May was a very expensive month. Some of those expenses I documented in my vacation rental reports and my dividend income report. But others I didn’t. Quite frankly, I wasted A LOT of money in May playing bingo. It’s almost too embarrassing to disclose. The good news is that I spent all cash playing bingo. But, that’s cash that I could have used towards paying down my debt or investing in my dividend portfolio. Now that it’s June, I’ve decided to get even more serious about paying off my debt AND investing. To do that, I plan on using the conscious spending plan. Let’s dive in to discuss.
Conscious Spending Plan
The conscious spending plan is a spending principle championed by Ramit Sethi and one that I try to follow.
The basic premise is this. You can spend money on whatever you want, so long as the fundamentals are taken care of. The fundamentals include contributing to your retirement accounts, and investing a certain percentage of your income that you decide. Of course, the fundamentals will differ for each person as personal finance is personal.
In an ideal world, once you get paid, you would pay yourself first. So, before you engage in discretionary spending, you would fund your retirement and investment accounts. Then, you can use the remaining balance to fund your lifestyle.
I really like this approach. It makes budgeting a bit easier to follow and I can engage in what Ramit describes as guilt free spending. The more money that is contributed to retirement accounts, the less money there is for discretionary spending.
My problem in May (and the months before that) was that I had too much discretionary money left over. That suggests I need to pay myself more!
Debt Payoff Amount Increased
I’ve decided to document my progress to getting out of debt on this blog. Of the 3 remaining consumer debts I have (not counting the mortgages), the only one that is of concern is the credit card with the largest balance. That is a chase credit card with a balance of nearly $14000 at the time of this writing. So, it’s going to take me some time to pay this off.
For now, I’ve decided to increase my monthly payment to $1000 per month. That’s a hefty amount, but I hope to get rid of this balance in about a year. Eventually, I may use some of the profits from the condo (if I have any) to help payoff the balance, but we shall see. In any case, if I can keep from using my credit card too much and maintain this $1000 monthly payment, I will be able to make a significant dent on this card soon.
Additionally, I am expecting to receive about $2000 extra at the bigginning of next month. If that comes to fruition (and that’s a BIG if), I plan on using most (if not all) of that money to pay down my credit card balance. I am trying to get it under $10,000 asap. To me, that’s an important psychological milestone.
Monthly Contribution To Dividend Portfolio Increased
As explained in earlier posts, I’ve decided to take a balanced approach to my finances. To that extent, I’ve decided to both invest in my dividend portfolio and pay down my consumer debt.
I am fully aware that it makes much more mathematical sense to pause my investment and focus solely on paying off debt. Afterall, my credit card interest is 20.74% which likely far exceeds the investment returns on my dividend portfolio. But to me, maintaining the behavior of consistent investing is important. Besides, I hate seeing the low balance on my dividend portfolio.
In other words, I would like to think that I can walk and chew gum at the same time. So, while it’s not the best approach mathematically, I’ve decided to both invest and payoff my debt at the same time.
Prior to this post, I was contributing approximately $550 per month to my dividend portfolio. Now, I’ve decided to increase that to $1000 per month. It’s still going to take some time to build my portfolio to what it was before, but at least I’ll take comfort in the fact that I am not wasting so much money every month playing bingo!
Discretionary Spending
Admittedly, the above will likely be a temporary increase. That’s because I am expecting my income to drop in the coming months and I may not be able to sustain this aggressive approach to my financial plan.
But, I am hoping to get used to the fact that I have a small amount of discretionary spending I can use every month. While I won’t be living on beans and rice as Dave Ramsey preaches, neither will I be wasting so much money every month on a game that is not making me any money. Besides, there are far more cost effective games I can get into – like playing chess!
I still plan on playing bingo, but not nearly as frequently as I did in May. Since I plan on paying myself first with every paycheck, I will be contributing to my dividend portfolio and paying off debt before I use my discretionary income. After doing this a few times, I hope to develop a habit where I am living a modest lifestyle within my financial means.
Final Thoughts
The struggle is real as they say. Thankfully, I am in a position where I have discretionary income every month. I realize that many Americans live paycheck to paycheck and have little to no discretionary income left. So, I am of course counting my blessings.
But, I think that if I can follow through on my conscious spending plan, it will be more beneficial to my financial future. It will be tough in the beginning, but eventually, I will get used to it. Like everything else, it will take financial discipline and patience. Of course, as always, I plan on documenting my progress (or failure) along the way.
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