Category: 
Dear Doctor Dot-Connector,
I have been officially debt free for a month! YAY!!! The problem is: I spent all of my money and won’t have more until Tuesday night. This is normally enough to make me panic…
I have enough groceries. There is nothing I NEED. I have $515 in my EF, $65 in the Xmas savings, and no debt. What tends to happen right at this point is how I got into a 10 year hole. I have a bad case of the igottahavits. I gotta have that new pair of shoes, I gotta have that book, I don’t want pasta for dinner so I’m going to buy some steak…
When my cash on hand gets low or gets to zero, I always seem to find something to justify a dip into the savings account or use the credit card so that I don’t miss out. It would be one thing if I did this every 6 months…but it happens every 2 weeks, almost regularly.
How can I keep myself on track and motivated to save money instead of spending everything I have??
~Positive Penny
Dear Positive Penny,
Congratulations on your debt free status! No doubt, your achievement is the result of a disciplined approach to managing your income and expenses and following an excellent plan. Why should anything be any different now?
The point of carefully managing your expenses, developing your income, and sticking to the plan is not only to get you out of debt, but to cultivate a set of practices and behaviors that constitute a foundation for building wealth. You now have that foundation in place. Whether you build a lean-to or a skyscraper on that foundation is up to you, but I’d say you’re headed for a camping trip if you abandon the practices and behaviors that got you here in the first place!
The question is, what’s the plan now? What are you out to accomplish in your life? What are you building, personally and professionally, that you can advance through the cultivation of new monetary resources? In short, what are you creating in life, that’s important enough to you to warrant creating a new plan and sticking to it?
You know what to do. You’ve just exhausted the context called “Getting Out of Debt”. You need a larger, more powerful context to operate from now, but the steps are the same. Manage your expenses with discipline and consistency. Create a strategy for developing your income. Identify your next set of goals for advancing your financial position. Last, but not least, create a plan and stick to it.
One of the difficulties in navigating the transition from debt-laden to deb-free is that the money you’ve been allocating for paying off your debt now seemingly has no purpose. You suddenly have the experience of being awash in what seems like “extra” money. If you relate to it as “extra” money, you’re going to have absolutely no problem spending it!
My suggestion would be to open an online savings account and have most of this income transferred directly (and automatically) to savings. I happen to be a big fan (and affiliate) of ING Direct. In fact, there’s a big ad in the right sidebar of this site that you can click to find out more about ING online savings accounts. The advantage to online savings is that the interest rates are higher than traditional savings accounts, but the money is more accessible than it would be in other types of high interest accounts (like CD’s).
Another reason why I like online savings accounts is because most of them offer some type of “automatic savings plan” that allows you to have any amount of money you specify automatically transferred from your standard checking account into your online account, on a weekly, bi-weekly or monthly basis. This takes the “extra money” component completely out of the picture, and forces you to continue to carefully manage your expenses, while steadily accumulating savings in the background. As far as I’m concerned, the less visible this money is, the better!
There’s one more practice I can recommend. One of the benefits of being out of debt is that you can actually afford to make the occasional impulse purchase, without negatively affecting your financial position. The trick here is to allocate a certain specific amount of money to impulse purchases, and never go over that amount. That way, you can still get the instant gratification of impulse purchasing while at the same time following your plan.
I suspect I’ll be writing more about life after debt in the future, so feel free to ask more questions and I’ll do my best to answer them!
All the Best,
Click here to read more of Doctor Dot-Connector’s coaching and advice
Possibly related:
September 12, 2007 edition of Carnival of Everythi
Welcome to the September 12, 2007 edition of Carnival of Everything Finance.
We had over 60 really good articles submitted for this edition.
My favorites have “*” on them.
Interesting article.
I’ve been noticing some people using multiple accounts for different purposes. I wonder if this really works — I sometimes have a hard time watching what I spend too but it’s because of my credit card! lol. One of the biggest things I think that you should mention is that part of getting out of debt and cleaning up your finances is finding ways to increase your credit score which is not as difficult as most people think.
I learned the hard way that if you want nice things in life you gotta show that you can pay your bills responsibly. Getting out of debt is just one step in the bigger race!
Hope you can post soon
Congrats Positive Penny! I’m still in debt, but your post along with the recommendation from Doctor Dot-Connector was very inspiring.
My problem is definitely thinking that any money after paying my rent and bills is “extra,” so then i spend this “extra” money and have nothing left to put into savings, but that’s definitely going to have to change.
Also, I never thought about opening up another account specifically devoted to savings, but that’s a great idea! Thanks.
Keep up the good work positive penny and thanks for the advice dr.