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Money Management

Money Management

Should I Invest While Paying Off Debt?

Should I Invest While Paying Off Debt_This post may contain affiliate links. Check out my Disclosure Policy for more information.

Whether or not you should invest while paying off debt is a hot topic in personal finance. There are many different ideas surrounding this topic.

The short answer is that it depends on your long term goals and if your employer offers a match.

I have always stood by the idea that if your employer offers a match, contribute up to the match. Most companies this means a small percentage of your check, it’s usually not much.

If your company has some amazing match, then it’s up to you to decide how much to contribute. I wouldn’t leave all the free money on the table though.

This is especially true if you’re a twenty something. Time is absolutely on your side and you have compound interest working wonders for you right now. Take advantage of it!

Once you are contributing up to the match, I would sit tight while you pay off your debt. Once you have made a dent there are some things to consider before upping your retirement contributions.

1. Are you contributing at least up to the match, if your company offers this?

When you’re first starting to budget and getting your finances together, it is very possible that you are living paycheck to paycheck. This happens when we don’t keep track of our finances and we don’t know where our money is going.

If this is you, don’t contribute to your retirement when you can’t get through a month with some wiggle room. It doesn’t make sense.

If you are contributing to retirement, I would recommend stopping your contributions and using this money to build an emergency fund and then pay down your debt.

Once you have a handle on your monthly budget and have some leftover cash, with an emergency fund of one month of expenses, then start contributing up to the match again.

2. Are the interest rates on your debts higher than 5%?

If your interest rates are above 5%, I would sit tight on contributing anything over the match. When you have interest rates higher than 5% on your debt, you’re playing a losing game by contributing to any investments.

You need to keep in mind your net worth. A good rule of thumb I use is asking myself, will this increase my net worth? Yes, investing will increase your net worth usually, but if you’re losing out on high debt interest rates, you’re not making any positive movement.

Once your high interest rate debts are paid off, then you can start to consider some investment options. Mathematically, it doesn’t make sense to do so before your high rate debt is paid off.

3. Do you have a fully funded emergency fund of at least 3 months of expenses?

If you still have debt with rates lower than 5%, then you can consider investing more, if you want. But, do you have an emergency fund with at least 3 months of expenses?

I would suggest first working on beefing up your emergency fund before contributing more to investments.

The reason being that in the event of job loss or other emergency, you’re going to need some money to fall back on. Your investments are not something you want to use in these situations.

Get your emergency fund up to 3 months of expenses and then consider other investment options.

4. What are your long term goals?

Once you have contributed up to your employer’s match, paid down your high interest debt, and have 3 months of expenses set aside in an emergency fund, it’s completely up to you what you want to do!

That’s the great part of personal finance, it’s totally up to you to design your finances to get you the life you want.

Some people hate the idea of debt and will pay off all of their debt ASAP and not even consider investing until it’s gone. Others aren’t as bothered by it and think more mathematically about the returns that they can get in their investments.

The important thing is to consider your long term goals and what feels right for you, your family, and your life. Personal finance is meant to be personal, so make it all about you!

If you hate your debt and would rather pay it off than invest, do it! You’re still making positive moves in regards to your net worth, so it’s a good idea!

Consider the big picture of your finances rather than the small details, will it increase your net worth? Moves that will increase your net worth are good moves!

Ask yourself: If I invest, will this increase my net worth?

This is the question I am constantly asking myself when considering new money moves. Your finances are meant to be personal and you need to consider that when deciding to pay off debt or invest.

I’m a numbers gal through and through. It’s why I used the avalanche method to pay off my debt. So, that’s why I consider my net worth when I make any decisions regarding my finances.

Right now, I am still chipping away at some higher interest debt (6% student loans), I have an emergency fund with 1 month of expenses, and am contributing up to the match with my company.

This is where I will stay until my debts are under 5% interest. Once I cross into paying off my debts with lower rates, I’ll probably consider upping my emergency fund and then upping my investments.

Of course, I will have to see where I am in my life and if my long term goals are the same at that time. Do you invest while paying off debt?

Money Management

How to Get Control of Your Finances

How to Get Control of Your FinancesThis post may contain affiliate links. Check out my Disclosure Policy for more information.

