Debt Totals 2-18-17

As you know, unfortunately, my debt total rose for the first time in 12 months last month. I’m very sad, but now, I’m more determined than ever to get out of debt. We are going to continue to live our life, but we are going to get out of credit card debt!

Not only has our debt total increased, but so has the amount of creditors we have. We have several small debts now that we didn’t have before.

I’m going to list them all here for you to see. I’m also going to list them in the order we intend to pay them off. In many ways we are working Dave Ramsey’s baby steps, but as you’ll see when I list our debts, we aren’t following them 100%. We are going to pay off some debts in a different order than he would recommend.

As of my last debt update, we owed $18774.63. That was back in November. Things have definitely changed since then.

Here are our debts:

            $500-ish            Personal friend (she booked our hotel room for a trip).

            $1969.62           Outstanding bill from our kitchen remodel

            $12314.86         Credit Card at 14.99% - current minimum payment is $

            $1500               The Boy (To pay off our other credit card, we borrowed from him.)

            $1500               The Girl (To pay off our other credit card, we borrowed from her.)

            $12745.25         Car loan at 0% - payment is $345

If you’re keeping track, (I know I am!) that’s a grand total of $30529.97.  That’s about at $12000 increase over our last debt total up date. EEEKKK!!! That makes me want to cry.

In the next month, I’m going to knock out the two small debts at the top of the list, then I really need to get to work on our credit card debt. Looking at these numbers, it seems very unlikely that I will be able to become credit card debt free by March or even by my goal of May, but I should still be able to get out of credit card debt by the end of this year, so that is what I am going to keep working on.

Looking at my budgets going forward, we should be able to pay off the first two debts by March 10 and then we can start throwing all our extra money towards our credit card debt.  We still charge on that credit card because, unfortunately, we are financing our lifestyle with our future earnings, so our credit card debt will likely increase before it starts to go down. Does that make sense? After we pay off a couple debts, any extra money can go towards our credit card.

I’m hoping that paying off these two small debts will give me the psychological boost I so need to keep motivated and really work to get out of debt.  Although we still charge on our credit card, I’m really going to try to charge less in the coming months. We aren’t going for no-spend months, but we are definitely working towards low-spend months.  We do have some planned spending that can’t be avoided, but hopefully we won’t overspend.

Also, now that we are back to working the envelope system, I need to work really hard on staying on budget. That would go a long way towards helping us get out of debt. We went WAY over on our food budget just this past week. Major budgeting fail, but going forward, we are really trying to stay in budget so we don’t have to charge any shortfall. In addition to not having to charge a shortfall, tightening our budgeting belt might give us a small surplus each pay period that we can throw towards debt or add to our surplus envelopes at home.

Another complication for our finances right now, is our living situation. We are looking to sell our house and buy a new one. Because we have a boy and a girl, our two bedroom house is no longer practical for us, but the explanation is a post for another day; as is the explanation for our new debts… Until then, wish us luck in paying off some debts!

Thinking about... Debt

I’ve been thinking a lot about my debt; specifically, how I have more than I thought.

Now that I’m actually starting to list them out, I’m realizing I had more than I remembered. Granted some of them are relatively small, but they are still debts. I thought about the trip we took in December to Universal Studios and how I owe my friend for the hotel. I thought about our kitchen and that we still have an outstanding bill for the plumber (my brother) that needs to be paid. I, of course, thought about our credit card and car. I remembered we owe our kids a bunch of money that we used to pay off our other credit card.

In other words, the debts just started piling up, and with them, my sadness.

It would be so easy to say some debts “don’t count”, but I would be lying. All our debts count. Even the small ones. Even the ones to friends. Even the ones to family.

All debts count! The small ones might even count more than the big ones because they are easier to pretend they don’t exist.

A lot of stuff is coming up in the next few months, the biggie being that we are seriously looking into selling our house (and therefor increasing our debt for a bigger house). This will definitely make our finances look different over the next few months. We’ll have to see what happens!

2017 Goals Check In

In January, I made three financial goals for this year: first was to get out of credit card debt, second was to end the year with $10000 in the bank, and third was to get one month ahead with our finances.

So far, I haven’t met any of these goals. :(

But, that doesn’t mean I haven’t made any progress because I have. First of all, I have created our baby emergency fun which will help to keep us from falling further into debt. We also have not added to our overall debt and have even actually paid down a little bit from where we were on the first of the year.  We’ve even added a small pittance to our savings.

