Whoops. Spent Too Much
I am not a perfect picture of FIRE discipline or anti-consumerism. Actually, if you picture perfect discipline, I’m really far from that. If that’s your lane, I have some excellent reccos here and here. I’d call this site FIRE-flirty – heavily invested in the processing and self-questioning part of the process of claiming independence, but willing to take a less direct path.
I do pretty well at not buying things. But I do spend too much sometimes on beauty and experiences. ‘Too much’ here being defined as more than I’ve allowed myself for these categories. If you are in chronic credit card debt, this post is not going to ring true for you and the advice here isn’t geared to your scenario. That kind of debt is grinding and stressful and I have empathy for people in this scenario; do reach out for help to sources that you trust. They should not have anything to gain from your continued debt.
The ’too much’ I’m talking about means I still pay all my bills. However, I have put myself in the position of not being able to do that fundamental thing I’m supposed to do no matter what every pay cheque: pay myself. (Read: pay into my savings). And to be honest, this happens semi-regularly, maybe 7 or 8 times a year.
Even still, I wouldn’t call myself irresponsible or undisciplined. In fact, I keep myself very accountable and manage to be, overall, fairly disciplined. And that’s because of the way that I respond in this situation.
What to Do? Become Your Own Debtor
So, what do I do when I can’t make a payment to myself? First of all, I always pay my other bills, including the credit card. The last thing I pay out to is my savings. (If I can make a partial payment, I do.) I choose this hierarchy because I would rather owe the money to myself than to someone else, who keeps the interest.
What do I mean by charging myself interest and ‘keeping’ it? When I don’t make a payment to myself, or I pay myself less than what I should have, I begin keeping a balance sheet in my net worth and cash flow notebook that tracks the amount I didn’t contribute as a debt to that account. It’s a debt to myself, and to my own future freedom. I then charge myself interest to represent what I would miss out on if I were invested in the market for 2 weeks at an annual rate of return of 6% (the number I use for all my market projections). In short, I become my own debtor.
To be clear: This is a zero-sum game for me. In no world can this be understood as a way to make money.
Getting Out of the Negative: Bringing Back Balance
Once I record what my debt (and ‘interest’) will be, I make a 3-paycheque plan to get it down to zero, or reduce it by $1,000 (whichever is less). My payment plans for myself have used all kinds of strategies. First, I look for ways to cut down expenses. Often this is from the discretionary spending I allow myself. However, this stage has actually led to changes that had longer term impact. It’s motivated me to switch insurance policies, cancel subscriptions I suddenly got very honest with myself about, and change phone service providers. In fact, doing this a handful of times per year in response to a very specific and immediate target has been a great check in for me. It’s served as a reminder of how easily spending can become automatic and uninspired.
Second, I look for ways to make more money. More than once, I have noticed that bank bonuses for opening new accounts can more than cover a debt to myself, and the interest involved in the waiting period for actually receiving the bonus. If you go with this option, read the fine print. There are waiting periods, account minimums, and required actions often involved. Be sure that these are viable for you. If you happen to have an emergency fund saved (or far enough along in process), these are excellent funds to use for this, since you were hopefully planning to keep them liquid, untouched, and easy to access.
Other options for making money could be anything. Think extra hours at your work (if available and actually paid out as extra/overtime), pet sitting, dog walking, freelance work, etc. Just like how I suddenly get creative when trying to cut my budget in these situations, I’ve found that trying to increase my budget a few times a year is enough to push me into finding new avenues for increasing my funds, some of which have stuck around for the long run. It’s also been one of the things that led me to understand the importance of diversifying my income.
A Savings Path… With Grace
Seeing my debt to myself tracked and reduced each pay cheque is a motivator in and of itself. It reminds me that I’m out of balance and need to reel myself in for a while. Often, the times I’ve overspent made sense to me. Like buying in bulk because an item that stores well is on sale. Other times, it was accidental or just not well controlled spending. That said, having some grace and recruiting my creativity and skillset to bring myself back to zero is refreshing.
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