Hi! Welcome to The Finance Gym Action Plan for a Better Life with Money video series. My name is Stacey Powell and if you’re ready to not just know better but also do better with your money, you’ve come to the right place.
The last few weeks, we’ve been showing videos on the four letter word “debt” and as I’ve looked at them, I realized, oh my god, they’re really serious. Like, I’m really serious when I’m talking about and telling you to stop using debt in this very serious tone.
Maybe I shouldn’t have been quite so serious. But you know what? It’s a serious issue. But today we’re going to talk about something a little bit more fun around debt and that’s how you can accelerate your debt payments in kind of a fun way.
So one of my very favorite money tips that I ever got and now it’s the favorite money tip that I give, I like to call the one-third rule. Whenever you get extra money, no matter what kind, you divvy it up in thirds. One-third goes toward your debt. One-third goes into savings because we do that equally and then one third goes towards something fun, something that you’ve really wanted, something that you haven’t let yourself buy because you’ve been so busy paying down debt over here.
So whether it’s a tax return, a bonus at work, birthday money, yeah, even birthday money, like if you’re serious about getting out of debt, even birthday money, an inheritance. Now if you get some huge inheritance, I’m not suggesting that you use the one-third, one-third, one-third rule. I’m suggesting that you go talk to a certified financial planner.
But if you get a $5000 inheritance, $10,000, $20,000, even something small, still sit down and think about this one-third, one-third, one-third concept because I think like with everything in life, if we do things in a more balanced approach, it benefits us. It benefits the mission we’re on. I see so many people get their tax refunds every year and use it to pay down debt and then they use their credit cards all year long and then they get another tax refund and they use it. It’s just this ongoing cycle.
What would it look like if you had a tax refund and you had no debt to put it down towards? You can do a one-half rule. Half of it goes towards savings and half of it goes towards fun.
So this is a tip that I’ve seen really accelerate people’s mission to pay off their debt. I’ve seen it accelerate their mission to build their savings and the other great thing about it is that you also kind of remember that when these little pockets of money come up, instead of just immediately shoveling all of that money off here towards paying down debt, it in a way motivates us. So that’s my favorite tip to get yourself out of the four-letter word “debt”.
So, as always, I would love it if you would come join us over at Team Do Better on Facebook. You can sign up for our newsletter over at TheFinanceGym.com. Subscribe to our videos right here and the next time you get some extra unexpected money, sit down and think about where you would like to spread that out to.