In 2011, Cait Flanders, in her own words, was completely maxed out, with $100 to her name and $100 in room on her credit cards. She turned that around and paid off every scrap of debt in less than three years, and documented her journey on Blonde on a Budget. Cait spoke with us about what it takes to cut down and how to change your fiscal priorities.
You just started a yearlong shopping ban. What inspired you to start that ban?
I started the shopping ban for a couple of different reasons. First, I had this aha! moment in my kitchen one day, when I was rummaging through a drawer of utensils, couldn't find the one thing I was looking for and realized I owned more "things" than I actually needed. Shortly after, I did a massive declutter/purge, removed 42% of the belongings from my home and took inventory of what was left over. What I found is, even though I'd always been somewhat of a minimalist, I still had so much more than what I needed. So the goal of the shopping ban is to use up everything I currently own and only buy what I run out of and absolutely need.
The second reason I put myself on the ban was to take a deeper look at why I felt the need to consume, what my triggers were and then document my progress. Some people think I'm crazy, but I'm confident I'll come out on the other side with proof that we don't need to buy a quarter of the things we usually do.
When budgeting, what do you focus on? What do you trim and what do you keep?
My budgets have changed so much over the last few years. When I was still in debt, I focused on having enough money to live and then put everything extra I could towards debt repayment. With that strategy, there were months I allocated up to 55% of my budget for debt repayment. After becoming debt-free, I definitely let lifestyle inflation set in a little bit, which was a mistake. Fortunately, it didn't take too long for me to figure out I was wasting money on things that didn't match up with my long-term goals.
Now, I'm back to trying to live on as little as possible, giving myself just a small entertainment budget and putting everything extra into savings. My goal is to live off 55% of my income and save/travel with the rest. There's not much I can trim back on anymore, but one rule I included in my yearlong shopping ban is that I'm not allowed to buy takeout coffee for an entire year. For years, I've bashed the idea that $5 lattes were potentially destroying my savings opportunities, and always carried a Starbucks cup in my hand. One month in, I miss Starbucks more than shopping, but it's been great for my budget, and waistline!
Do we trick ourselves when it comes to money? Do we fool ourselves a little too much?
I don't know that we trick ourselves, but we definitely justify purchases - especially when we're paying for things with credit that we can't afford to pay off each month. I can't point fingers, as that was my go-to move for years. But I do think that it's a lot easier for us to live in denial about our financial situations than face up to it - until we're maxed out and have no other option, that is.
How did you build your budget template? What was your process?
My budget template is pretty straightforward. I've seen so many online over the last few years, but couldn't find one that looked nice and also broke things down into overarching categories (housing, food, travel) with smaller categories (rent, mortgage, groceries, take-out, etc.) underneath. The one thing I made sure to do was put debt repayment and savings at the top; those should be the two most important parts of everyone's budgets.
What are some misconceptions about saving you see floating around?
Something that's bugging me a lot right now is that I think too many people, my former self included, take the minimum savings percentages personal finance experts say should be in our budgets as face value. You always hear that you should save 10% in this account, 6% in that account, etc., but those are minimums, not goals. Our goal should be to save the most we can, especially while we are young! If you're already saving 10-20% of your income, that's great - but can you save more? Do you really need 80-90% of your income to live off of, or could you live off less and save more?
If you could talk to your younger self about money, what would you say?
Oh, there are so many things I would tell my younger self! If I could only pick one, I'd definitely tell myself to not use credit cards like they're free money. One day, you do have to pay them off - and it's not fun. Learn how to use credit cards properly right from the start, and if you're ever carrying a balance, do not accept an increased credit limit offer from your lender!