You’re likely here because you’ve had that heart pounding, sweaty palm moment wondering how you’re going to make X & Y payment and feed yourself until next payday moment and you’ve decided that’s NOT okay. I got you. 

For some strange reason, none of us actually change until we’re made to, and even then it’s really tough! Whether you’ve had that moment or you’re trying to prevent it, you’re doing the right thing. 

The Strategy

We aren’t going to make much progress very quickly though, if we don’t lay out a solid overall plan and some necessary basics right up front. In my prior post, I talked you through pulling your credit report and gathering statements, accessing all your banking information and documents, and making a list of every account you own or owe with current balances, contact information, and account numbers so that you literally have all the pieces of your finances in one place. 

Now that doesn’t seem like much progress, it’s just a messy pile of paperwork right now, but wait, it seriously IS a major accomplishment. You’ve done the legwork to just figure it out, even on accounts you’d forgotten about or maybe didn’t look at on purpose because they were such a mess. 

It’s not You, It’s your Behavior

So now you’ve been staring at that list & maybe you couldn’t help yourself – you added up the total and nearly passed out. Or maybe you got pissed off and upset that this scary number is existing & representing you. 

Right off the bat, we’re going to establish one of the first, most important principles of personal finance. Your balances don’t represent you. They don’t represent how bad of a person you are or how poor of a mom you are, or whatever crazy thoughts hit you over the course of the past week.

That’s all bull. Your balances represent your behavior. They don’t represent you.

Think about a toddler acting out throwing a fit. She wants a lollipop and wont quit screaming until she gets it! This behavior doesn’t mean she’s a bad person, an idiot, selfish, or any less beautiful. It’s a behavior – she is worthy of love, she is beautiful (when she’s not screaming), and she will grow up to make amazing things happen in this world. 

Behaviors can be taught and learned, and most importantly, changed. So, those numbers reflect behavior – that’s the biggest thing you’re going to focus 

There’s More to It

It’s not just about getting debt free. If your behaviors around and with money aren’t adjusted, you’ll repeat similar actions that got you here in the first place, and you’ll be back in debt in no time, perpetuating the yo-yo diet of debt. So this is full of “mindset” and “positivity” pointers, but don’t be fooled – these are actions steps just as much as everything else.

Adjusting your mindset, behavior, and the amount of cash you have are all strongly correlated. Listen closely to your thoughts throughout each day. What are you saying to yourself? They are likely negative, fear based phrases that reflect the lack mindset. 

Recognizing those “inner” thoughts

Don’t allow those thoughts to be subconscious anymore. The moment one crosses your mind, whip out your phone or notepad and jot it down. Take a moment to re-read the thought you just had and then below it, write a new, more positive phrase that would be better for your self-esteem. 

I’ve created a list of some commonly used negative phrases paired with some replacement guidance for you (here). Take some time to evaluate where you’ve heard that negative language before, if you really believe it, and – most importantly – if it’s ever helped you achieve your goals. Also decide if you’d ever let anyone else talk to you that way. I bet not. 

If your current mindset hasn’t helped you achieve your goals, it’s time for a reset.

This is a Long-Term Thing

Here’s another thing to consider, you won’t be “done” fixing your finances at the end of this series. You won’t ever be done. Your relationship with money is one that is going ebb and flow and need to be counseled and nurtured forever. It’s likely the hardest, most emotional, most attention-sucking relationship you’ll ever have. 

It’s important for you to know that while I’m giving you the tools you need  and helping you walk through the thought process, this is something you’re going to have to work on for a very long time. A spending mindset doesn’t just flip into a savings mindset (free download) suddenly one day. 

You’ll constantly be tempted back to that “normal” reckless behavior. Don’t give the drunk a drink – In other words, don’t tempt yourself. Don’t got to Target to “browse” when you and I darn well know that you’ll be pushing a buggy filled sky-high with cute mugs, perfectly fashionable flowy tops, the cutest leopard shoes, and sparkly throw pillows within 10 minutes of you stepping foot in that place.  

Your New “baby”

Think about this financial journey like the little toddler, this is your financial baby. You’ve got 18 years to raise her right, even then, she may call you and need to move back in, want you to pay for this or that, and then, one day, tell you you’re going to be a grandma. The relationship never ends. Your work is never done. Your time together just adjusts throughout life, but your goal is to be as close and supportive with her as you can. 

