Friday, February 27, 2015
Debt Free is the Way to Be!
I love him. I hate him.
He has caused us to be debt free a few times before......and he has kept me from going out to dinner when I technically had the money but the money was already earmarked.
I have blogged on Dave Ramsey and Financial Peace University previously. But, this time, I'll go a little more in dept.
During our honeymoon, back in 2007, H took Dave's book and literally read it on the beaches of Mexico.
I drank fruity drinks, and H read about money.
When we stepped back on US soil, H handed me envelopes with titles like: Gas, Groceries, Entertainment and Meg.
I looked at him, then I looked inside the "Meg" envelope and saw $20.
This isn't going to work.
I nicely told H that I make more than $20 a week.......I need more in my envelope than $20 a week.
Back story: Growing up, I NEVER received an allowance. My dad thought it was my "right of passage" to do chores around the house and that he shouldn't have to pay me for "earning my keep in his house." So, when I started getting an "allowance" once I was married, and it was only $20, I sorta didn't like it.
Here's what we did to get our budget going:
-Get a blank sheet of paper.
-At the top, write how much money (including combined income) you bring home each month.
-List and subtract out your bills.
-Get your total and start thinking.
Think about how much driving, eating and things you want to do. Think about how much savings you want. Think about your debt.
-Budget for your gas.
-Budget for your groceries.
-Budget for your entertainment last. This should be the very last item on your paper.
Here's some caveats to remember:
- Debt is bad. So make a list of ALL of your debt (i.e. student loans, car note, credit cards, etc.) and rank them in order of smallest to greatest balance. Then, make it a priority to PAY IT OFF!
- Give your tithe to the church 1st. God has provided you with a job. Give him 10% (or more) back.
- Your 1st few months will be a trial run with your cash envelopes.
- It's ok to take money out of 1 envelope and use it in another. Again, trial run.
- The goal is to have money left out of your envelopes at the end of the month (or 2 weeks)......however, it's ok if you don't. Just don't swipe your debit/credit card.
- Your bank account shouldn't have money in it. Get it down to $20. Move any extra money into your savings.Take your debit/credit card out of your wallet. Don't be tempted.
- If you have a lot of debt, you don't get a lot of entertainment money. Think of debt as punishment! You want it gone and gone FAST! It needs to be a priority to pay it all off.
-The goal is to pay off your debt and to pay it off QUICKLY! You need to tell your money where to go......and not have companies ask you for money!
Live like no one else to you can live like no one else.
The debt snowball is a whole other animal. It basically waters down to: pay your smallest debt first so you can have some self gratification and work your way to the largest. Oh, and watch those pesky interest rates too! Just read Dave's book.
Ok- here's mine and H's real life situations.
2007, I had a small student loan debt. Thankfully, that was all of the debt that we had. Our goal was to knock it out. We did the envelope system....and the money that was left over every 2 weeks went to my student loan. In our budget, of course we counted it as a bill to pay, but we also tried to find extra money we could use to throw at the loan. Sometimes that meant saying no to going out to dinner......or to buying clothes.....or taking a weekend get-a-way. I'm not going to lie, it was hard, but we had a priority and we knew that once we paid off the loan, we needed to start saving for a new car.
New as in used.
Thanks to our diligence, we paid off the loan quickly. Thank goodness it was small. Next up, we knew we needed to a car, so we started paying ourself a car note in our saving account.
Caveat: set up another checking or savings account for earmarked money (i.e. new car, vacation, IVF, etc.) It makes is harder to get to the money in situations when you think you "need" it. Don't get a debit card or checks for the account. Make it where you HAVE to go to the bank for your withdrawals.
So, we started saving for a car. This is where we deviated from the Dave plan. We don't exactly see eye to eye here.....but, we understand what he says. Dave says to buy a car that is the amount of money that you have saved.
I get it, and that's very smart.
However, we buy a newer-used car that will hopefully last us longer. The trade off is that we have a loan. Dave also says to buy used due to a car losing SO much value the minute you drive off the lot. Now that I have owned and sold a previous car, I totally understand this. Cars are not investments. They depreciate before you even make it home.
We were debt free until we bought our Volvo. Now, we have a car note. AND, we start the cycle again. Thankfully, that is all of the debt that we have.......but, it's still a debt and debt is bad.
We are still rocking with the envelopes and pay off the Volvo in 3 years. People, I'm don't want to paint a rosy picture here.....we had to say no to things that we really want to do and places we really wanted to go. However, we wanted the financial freedom more though.
Now, it's IVF time. This is what got us. This is what broke our spirits. After my 1st surgery, we knew it was about to get tough. I was a stay at home wife (due to just moving back to MS) and thinking with each passing month, I was about to be a stay at home mom. I wasn't looking for a job, I didn't want a job.....I just wanted to be a mom. When we started to see how much infertility cost.......I GOT A JOB! One of the best financial decisions we have ever made was to continue to just live off of one income. We had lived a few months with just one income and had reconfigured our budget......so when I started my job, the sole purpose was to use that money to save for Jaxon Riley. I had my pay check routed to a savings account. We never touched it. When it was time to pay for 3 rounds of IVF, BOOM! we had the money.
Don't get me wrong, it was tough writing out a check for A LOT OF MONEY for IVF alone. We had already paid for an additional surgery and 4 IUI's. When we met with the financial coordinator at the IVF clinic, we knew we needed to prepare for the worst.
In the meantime, God provided COUNTLESS blessings to us and we recognized those. We prayed about how to be diligent with our money. We prayed that God would show us allowances in our budget that we could remove. Our heart was more than ready for a baby and we made that our priority.
When I started my job, I needed a more reliable car (H took my Volvo). The car I was driving was the car my parents bought me in high school and it had just left me stranded on the side of the road. It was a necessary evil. So, here we go again. However, this time, the car debt wasn't a priority. Operation GET JAXON HERE was in full force.
To maximize our budget, we said no to vacations. We said no to weekend getaways. We lowered our Christmas budget. I meal planned like no other. Thankfully, at the time, we lived in a small community where you had to drive 30 minutes plus to watch a movie or have a variety of restaurants at your disposal. That alone saved us a LOT of money. I didn't want to drive an hour (round trip) just to get full on food. I could do that with a bag of popcorn and a glass of vino.
Fast forward: October 2013. I'm now pregnant. IVF is OVER! Now, we get to decide how to utilize my paycheck. We set goals and pushed the reset button.
For several months, life happened. It brought an unexpected surgery for Jax, new tires on the cars, car repairs, french drains....you get the picture.
Thankfully, we are debt free again. In January- it was official. While most families are still feeling the hit of Christmas on a credit card, thanks to Dave Ramsey- I wrote a check and paid off my car.
And it feels good.
The motto at the Jones house is: Well, we are debt free until we are not anymore.
The purpose of this post is to motivate you. I want you to know that it is possible and within reach. Don't get me wrong, it's hard to say no to fun things when you wake up everyday and go to work and work hard for your paycheck. However, once debt free, it does make going to work a little more exciting because YOU get to decide what you are working for.
A vacation! A new (used) car! Fun dates! Quick trips during the summer!
My free advice, start next month on your road to financial freedom. Make it happen. If H, who wants to save everything.......and me (who wants to spend everything) can do this, so can you!
We still have a mortgage. Because we are not living in our "forever" home, we are not tackling that debt aggressively.
***I'm totally condensing the Dave Ramsey method here. Read his book for more info and how to work your way out of debt.***
Happy Saving. Budgeting. Coupon Clipping. And cutting back.