I remember when I got my first bill in the mail from my student loans. At the time, I was on campus at Syracuse University in my first semester of grad school. My father called me and told me a bill came for me from my private student loans for undergrad.

I didn’t even know I’d be getting a bill so soon after graduation, less than a month after. Talk about a reality check for me. My private loans didn’t come with a grace period apparently and they weren’t aware I was a student full time.

Panic ensued. Not because I’d need to pay that bill, I knew they would be deferred once I got the right paperwork to them. But because my private loans from undergrad alone were going to cost me $1,400/month in minimum payments.

Did I mention I was adding more debt at the time to go to grad school?

Yeah. Not the best decisions were being made, but I was under the impression that student loans were fine, it’s how everyone went to college. Did I mention I was going to school to be a teacher? Yeah, really bad decisions were being made.

Luckily, my reaction to bad situations is typically trying to figure out a way to fix it. I immediately jumped into action on the internet and reached out to my wonderful mentor that worked in the school of education.

I was determined to not let this ruin my finances or my life and control me for 20 years, like they originally would have with minimum payments.

These are the steps I took when my financial world was spinning out of control.

1. I took a close look at my current finances.

I wrote all of my accounts out, how much money was in all of my accounts and how much cash I had to my name. Then, I took a close look at my spending and where my money was actually going.

For me, my spending every month wasn’t bad while I was in grad school. I had some bad habits, like grabbing coffee between work and class, or grabbing dinner on my way home after my night classes. I was determined to make changes to my spending right there.

Luckily, my current situation wasn’t too bad. Of course, this didn’t include my massive impending student loan debt. But, I tried to focus on my current situation, not what was to be post grad.

2. I created a zero based budget for myself.

At first, it was hard for me to think about being on a budget. I had such a negative connotation of the word budget. There was zero part of me that wanted to feel restricted, like a budget would do.

It’s time to reframe your thinking about budgets, like I had to do. All a budget does is give you a plan for your money. And a zero budget makes sure you don’t leave any money on the table, it puts every single dollar to work for you.

Basically a zero based budget just means that every single dollar goes somewhere by the end of the month that came in. Your expenses equal your income. This allows you to reach your goals so much faster by using all of your money every single month.

Check out my post here that shows you exactly how to create your own and download the template I use to manage my zero based budget every month here.

3. I created a debt payoff plan.

Once I got myself on a budget and knew where my money was going, I was ready to get serious about my debt payoff plan. I knew it was going to be tight being a teacher and having such a high minimum payment.

My plan motivated me to keep going, even when I was only making small extra payments in the beginning. I love undebt.it to keep track of my debt payoff because it tells me my debt payoff month and updates as I make extra payments.

Creating a plan will get you motivated to start paying off debt because it shows you how much just a little extra every month can make a huge difference.

4. I supercharged my efforts throughout my journey.

At first, I just wanted to get my finances together. Once I felt confident with where I was, I was ready to really make changes. I increased my income through many different side jobs to pay off my debt faster.

This was life changing honestly. I eventually was making enough in side jobs that I lived off of that income, and my entire salary went to my student loans.

Then, I refinanced my student loans with Earnest, which was honestly the best decision I ever made. I decreased my interest rate by more than 2% saving me so much money and allowing me to pay off the loan faster. You can use my referral link and get $200 when you refinance your loans.

Before you refinance though, make sure you check out my post that outlines if refinancing is right for you.

The truth is, it’s going to be hard to get control over your finances, but you can do it.

Making changes is hard, especially when it comes to your life. But, your life will be better once your finances are under control. I am still chipping away at my debt ($66k left as of July 2019), but I am so much less stressed just from paying off as much as I have. My life isn’t controlled and dictated by money and I get to make my decisions for me, not because of money anymore.

I want everyone to be confident in their money and take back control over their own finances. If you’re struggling with your money, I know how you feel and I want to help you get to a better place. Check out my monthly coaching offer where I help you get to a better place financially and create your very own money plan. How do you feel about your money, in control or controlled?

Money Management

Why an Emergency Fund Needs to be More Than $1,000

Why an Emergency Fund Needs to be More Than $1,000

This post may contain affiliate links. Check out my Disclosure Policy for more information.

I know this is going to ruffle some feathers out there. The reality is that $1,000 in an emergency fund just isn’t enough. Cost of living in most places in the US, is just so much higher than this amount.

