How Budgeting Changed Everything: From Debt to Saving for a Home
If you read our post, “We Lost Our Home,” you know about the whirlwind of emotions we faced when our rental was sold, and we had to move out. But there’s a part of the story I didn’t share—how budgeting became the game-changer that turned a difficult situation into an opportunity for growth.
When we moved into that house a decade ago, I didn’t have a budget in place. I was already juggling some debt, and as life happened, that debt only grew. By the end of 2019, I was completely overwhelmed by my financial situation. I wanted to travel and dreamed of buying a home, but my finances were holding me back. I knew something had to change, so I decided to dive headfirst into The Budget Mom’s Budget by Paycheck Method.
The Start of Something New
Getting started was intimidating, but I finally sat down and created a budget. For the first time, I had a plan for my money. I began saving for things like Christmas and birthdays, which felt revolutionary. For years, those events were sources of stress, but having a sinking fund in place made all the difference.
At first, I struggled with spending the money I had saved—it felt like I was undoing my hard work. But I quickly realized that’s exactly what the savings were for! If you think you don’t have money to save after paying bills, I challenge you to take a closer look. I thought the same thing until I started budgeting.
Saving in Small Steps
In the beginning, I used cash for variable expenses, like groceries. I followed The Budget Mom’s advice and saved all the spare change I received. At the end of the first year, I had $100 saved—just from change! It was proof that small steps really can lead to big results.
Eventually, I switched back to using my debit card for convenience, which meant no more change savings. However, I discovered The Budget Mom’s savings challenges offered on her website. For a small fee, these challenges helped me save additional money, which I used at the end of the year to help pay off debt.
Tackling Debt: Snowball vs. Avalanche
Losing our rental unexpectedly was devastating, but it also freed up some money in my budget. With that extra breathing room, I made paying off debt my priority.
When it comes to debt, you’ll often hear about two popular methods: snowball and avalanche. While I’m not a financial expert, I can tell you what worked for me:
- I started with the snowball method to gain momentum. This approach focuses on paying off the smallest debt first, which gave me quick wins and the motivation to keep going.
- Once I tackled my smaller debts, I switched to the avalanche method to tackle larger debts with higher interest rates.
This combination worked beautifully. By the time I moved in with my parents, I was able to pay off the last of my consumer debt within a few months. The feeling of being consumer debt-free was indescribable! From there, I returned to the snowball method to pay off family loans.
Saving for a Home
With my debt under control, I was finally able to focus on saving for a home. While it feels amazing to be in this position, it also feels like a long journey ahead. For anyone feeling stuck in debt, here’s my advice:
- Create a Bare-Bones Budget: List only the necessities—what do you absolutely need each month?
- Cut Costs: What can you temporarily let go of to free up extra money?
- Find Extra Income: If your paycheck doesn’t cover your essentials, look for ways to bring in more income.
- Apply Savings to Debt: Every little bit counts, and over time, the progress will show.
A Big Announcement Coming Soon!
We’ve built up our house savings and are now in a position to purchase a home within our budget. However, we’ve temporarily paused our savings because we have an exciting announcement to share! Make sure to check back next week for the big news—we can’t wait to share it with you!