avalanche method is incredibly difficult to stick with. So while it is the fasted way mathematically out of debt, in practice pick whichever will allow you to stay on plan and not fall back into bad habits.

Starting a new habit

After listening to Atomic Habits I decided to start a new habit of paying off my credit card one dollar per day. I placed a recurring task in my todo list app of choice(Todoist) and began to tackle the debt. I figured $1 per day is small enough that I won't have to worry about sacrificing on other bills, or over drafting my account, but large enough that in addition to my normal bi-monthly payments that it would have a noticeable impact, not just on the balance but also on my psyche.

Results

I have been at this for over about two weeks now and I must say, around pay day this made a huge difference psychologically. I do not budget every dollar out of my income. I save some extra every month for emergencies or other spending. The simple reminder that I am paying $1 every day towards a credit card helped to thwart some unnecessary purchases and put that money into the card to help pay it off faster.

The journey continues

This is just the beginning of my financial freedom journey. I will periodically post more tidbits of information that I find helpful, but for now I am following a debt payoff plan that is fairly realistic and conservative in nature.

I am getting married later this year and will be attacking that plan to exploit any opportunities I can to help speed things up and set us up in a better place as a couple and into the future as a family.

Thanks for reading.

References

Atomic Habits by James Clear Amazon Affiliate link