Time to strategize about your financial baby’s life and set up some solid foundation in which she can be nurtured. You wouldn’t say those negative things  about your sweet little chubby-cheek financial baby and you wouldn’t let someone else say those things to your face, so time to woman-up and adjust those thoughts while taking the action steps. 

Goals & Planning

Remember that “Why” you read about in my prior post? Bring that back to the forefront of your mind right now. There’s no point in doing all of this leg work with no plan and no goal in mind.

You know, that super abundant dream you don’t mention often because it’s a totally nutzo goal  and you doubt you’ll ever be able to do that? Remember, that non-profit you wished to start or that school you wanted to build, or that clean water mission, or that counseling organization you wanted to start for foster families… whatever that crazy thing is that you used to dream of but promptly stuffed it down because it’s “never” going to happen. 

Maybe you just dream of a life of simplicity and worry free time traveling. Maybe if your finances were in order, you could stay home with your kids, retire early, or be less distracted and more able to focus on your family and friends. Whatever abundance means to you is why you started on this journey, and you must start with that goal in mind. 

In the first step, you gathered all your information. As you keep reading, we’re going to talk about a starter rainy day fund, calling your creditors to negotiate, making the minimum payments on time using automation, and discussing needs versus wants. 

You’re going to learn how to stop the bleeding. Over draft fees, late fees, and interest are all your income that you’re choosing to give away each month. Yes, I said choosing. You have a choice. You’re going to drop that bad habit like a hot potato.

Over the course of the next few posts, we’re going to talk about and strategize to actually pay off your debt – all of it. We will compare laddering, snowballing and the avalanche methods and see which one is right for you. I’ll walk you through calling creditors, how to make some extra cash, and how to stay motivated through this whole thing. 

Actually, I’ve created a free workbook to help guide you through this process as you read this series of Mama’s Abundant Money posts.  Pop your info into the form below and you’ll promptly receive worksheets, instructions, and even a cash flow calendar to help you rock this whole journey!

Toward the end of this series, we’ll dive into investing. I can’t wait to share with you all I learned about retirement and college savings accounts, the funds inside them, and how to totally secure your future!

That’s the fun stuff where you can really see potential.You’re going to get a dose of behavioral  psychology as it relates to money and a bit of encouragement each step of the way. After all, you won’t ever be able to experience the true abundance of investing or the full confidence around your finances without slogging through the muck to get there. 

The finish line is the sweetest to those who actually run the race. 

So now that you know what to expect and a few basics of what’s to come, time to do the dirty work. 

Automate Minimum Payments on Everything

Aside from working on your thoughts surrounding money, one of the action steps I want you to focus on is to make every minimum payment, and not more than that, on time this month. Don’t pay even $20 over the minimum on anything right now. 

You’ve been spinning your wheels making slightly more than the minimum payment on everything for years because that’s what you heard you were supposed to do. 

Everyone knows you’re supposed to pay more than the minimum or you won’t ever pay it off, right? While partially true, you aren’t getting anywhere doing this on all your bills. That just spreads your cash flow super thin while all of the accounts edge toward 0 at an agonizing pace. 

That period of your life is now over and done. For this month only, you’re going to hoard your cash in your checking and savings accounts as if there won’t be any more coming in. I know this is bizarre behavior if you’re trying to pay things off, but stay with me. 

Along with making only the minimum payments (don’t forget the on time part!), don’t make any large financial moves this month. No 401K loans, no major contributions toward retirement, no shopping for a new car, no balance transfers, no refinance conversations and most definitely not any new credit applications. I mean it. NADA. 

If this happens to be a month where you have a big bonus come in or you get your tax return money back, the instruction remains the same. Don’t do anything. Build your checking and savings as large as possible while ONLY making the minimum payment on every single thing this month.

I know this is strange. Being “normal” wasn’t helping you though, right?

Be strange with me and let’s go places!

In the long run, one month is not going to make a single difference. A month of planning instead of a month of mistakes is what’s going to happen right now. To ensure you don’t miss any payments and that they’re all on time, I want you to log in to each credit card, loan, and utility account (don’t forget your mortgage or rent!) and automate them.

Set every single bill to be paid automatically 1-2 days prior to the due date, in the amount of the minimum payment only. This goes for all credit cards, loans, car payments, mortgage or rent, and utilities.

Automatic payments are the best option to ensure we wont miss anything and will avoid all late fees. If auto-draft options scare you, set calendar reminders containing the creditor, last 4 of the account number, the amount, and the due date for each payment 3 days prior to the due date. Turn notifications on and pay attention. 