Realistically, you don’t touch your emergency fund much. I know for myself, I don’t really ever touch mine because I have sinking funds for most of the unexpected expenses that pop up. My emergency fund is truly there for job loss or serious health issues.

In both of these situations, $1,000 wouldn’t even come close to cutting it. My minimums just for my student loans are $1,100!!! I couldn’t even afford my debt minimums in the event that I lost my job.

Of course, this is why I encourage multiple income streams, but that’s not the point of this post. My point is that $1,000 isn’t going to support you in the event that you lost your job.

Everyone’s situation is vastly different, which is one of the biggest reasons that I don’t agree with a one number fits all dollar amount. Just depending on where you live, that number could be vastly different. It is dangerous to tell people a single number to work from because that could push someone into financial ruin.

This is especially true if you have large non-mortgage debt, like I did and continue to pay off. You’re not in a situation where you’re going to pay off your debt in a year. Unless you hit the lottery or something!

Those of us with large debt especially need to have more than $1,000 saved for emergencies. I encourage 1 month of expenses at first.

Depending on your situation, you may want to consider adding to your emergency fund while paying off debt. If you own a home, have children, have an unpredictable job, or any other situation that requires money unexpectedly, add more to it.

I’ve been paying off my student loans for almost 4 years. I still have $67k left. When I lived at home, I had a small emergency fund of $1,000 with my sinking funds. My expenses were very small and almost all of the unexpected expenses would be covered by my sinking funds.

Now, I have moved out of my parent’s house and I have been increasing my emergency fund every month. I plan to continue adding to it until I have 3 months of expenses saved.

Even though that money could be going to debt, I would feel much more secure knowing I have money set aside for emergencies. The reality is that it isn’t a case of if an emergency happens, it’s when an emergency happens. By having more set aside, it allows you to more easily tackle your debt.

You may think it is counter productive to have an emergency fund of thousands of dollars set aside when you still have debt. I definitely felt that way for a bit of time. Mostly because I just wanted my student loans gone so badly.

But, once you have that emergency fund set, it allows you to easily make extra debt payments because you’re prepared for something that comes your way. The stress of what if, doesn’t stop you from putting your extra money to your debt.

If you’re trying to figure out how to build your emergency fund while paying off debt, my budgeting template helps you to do this. It has a section for income, expenses, and savings. Creating an emergency fund is so important and it absolutely deserves a line in any budget until it is full.

When you have an emergency fund set, you are free to put as much money as you want to debt. So, how much do you have in an emergency fund while you pay off debt?


Money Management

How to Prevent Over Spending

How to Prevent Over Spending

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Having a budget is great. You are telling your money where you want it to go and you’re being mindful of your spending. But, how do you stop yourself from over spending?

If you’re like I was, I would make my budget at the beginning of the month. I had some great intentions for my spending that month. My student loans stood no chance with how well my budget was made.

But, then it sat in my Drive for the month until the end when I zeroed out my budget. I was fortunate that I made a lot more than I spent because I lived at my parent’s house and worked a lot of side jobs.

I’d reconcile my budget at the end of the month and whatever was leftover I sent to my student loans. Extra payments were being made, so who cares if I overspend in my eating out budget?

The problem is that this creates a terrible habit of spending whatever I want, as long as it’s within reason. I had the privilege of having extra money, but what happens when I don’t have this? I overspend and don’t have the income for it, that’s what.

Also, it slows down your progress towards any financial goals that you do have. I’m not saying you shouldn’t spend any money, but you shouldn’t spend money just to spend it. Make your money bring value and joy to your life, not just to spend for no reason.

So, here’s what I do to make sure I don’t over spend every month.

1. I make sure I have a realistic budget.

There is nothing more defeating than constantly over spending month after month. So, do yourself a favor and create a realistic budget that actually reflects your spending.

What’s the point in making a budget, if you’re making one that doesn’t reflect where you are in your money journey? I’d love to delete my student loan payment from my budget, but that’s just not possible. So, you shouldn’t do that with your other categories either.

Don’t make your budget based on where you want to be, but where you currently are. So, make your budget realistic from the start to set yourself up for success.

2. Check in with your budget daily or weekly.

In order to prevent over spending, you need to make sure you check in with your budget regularly. That’s why your budget should have an “actual” category. This is where you note your actual spending for the month. Without this spot, your budget is useless.