The way I have structured my goals, it makes it really hard to reach goals 2 and 3 until I have completed goal 1. However, in many ways, goals 2 and 3 will also be reached simultaneously. $10000 is just about the amount of money we need to be a month ahead.

Each paycheck we receive I am transferring $50 into our savings account. It’s a small amount, but with that amount, we are slowly increasing our savings and slowly paying back our children’s accounts. We owe both of our kids’ money, however, they are at the bottom of the list to be paid back because their accounts aren’t accruing any interest against us. We get three paychecks a month. With each one, I deposit $50 into one of our three savings accounts: mine, The Boy’s and The Girl’s. These slow deposits are helping us reach our goal 2.

Of course, we are working towards goal 1, too, but that is slow going. We send all our extra money at the end of the month to the credit card. Sometimes the extra money is a lot. For example, this month, it will be over $500. Some months, we have just a few dollars extra to throw towards our debt. I still have a super stretch goal of being debt free by our anniversary in May, but I don’t know if it’s feasible. We’ll have to wait and see.

When I picked my goals this year, I really tried to choose goals that would be reachable and work at the same time. I also didn’t want to have so many goals that by trying to reach them all, I wouldn’t reach any of them. While it remains to be seen if I was successful or not, I definitely think I am on the right track. If I am lucky enough to reach any or all of these goals, I can always reevaluate and add or change my goals as necessary in the future; but one step at a time.

A New Budgeting Idea

In order to work on getting out of debt, I’m really making an effort to get back to budgeting and the envelope system. To that end, as I started to plan my March budget, I put $500 into different categories that I haven’t been funding. By not funding envelopes, I am setting myself up for failure. Just because I don’t put money into those envelopes, doesn’t mean I don’t spend in that category.

Whether or not we put money in our “toiletries” envelope, we have purchases in that category that need to be made, things like toilet paper, dish detergent, dish soap, shampoo, soap, hairspray, etc. In an effort to not fall further in debt, I’m trying to fund all our envelopes as necessary. Unfortunately, this plan may keep us in debt a little while longer, but it will keep us from falling further into debt, if that makes any sense to you, reader.

For the month of March, we have earmarked $500 into envelopes. We are putting money towards: toiletries, hair care, clothes, school, and kids’ activities. We are also putting $200 for the month into savings and $200 into our car repair/tires envelope. In all, that adds up to $900 in March not going towards debt, but it also leads to less money being put on our credit card.

There are always “unexpected” expenses that come up and I’m trying to be more prepared for these expenses. The competition dance season will be in full swing come March, as well baseball and there are always little expenses associated with the kids’ activities that need to be paid.  I recently started reading a new-to-me blog that has given me a great idea about how I handle our expenses. It’s called shaking the money tree and she has been blogging since 2008. I’m currently working my way through the archives and love what she does with “left over money” from her envelopes at the end of each month. She takes the left over money and puts it in another envelope labeled the same way to use on those months when expenses just seem to be higher.  She continued putting the left over money in the envelope until each of them reached whatever threshold she believed made a good amount for that category.

I really like that idea. Sometimes, $100 is more than enough money for toiletries in a month and sometimes, we spend nearly twice that because we run out of everything at the same time. I think I am going to follow her example. I will create envelopes for my envelopes (I know that sounds silly, but hear me out) and put left over money in the new envelopes, to a certain point, to help pay for the months where what I budgeted is just not enough. That will also keep me from carrying around too much cash, which is always a worry. If I ever spend everything in the first envelope, I can always pay the remainder using my credit card and then run to the bank with the left over envelope and transfer the money from there. I know it sounds complicated, but I think it might work for me.

We won’t put gobs of money in the new envelopes. I will only put an extra $100 - $200 in each envelope depending on the category. The hair care extra envelope will top off at $100. The clothes extra envelope will go up to $300 and so on. Each category will be different and all the envelopes will be labeled. This has the added bonus of giving us a little extra cash around the house. I always worry that we don’t have enough ready cash so this will get rid of that worry too!

I’m already excited about next month’s budget and I can’t wait to transfer money from envelope to envelope!

DEBT

In the next week I’m going to write a debt update, but not today. Today, I just want to complain about debt and how much it sucks!!!

When all is said and done, we are actually going to pay a little more debt off this month than I thought we would be able to, but it’s still not enough.

With my next payment, which will be on Friday, we will have paid $3200 towards our credit card, but because we are still using it, it doesn’t all go towards our debt. In total, we will have only paid off $1100 worth of actual debt. I am hopeful for next month, because hopefully, we won’t have any unexpected out of town trips to pay for. For our trip to Oregon for my grandma’s funeral, we paid $215 for our hotel and $300 (or so) for food. That all went onto our credit card.