Can’t Even Cover Your Minimums?

If your minimum payments on your debts are more than what you can afford in a month, you need to negotiate with your credit card companies. While I get it because I was there too, you have some drastic changes to make in your habits (that’s what got you into this position) while calling your creditors.

Two important tips right here when it comes to creditors: 

Only worry about the items not already in collections. If something is in collections at this point, leave it there until you handle the other, more current items completely. Plain English? Only call or make payments to a collections account AFTER your current debts are completely paid off.

Bring all of your regular (not in collections) creditors current and keep them that way throughout this debt pay off process. Late fees and increased interest rates because of missed payments are just a waste of your money. Stop the bleeding immediately. 

Your first tasks are to prioritize needs, temporarily trim all other spending (cancel Audible, other subscriptions, and control your grocery bill), and negotiate with your creditors to freeze your accounts and reduce your minimum required monthly payments. 

These steps in combination will reduce your monthly outflow and make it so that you can keep your credit current without going deeper in debt to buy groceries & other necessities each month.   

Wants versus Needs

Even to this day, I evaluate our spending by looking at each transaction and evaluating if it was a want or a need. Now and forever forward, I suggest you consider this each time you are about to make a purchase. 

Needs always come first and include things like utilities (electricity, gas, water, and these days internet), your rent or mortgage payment, and food. Netflix, organic shampoo, fast food, a new top, or soccer registration are not necessities. The platinum internet plan, a car wash subscription, and deliveries of Hello Fresh aren’t necessities either – they are luxuries. 

No one in the family is going to like to hear that, but it’s the truth. Depending on how serious you are and how uncomfortable or weird you’re willing to get, you’ll want to consider pausing these expenditures for a little while. 

Habit Interruption

In addition to hoarding your cash payment-wise, I want you to temporarily pause on all purchases. No new dresses, you dog doesn’t NEED grooming, you should pack your lunch, and halt that Amazon cart. Pay your utility bills and buy deodorant, if you must,  but that’s it!

You probably hate the idea of being restricted, so you might be going “Heaaalll to the naw!” right now, but we’re abruptly interrupting all your habits. I won’t make you do this for long – I know it’s uncomfortable and I know the kids are inevitably going to need something. I know soccer is going to run late and you’ll need to break down and buy hamburgers. 

This temporary, yet drastic change is not to be looked at as restrictive, and instead as ultra productive. I’m throwing you into uncomfortable territory on purpose and making your emotions and your brain try to work together to figure out this confusion. No more mindlessly swiping that card.  

Again, don’t look at this as restriction. Be creative and figure out how to cook a week or two worth of dinners using only what’s currently in your pantry and freezer. I use Super Cook to enter ingredients I already have to come up with a recipe for dinner.  Find free entertainment for the family. You don’t have to turn into the most crazy, frugal mom out there, just be more mindful of what is needed and the cheapest way to accomplish it. 

For a little while, you’re going to be extremely conscious of your purchases. Every time you’re about to buy something, you need to pause and evaluate whether this thing is a necessity, if there’s a cheaper way to get it, and how you can avoid this spending pattern the next time. Play a game with yourself and see how much money you can not spend.

The Emergency Fund: What, Why, and How Much?

Did you know that 58% of Americans don’t have $1000 in cash? If an emergency came up, they don’t know where they’d get that kind of money. Most say they’d use credit. You probably aren’t super shocked by this though, because you might be one of them. I was totally there and I know how people can get themselves in that position. 

You’re no longer, never-ever, going to be that statistic.

Promise yourself. 

As you hoard your cash this week and this month, you’re working toward a “baby” emergency fund. You’ve probably heard of that, but maybe you didn’t know what it was supposed to do or why or how much it should be. 

We aren’t talking the super-intimidating 3-6 month emergency fund that you’ve also probably heard about. At this point, it probably seems completely impossible that you’d ever be able to have that much in savings. It’s okay, don’t panic. We’re going to establish a starter fund first, before launching into paying off debt and waaaay before we talk about investing. 

Why? You need an emergency fund, or for a more fun version, an FU fund (yup, there’s a curse word there but SUPER worth the read!) to create peace of mind and security. You need a stack of cash sitting there so that you don’t panic or turn to credit when something crazy comes up. 

By establishing this “slush” as some people call it, you’re insuring yourself and your anxiety against any likely mishap that could pop up. This cash gives you the ability to laugh in the face of disaster because you know you have it covered and are’t going to play that same ol’ game anymore.