When you reconcile your budget, make sure to take some time to reflect on your spending so far in the month. This is especially important midway through the month.

In my budget, I personally use Google Sheets because I can set up all the formulas to do the math for me and change colors based on where I’m at. Green means I still have money leftover, red means I overspent. You can get your own copy here.

If you’re in the red already and still have month leftover, you need to figure out why you overspent and how to make up the funds. If you’re in the green, that’s good and you need to see how much more you have in comparison to how much month is left.

This is the key to not overspending. Check in with yourself throughout the month and if you’re getting close to overspending, stop future spending, if possible.

3. At the end of the month, check in with your budget and make changes.

When the month is over, it’s time to zero out your budget and reflect on your month’s spending. If you did over spend in a certain category, where did you spend the money? Was it a special month that you forgot to budget for? Or, is this typical spending for the month and you should increase the category?

Certain categories I wouldn’t increase, even if you did overspend. You need to decide what is important to you and why you overspent in that particular category. If you underspent in eating out, but overspent in groceries, that makes sense! To me, this is still a win because chances are your overall spending is lower in this situation.

You could also find ways to streamline your budget categories. If we consider the above example, they directly affect the other. When we spend less at restaurants, we typically spend more at the grocery store. So, maybe just have a single food category to cover both.

This allows some flexibility in your budget month to month. It also gives you the freedom to spend your money in that category however you want.

You need to find the right balance.

Budgeting takes times. It’s not something you will master over night. Even after years of budgeting, I still have months where I overspend. It happens and we can’t dwell on it.

But, we should reflect on it and consider why we overspent. For example, this month I spent more in my food category. I know it’s because I went to a lot of unexpected happy hours and lunches with my coworkers before I left my old school.

Realistically, I should have planned for this going into the month since I knew it was my last month at the school. Lesson learned and I’m now moving on from it.

Overspending will happen, just make sure you have a plan to prevent it and a plan for when it does happen. How do you prevent over spending? 


Money Management

How to Manage Your Sinking Funds

How to Manage Your Sinking Funds

This post may contain affiliate links. Check out my Disclosure Policy for more information.

I absolutely love sinking funds. They are a total game changer to any budget. If you don’t know what a sinking fund is, you can check out my post here.

They can be tricky to manage at times and getting into the swing of them definitely is difficult. Sinking funds budget in a totally different way. The great part about them is that you can use them in whatever way you want.

I personally try to keep only a few. Having too many gets complicated and I’m all about that minimalist life right now. I combined a ton of my sinking funds into very broad categories. Managing them is easier this way.

I personally have 3 sinking funds currently, you could argue I have 4. I have a car, moving out, and summer sinking fund. Also, I contribute monthly to my emergency fund because that is used for any medical expenses that come up unexpectedly.

Most of my sinking funds are fully funded currently. My moving out and summer sinking fund will be gone shortly. That means I will only have my car sinking fund and my emergency fund. This is what works for me.

Over the years, I have created a system to manage my sinking funds. I try to keep it pretty low maintenance because I don’t want my sinking funds to take up a ton of my time. They are super important though and have helped me out so many times.

1. List out your sinking funds.

The first thing you need to do is list out your sinking funds. If you don’t have any sinking funds, think about the recurring expenses you have that are hard to plan for, or that you want to be prepared for when they come up.

Once you have them listed, think of realistic amounts for each of them. Most sinking funds won’t be contributed to forever, unless it’s for yearly expenses you have.

For example, I felt comfortable having $1,000 in my moving out sinking fund. Once that sinking fund was full, I stopped contributing to it.

My summer sinking fund is slightly different. That is contributed to monthly to supplement my income in the summer when I don’t get my teaching salary. For the last 4 years that has been contributed to for 10 months of the year. My new school is on a 12 month pay schedule, so this sinking fund won’t be needed.

2. See if you can combine any sinking funds.

When I first started, I had so many sinking funds. It was a mess honestly. I spent so much time managing it all and trying to figure out what went where and which sinking fund to pull from. It was just way too much.

That’s when I moved to a more simple approach. Anything that has to do with my car, comes from the car sinking fund. I stopped marking for specifics because it took way too much of my time.

