How I Found an Extra $8,400 in 20 Minutes — Seriously

On July 16, 2010, I paid off the very last of my debt. After six months of intense number-crunching, frugality and focus, I was rid of the $9,000 weight that had been on my shoulders for the past few years.

For the next six months, I focused that same intensity on saving. I paid myself first and spent only what I had to, also allotting a very small amount of money to spend fun stuff to keep me sane. I was able to move out of my mom's house the day after Christmas with more than $10,000 in the bank.

Since then, I've enjoyed living in my own place and not having to worry so much about money. I've put more money in the bank (nearly double) and also spent a fair amount, too. I vacationed in Hawaii, spent a weekend at a conference in Portland, went skydiving, paid several race entry fees and have already paid for a few more small trips, including a long weekend in New York City this fall and a few days in Las Vegas to run my first marathon in December.

What I haven't been doing is budgeting or consciously saving money from each paycheck.

I've decided to change that this month and go back to basics. I've had my fun; now it's time to get serious about the things I want in life and how I'm going to fund them.

I'd love to travel much more, dive further into photography and continue to do adventurous activities — and all that ain't coming for free.

For the first time in a long time, I wrote an old-school budget using a pen and paper. I figured out my all my monthly expenses, which I really hadn't done since I moved out of my mom's house:

• Rent
• Utilities
• Internet/cable
• Car insurance
• Cell phone
• Prescription

I also decided what I'd like to realistically spend on things that don't have fixed monthly costs, but are instead determined by my choices:

• Groceries/toiletries
• Eating out/having fun

My health insurance, 401(k) contributions and bus pass payments come directly out of my paycheck, and I fill my gas tank maybe once every three months. I own my car outright. My gym membership is prepaid for a year. I don't really shop for clothes, and I rarely get my hair cut. Pretty much anything else I'd spend would be by choice.

I also hadn't really looked at my income in relation to my expenses. It recently changed (in a positive direction — woo-hoo!), but I wasn't sure how much more I was earning per month than I used to.

Once I figured everything out, here's what I discovered: I could be putting as much as $700 per month into savings.

Whoa. That's $8,400 a year!

Good thing I figured that out, huh?

The reason I have as much in savings as I do is because I earn substantial quarterly bonuses at my job. I put those bonuses directly into savings, and it all adds up quickly. But I've overlooked the additional money I could save from each paycheck, and that's going to end right now.

I set up my first ING Direct savings account tonight and deposited $300 into it. I also set it to auto-transfer $300 from my checking account on the 15th and last day of each month (my paydays).

Now I'll automatically be saving $600/month that I otherwise would have let sit in my checking account, only to be wasted on a bunch of little things simply because it was there.

I'll see how the $300-per-paycheck works out over the next few months as I actually live on this budget, then adjust the auto-transfer higher or lower accordingly. I'm hoping that I won't even notice the money when it magically leaves my checking account, and that I'll stockpile $3,600 or more in the ING account by the end of the year.

I've named that account my Freedom Fund.

As I look back on the last year and a half, I can identify three distinct periods of how I used money:

• Six months of intense debt repayment
• Six months of intense saving
• Six months of enjoying and spending money while still saving some

Ever since I've become debt-free, my biggest mission has been to stay that way. That means I need to find a balance between enjoying money and continuing to save it.

I have no regrets about how much money I've spent in the past six months; everything I spent it on was completely worth it. But now I'd like to put more of a focus on saving again, and I feel good about the steps I've taken to do so.

Personal finance is about much more than getting out of debt. It's about deciding what's most important to you and directing your finances to support those things.

One of my favorite ideas from Dave Ramsey is that rich people tell their money where to go, and broke people wonder where it went.

I don't ever want to be left wondering.

Have you re-evaluated your finances lately? What kind of money could you be missing out on if you haven't?

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