That game never got you anywhere positive anyway, so we’re flipping the script.

How much? If your total income is less than 50K, I suggest starting out saving $500 as a rainy day fund. If you are in a higher income bracket, Dave Ramsey recommends you shoot to set aside $1000 as fast as possible. Love him or hate him, he has a few good points. I’m going to go into a little more detail here and guide you as to how much you may really need. 

We started our journey with $20 in the bank and 2 weeks until the next pay period (full story here), so I get it if you’re thinking “Where on earth am I going to get that kind of cash? Remember, I can’t even pay all my bills!?!?!?” You take it slow, that’s how.

By making only the minimum payments on everything and temporarily pausing your purchases/ shopping etc. you’re allowing more cash to build up over the next pay period or two. Start with whatever you can set aside, and for each purchase you avoid and each amount over the minimum you don’t send this month, add that value to your fund until you reach your comfort number. 

When I was ramping up our fund, I chose to establish 2K as our “comfort number” because we had two kids in daycare and I figured if all else went to hell, I needed to be able to still send them so I could work on a resume, go for interviews, or be able to call creditors in peace. 

That $2,000 made me nervous to only have that much, but also comforted me. At least I could keep the kids in day care while providing myself space to figure things out.

Your starter rainy day fund value should teeter on the brink of discomfort and I-could-make-it-work. If you’re so fortunate not to have day care costs, maybe that fund is the value of your utilities plus gas for the car for the month.

I absolutely do not recommend your rainy day fund be greater than $ 2,000. I also do not want this process to take more than a couple of months.

You’ve got to be the one who takes charge and makes the decisions on this. Start exercising your power here and find the happy medium between the time it will take versus the amount you need. 

Work diligently over the next couple of pay periods to get your mini emergency fund established. Do not move on to any further steps until you’ve tackled the steps in my prior post and your FU fund is totally funded. 

In Review

At this point, I’ve walked you through establishing your starting point, discussed some mindset items and helped you reset some of those subconscious thoughts, and talked about the details of your emergency fund. These three things are establishing a strong foundation for your journey. You’re doing all the planning and packing for this long trip across the Sahara you’re taking. 

You should be one proud mama – you’ve taken some major steps toward changing your financial life. It may or may not feel like you’ve done very much, but you’re already miles ahead of someone who still hasn’t taken any action. 

These initial steps are imperative for your success and your confidence through this process. I encourage you to reach out to me with specific questions or things you’re unsure about. However, I also encourage you to make a choice and stick to it. Don’t choose a path, a value, or a door and then constantly question your choice – find your confidence through this. 

Be Open with Others

I believe in your ability to harness your power as a mother and own the ability to alter your family’s future for generations to come. Meanwhile be open about this with your husband and your kids. Work together, discuss things, make pros & cons lists have a glass of wine while you’re reviewing numbers, etc. 

When your kids ask what’s going on or say the dreaded “I want that!” phrase, simply and openly tell them “We’re choosing to make different and better choices with our money right now.” They may ask why or even have a few other insightful questions. Feel free to briefly explain things and be open that you’re working on managing your money more responsibly toward your goals. 

They may like it and they may not, remember who’s the parent here. Remember with any big change in life, there will be haters. Sometimes those haters will come around later and than you for being so bold and true to your vision. 

That could be a very insightful conversation between you and your kiddo. You have the chance in that moment to make an important positive imprint on your child through this conversation. If you’re not a mom yet, do this with your friends, co workers, and family. Take special care not to be dismissive or negative about it. If they see you sigh and roll your eyes about money, imagine what they will assume. You’re the adult here, act like it. Let your decision empower you.

Looking Forward

The old you who was paralyzed with fear and who felt lost when it came to money or what to do first doesn’t even exist anymore. Ever heard the “you can lead a horse to water…” quote? Well, you chose to allow me to lead you (thank you) and you’re choosing to drink.  I’m so dang proud of you. 

Stay tuned for the next post where I’ll walk you through the dreaded budget (dan dan dan!!), what the anti-budget is, and we will discuss the different payoff plan types (avalanche, snowball, and laddering) and how to execute them! It’s going to be soooo exciting! 

In the mean time, automate those minimum payments, hoard your cash, call your credit card companies if needed, be super conscious about your spending habits, and build that starter rainy day fund.  As always, reach out to me if you’re stuck somewhere or if you have any questions.