The most important tool one woman used to pay off almost $24,000 of debt in 15 months
She paid it all off in just 15 months.
She did it by crushing her autopilot spending habits, modifying her priorities, and paring down her expenses.
The first, key tool she used to eliminate her debt was to use what she calls a reverse budget: "a detailed document listing all of your purchases from the last three months."
After creating a reverse budget, Newell Jones could see patterns that she was unable to recognize before, she writes in her upcoming book, "The Spender's Guide to Debt-Free Living." "I saw the sad details about where my money was going, and how much I was wasting. The bottom line: I was buying stuff I didn't need with money I didn't have."
Create your own reverse budget by getting your bank and credit card statements from the last three months and make a list of categories of where your spending is going. Be sure to record everything. Get the totals for each category, and divide them by three (one for each month) to find the average spending per month.
In her book, Newell Jones suggests looking for "unskewed, unabridged, undoctored spending habits."
In other words, what do you buy when no one is looking?
She writes:
If you don't know where your money is going, you can't stop it from going there. It's absolutely vital that you know how you are spending your money ...
It's easy to think that you need everything you're buying, but you have to be honest about your spending to make any lasting changes.
The budget will help you narrow down where you money is going and will reveal patterns and problem areas. A "problem area," according to Newell Jones, is "unnecessary expenditure that appears in the reverse budget multiple times."
After figuring out your problem areas, you can tackle them by:
Identifying triggers- the people and places that "put you in temptation's way."
Making a diversion plan by having a backup activity for time when you're tempted to go to a place you know will trigger your autopilot spending. For instance, instead of going shopping as she usually did during her lunch break, Newell Jones kept busy at work: She asked for more tasks and organized everything, which kept her engaged.
Creating a "commitment device" such as a "punishment" for the times you do fall back into your spending habits. Punishment ideas Newell Jones suggests are putting aside money for each slip up and sending an extra payment to your credit card company.