This was also when I put my medical sinking fund into my emergency fund. About 2 years ago I started having reactions to antibiotics. This caused my doctor to make me go through a ton of allergy tests about a year ago to find a safe antibiotic for me to take.

Out of nowhere, I had a ton of medical expenses. Nothing major, but my medical fund was wiped clean from all the copays and medications (I am so grateful I have quality health insurance!). This made me dip into my emergency fund.

This experience made me realize that most of my medical expenses are emergencies because I don’t know they are coming. So, I beefed up my emergency fund and left it at that.

3. Create a system to manage your sinking funds.

Most of my sinking funds are pretty permanent. Or, they were at the time I started them. For this reason, I created new accounts for them in Ally. I love my Ally accounts and have had amazing customer service with them.

This allows me to manage them very easily. I set a limit that I am comfortable with for each category and contribute to them until that limit is reached. For my emergency fund, I always contribute $100 to it because I haven’t hit 1 month of expenses yet, now that I have moved.

Once I hit 1 month of expenses, I will add a buffer of $500 for medical expenses and that will be my sinking fund. For me, I feel comfortable having this system in place. It covers most of my recurring expenses and it is easily managed.

If you have a lot of sinking funds in one account, I suggest you have a spreadsheet or some other way to manage how much is in each of your sinking funds. Personally, I wouldn’t have sinking funds at home. One, it isn’t secure this way and two, it’s not doing any work for you sitting at home.

By having my sinking funds in Ally, it is earning me some interest. If I’m having money just sitting around, I want it to be at least earning some interest.

Figure out a system that is easy to manage and works for you.

Every person’s financial situation is different. What works for me, probably won’t work for you. That’s why you need to take the time to figure out a system that does work for you.

Sinking funds are a wonderful thing that allows you to prepare for a lot of situations. That’s why it’s so important to figure them out. If you need help with this, this is part of my monthly 1:1 coaching I offer.

Getting your budget right will help you finally start reaching those big money goals you’ve always dreamed of reaching. How do you use sinking funds?

Money Management

How I Budget Every Month

How I Budget Every Month

This post may contain affiliate links. Check out my Disclosure Policy for more information.

When you are first budgeting, it can be a process to figure out. After awhile, it becomes second nature though. The most important thing is to find a system that works for you. Once you’ve found the system that works, the key is streamlining it.

I would suggest trying different ways to budget until one feels natural to you. I love hearing how others budget and manage their money. It always gives me a new perspective and things to consider when I manage my money.

Sometimes I get stuck in my ways with budgeting. It’s good to periodically look over your budget to see where improvements can be made.

This is the process I do to manage my money every month. I use a template I created on Google Sheets, you can get a copy of the template here.

1. Before the month starts, I copy my budget from the previous month and make adjustments.

The great thing about using Google sheets is that you can simply copy the tab from the previous month. This makes it much easier to create my budget every month. The first thing I always do before the month is make a new tab for the upcoming month.

Once I have the new tab for the new month I can start making adjustments based on the previous month. I’ll look over my variable categories and see which I can lower or need to increase. Also, I’ll add any expenses I’ll have for that new month.

2. Throughout the month, I check in every Sunday.

I have been budgeting since 2014. When I first started, I checked in every day with my budget. This kept me accountable to my goals and made sure I was staying within my budget.

Now that I have created better habits and am naturally more frugal, I only check in once a week. During that time, I update my actual spending for the week in my different categories. Any of my bills that were paid, I add them as well.

By checking in with my budget, it allows me to see where I’m at in my budget and how much more I have left until the end of the month.

I do use credit cards that I pay off every month. This allows me to quickly update my transactions every Sunday. If you use cash, you can easily track your spending with your receipts.

Since I do a few side hustles, I will also add the additional income I make each week as it comes in. This allows me to see where I’m at with my additional income. It holds me accountable to reaching my goals and allows me to see if I need to work more to reach my goals.

This also makes it easier to work more. Sometimes it’s hard to work so much, but when I see how much closer I am getting to my goals, it’s easier. For example, I can calculate how many more VIPKID classes I need to teach that month and it might encourage me to stay up a little later or get up a little earlier.

3. At the end of the month, I zero out my budget.

I follow a zero based budget, so every single dollar has a job by the end of the month. At the end of each month, I add up all of my income and all of my expenses.