Although a decrease of $1100 in debt is good, it’s not good enough. I can’t wait to receive my “lump sum” payment on March 20 so I can plunk the whole thing down on our credit card. That check should be in the neighborhood of $2000. We are also hoping to get a small tax refund that could go totally towards debt as well.

Every time we get close to being out of debt, I do something to screw it up. We were doing so well paying for our kitchen and then we got our granite and December hit and our budget went out the window… now, we’re paying for it… literally. I know we only have ourselves to blame, but it still drives me bonkers!!!

Debt is a monster! It takes just minutes to accrue but months or years to slay. That, more than anything, is what I wish we could instill in our kids. Debt is not a tool. Debt is only a hindrance. Debt does not “help” you. Debt only helps the lender. Debt is not the best way to build credit. Debt is not your friend. Debt is only your enemy. Debt is baggage. It is a weight constantly pushing down on your chest making it hard to breathe.

Going forward, I’m hoping that, on average, we will be able to pay off $2000 a month (this is including March, which is going to be our best month). If that’s the case, we won’t be debt free until August. Ideally, we would be able to pay more, but we do have some planned expenses coming up. We have a trip to Washington D.C. in two months and a trip to the Grand Canyon coming up this summer. Both of these will be doable if we are frugal the rest of the time. I’ve said this before, and I want to reiterate it, as badly as we want to get out of debt, we don’t want to get out of debt at the sacrifice of our children’s childhood. 

So, the trips will be made and then we will reevaluate where we are and make a plan, or just keep working this plan. Pay as much as we can out of our paychecks and any extra each month that we can scrape together towards our debt. 

Payday High to Next Day Low

I read this sentiment a lot in personal finance blogs, or more specifically, in debt blogs. Payday comes and you have a high for 10 minutes then… *poof* all your money is gone and you are waiting for payday again.

I love logging into my account and seeing money there. I check it religiously EVERY payday. Then I sit down and pay all our bills and debts and the money is gone. I can’t wait for the day when payday is just another day. Or when I log into payday and instead of transferring my money to other people, I can transfer it into my savings account.

I know we dug this hole ourselves, but the “daily” grind of being in debt gets old. And not just any old debt, credit card debt. I cannot wait to be credit card debt free. With any luck, I just have a few more months of that self-created hell left.

On another note, we have received all of our tax documents so we can begin to do our taxes. I’m really hoping to receive a return that will take a chunk out of our credit card debt. Our tax return, combined with my “lump sum” payment from my raise, and our regularly scheduled payments, should bring our credit card debt down to a much more manageable amount. Here’s hoping to credit card debt freedom.

Emergency Fund... Check!

Although it isn’t one of my stated financial goals for 2017, I did reach an important milestone towards financial freedom today. We achieved Dave Ramsey’s baby step #1 today. We have $1000 in the bank to be used as our baby emergency fund. Obviously, it won’t cover everything, but it will cover most, if not all, minor emergencies.

Last month I paid off one credit card balance. Now, I need to sit down and really list our debts to decide how to pay them off. We owe several smaller debts (including to our kids, which we will pay last, I’ll explain that in a later post), and one monster credit card debt.

Until we fully decide how to proceed, I’m going to continue to pay the most money towards our credit card debt. I plan to list our debts and their amounts near the middle of the month.

In the past, Dave Ramsey and his baby steps really worked for us. I don’t know why we went away from them, but our finances definitely suffered for it. The baby steps break debt and personal finance down into manageable chunks. We don’t follow him 100% as we have debt but still continue to contribute to our retirement, but we definitely use his steps as our guiding principle of debt and finance management.

Baby step number 1: build a $1000 emergency fund, is complete. This will help to keep us from falling further into debt. If the washer goes out, we’re covered. If we have car troubles, we won’t have to worry. I think the $1000 is as much about peace of mind as it is about financial security. Not only will I not have to use my credit card as an emergency fund, but I have a little cushion between me and fear; a little cushion between me and uncertainty; a little cushion between me and sleepless nights. It’s not much, but it’s comforting nevertheless.

Now that we have reached this milestone, it’s time to really work on our goals. We want to squash our credit card debt, get $10,000 in the bank, and start living off of last month’s income. None of these goals are unreachable, but to achieve them will take hard work and discipline.

Slow and steady wins the race. We didn’t get into debt overnight so we won’t be able to get out of debt overnight, but we will get out of debt!