Kumiko Love runs a finance blog called Budget Mom and is sharing her tips on eliminating debt.
Just like many Americans, Kumiko Love found herself mired in devastating student loan debts. After becoming a single mom to her young son, Love, even at age 33 found herself still paying off massive debts. But Love soon embarked on an important journey as a financial counselor. She learned valuable information that she has since shared with over a million followers on her blog, The Budget Mom. "I really want to teach my readers [they can] have this life they truly love but living in a way where it's not putting them in debt," Love told Good Morning America. "It's about showing what that looks like in a real person's life, which is why I share my real numbers with my readers." Speaking of how she managed to get rid of her $77,000 debt in three years she credits it to three strategies rolled into one: there’s the calendar method, the cash envelope method, and the paycheck method. She created her own system, which she called “the budget-by-paycheck method."
The finance blogger admitted to NBC, “I tried every budgeting method out there. Percentage budgeting, calendar budgeting, I tried the cash envelopes, I tried the half payment method, I tried monthly budgeting, and every single time at the end of the month I would come up short.” The young mom soon realized that when she began to budget for paychecks rather than the whole month, she ended up managing her spending better and saving a whole lot more. “When I started budgeting my money by paycheck every single time I got paid, and I was allocating every dollar for a purpose when I received my paycheck, I started finding myself succeeding, I started finding myself actually saving money and having more to throw down towards debt,” Love said.
So let's get down to her three clever strategies. First, use the calendar method to note down any upcoming expenses you have in the following month. Markdown holidays, events, when the rent is due, etc. Love also writes down the calendar dates when she gets paid. The calendar method is a trial and error method to figure out the best way to pay your bills. “It’s making people realize that the budget isn’t just about your bills,” she said, “that things come up in our life that most of the time we’re not financially prepared for.”
Now, you must know where your money is going and track your spending. The second step is to use the paycheck method. Here you need to create a budget for your paychecks based on the approaching bills and expenses you’ve marked in your calendar. But be realistic. Before you do this, Love says to track your spending during the present month. She adds, according to NBC, “When you track your spending you’re going to get your realistic categories you should be using in your budget, and it’s going to identify your regular, recurring expenses or monthly bills.” Create a zero-based budget, which simply means your income minus expenses, equals zero. "Zero-based budget is to create a plan for every dollar," Love told GMA. "So every dollar [you] make is being used for a place in your budget. If it already has a place, then we get rid of mindless spending."
The third step includes the Cash Envelope method. "You pay your bills online,” says Love. “Everything else, you pull out for cash spending, which comes into play the cash envelope method.” So you need to withdraw cash for your variable spending and put the specific amount for each category in envelopes dedicated to those categories. Variable spending can include things like entertainment, outings, groceries, etc. Then, each month, the trick is to work on lowering those expenses. If you spend $100 on gas every month, aim to make it $90 the next time. By using cash, it limits your debit and credit card use, so you're not putting yourself in more debt. “I am a firm believer that my budgeting method can work for anyone, no matter their income size or schedule,” Love told GMA. “As long as you put in the work to make it personal and realistic to your own life, there is no doubt in my mind that you can be successful.”