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Life

The Quest for Financial Freedom

I worked with a financial expert to try and learn how to save money and eliminate debt. See what happened, and how you can work on improving your own financial status.

By Savannah Waszczuk

Feb 2013

Every December, publisher Gary Whitaker asks us about our work-related and personal goals for the next year. At the end of 2011, I said that my personal goal for 2012 was to build up my savings account and hopefully be able to buy a house by 2013. When general manager Joan Whitaker saw my answer, she put me in touch with K.C. Rakow, owner and operator of Your Financial Solutions. Rakow shared a few tips to help me get on track. Whether you’re looking to save for a new home of your own or even just pay off a lingering bill, Rakow’s tips can help you, too.

1. Get organized. 
Rakow advises to create a file system for important financial statements, have a designated area for your bills (to reduce the chance of missing a payment) and set up automatic payments where possible. Auto-pay prevented me from forgetting to pay a couple of my bills, which ended up saving me a nice chunk of change on interest rates.

2. Have a plan for your money. 
Creating and sticking to a budget can reduce the stress in your life because it puts you in control of your money, not the other way around. Don’t be afraid of the B word!

3. Use a cash envelope system. 
For areas within your budget where you tend to spend too much (eating out, coffee, going to the movies, etc.), put a budgeted amount of cash in an envelope at the beginning of the month. When the cash runs out, you don’t get to eat out or go to the movies until the next month. I gave myself $100 for eating out/”fun” each month and, although my friends missed me at a couple of happy hours, it ended up saving me several hundred dollars.

4. Create an emergency fund. 
I know better than anyone that life can throw us curve balls. During my fourth month of practicing my new budget, I moved into my own place and lost a roommate, more than doubling a few of my key monthly bills. In month ten, I got in a car accident and had to dish out a thousand not-budgeted dollars for an insurance deductible. Having an emergency fund helps reduce the financial impact of these kinds of events. Start with $1,000 set aside in a savings account, and then set a goal of increasing it to 3 to 6 months of your monthly expenditures after you’re out of debt.

5. Get out of debt. 
List your debts (credit cards, student loans, etc.) from smallest to largest and attack the smallest one first, and then the next smallest, and so on. Thanks to Rakow, I paid off an old credit card bill that has been haunting me since college.

6. Figure out ways to save each month. If you have created a budget, you can compare what you spend each month to what you budgeted for that category. This will help you decide what to cut. Ideas include taking your lunch to work, making coffee at home, renting movies instead of going to the theater, planning meals for the week in advance and using coupons.

7. Stay the course.  
Many people get overwhelmed with their financial situation and give up. Getting out of debt and saving takes time, but it can be done if you stick to it. Thanks to those curve balls I mentioned in No. 4, my road to financial freedom was put on hold a couple of times. But, even though I still haven’t purchased my own house, I’m living on my own, paying off debt, making wiser financial decisions and getting a lot closer to having my last name on my very own mailbox. 

 

Do it Yourself!

Want to work on eliminating your debt and saving money? Rakow recommends reading a personal finance book, such as The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley and William D. Danko, or attending Dave Ramsey’s Financial Peace University courses, offered at many local churches (including Second Baptist Church, Springfield, 417-887-3111).

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