After studiously reading an array of money management books, Portia, who after graduating started earning approximately $100,000 a year, knew it was time to take charge of her wayward personal finances. She first built a “mini-emergency fund†of $1,000 and then tackled her $35,000 student loan debt. With payments of around $2,100 a month, she paid off the balance in 16 months. She cut back on her spending by living in an inexpensive apartment, sticking to a fixed budget for going out, and searching for cheaper travel when visiting family.
Proud of her progress, she also shared her financial success with her then-boyfriend, Kyron. Since he had a salary in the low $100,000 it would be nothing for him to go out to dinner with four or five friends and foot the bill. He also had nearly $30,000 in student loan, car, and credit card debt despite the fact that he had about $30,000 sitting unused in his checking account.
Portia convinced Kyron to keep about $1,000 in an emergency fund and use the rest of the money to pay off his debts. While Kyron was nervous at first about draining his checking account, he quickly saw the wisdom in that approach. “In the past, my entertainment budget was whatever was left over at the end of the day,†he says. “But now, what’s left over goes to saving.†A little more than a year later, he has re-saved that $30,000, “and I have no debt,†he adds.
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