My salary is the same every month, this is the number that I budget with at the start of the month. Throughout the month, I add my side hustle income to my budget.

This means at the end of the month I have leftover money, assuming I didn’t need to cash flow any unexpected expenses. The leftover money goes to my debt.

Find your system and make it work for you.

This system took me a while to figure out. It’s what works for me, maybe it will work for you. Or, maybe part of it will work for you. Take the time to figure out what works for you and get your money to work for you.

Budgeting your money is just that, telling your money what to do. It’s not about restricting yourself, it’s about making your money go where you tell it to go. So, figure it out as soon as possible and stop letting your money slip away from you. How do you budget?

Money Management

What I Do When I Don’t Reach My Goals

What I Do When I Don't Reach My Goals

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Last month I didn’t reach the goal that I set for myself. Going into the month, it was a bit of a stretch. But, I really wanted to cross that off. I love setting big goals and seeing how far I can go.

My goal was to get under $70k in student loan debt. It didn’t happen. And I missed it by about $150. Of course I was disappointed in myself, but it happens.

I’d never reach any goals if I let it get me down. There have been so many times that I could have given up. I know there will be so many more as well. It happens and we need to know how to deal with them.

This is what I did last month when I didn’t reach my goal.

1. Got upset.

At first, I definitely was upset and I let myself be for a bit. When you’ve been on this journey it’s inevitable to get down on yourself every now and then. Personally, I love challenging myself and seeing how far I can push myself.

I knew my goal was going to be a stretch for me, but I wanted to do it anyway. That’s the thing about goals, they gotta be a little scary to make real progress. It killed me that I was short by $150.

Immediately I started thinking about all the “if only” things in my budget. If only I worked a little more in my side hustles, if only I didn’t use my eating out budget this month, if only I didn’t budget my hair appointment this month.

I let myself take sometime to be upset that I didn’t reach my goal. But, I didn’t let myself stay there.

2. I reflected on the last month.

Once I actually looked at my budget, the reality was that I just didn’t make enough in my side hustles. I got paid from my April after school program hours. April was spring break for my school, which meant I worked a lot less than normal.

May was also weird for my babysitting and tutoring. I love babysitting and tutoring, but the reality is that you work for your client. If they don’t need me one week, I don’t get paid that week. This unfortunately happened a lot more than I expected.

And being totally honest, I was anticipating my retro payment on May 15th. In my current district, we haven’t received a raise since 2016 and were told that we’d be getting retro pay from the last two years. Things happened and it still hasn’t been processed.

This was disappointing for me, because I wanted to make a massive debt payment. But, this is why you should never anticipate money, wait until it is actually in your account. Even though I know I can make that payment whenever the money hits my account, I was excited to do it last month.

3. Make a plan to continue towards your goals.

I know I’m going to get under $70k next month. Just my minimum payments will get me there. So, I’m excited for that. It will be especially nice since this summer is going to be so up in the air for me. And I still hit a huge milestone of paying off $130k, so I can’t dwell on the bad too long.

I am moving out and switching jobs in June. It’s going to be a little crazy for sure. But, I have planned for this and I am confident that I will be fine throughout this summer.

I honestly don’t have any plans in my budget to make extra debt payments in June, July or August. My plan is to try my best to only use incoming money throughout the summer. If I need my summer sinking fund, I will obviously use it.

Once September rolls around and I get my first paycheck from my new job, I will empty my summer sinking fund and my moving out fund to make a debt payment. My current school doesn’t offer 12 month pay, only 10 month pay. So, I would rather have more money stashed away throughout the summer, than make extra debt payments.

You have to keep moving forward  to reach your goals.

The important thing to remember is to just keep moving forward. Whenever you make big goals, you’re risking the chance of failing. But, if you let that failure hold you back, you’re never going to improve.

Failing is a part of life and it helps us learn. I learned the hard lesson of not tracking my side hustle income more closely and anticipating funds before they come in. If I had tracked my income better this month, I would have seen that I was short in this area.

Take failure as an opportunity to grow and learn. Don’t spend much time sulking about not reaching the goal, keep pushing forward with a different outlook about it. I have outlined my plan that I use in my financial life in my ebook, it will help you get started on your own path. How have you navigated not reaching a goal?