Tags: monday money

June 2011 kids

How to get out of debt, part 4

The budget is set. Your envelopes are full of cash and now it is time to start dumping the debt. This is were it starts to get fun. It feels good to watch the numbers get smaller.

The first thing you need to do is write down all the debt you have, except your house. You will list who the money is owed to with the dollar amount. What is debt? Anything or anybody that you owe money.  This could be lloans from family, credit cards, school loans, or car payments. When you have everything written down, rearrange the list so the smallest amount owed is at the top and the largest amount owed is at the bottom. Don't be concerned with the amount of interest you pay on each payment, just the amount owed.

Here is what our snowball looked like when we started:
Dept. Of Education - $3000.00
Mini-van - $12,294.00
Personal Loan - $13,000

It works like this. You continue to pay the minimum payments on everything except the smallest loan amount. On the smallest amount you pay the minimum plus any extra cash you can find.

Our minimum payments were laid out like this:
Dept. of Education- $50.00. However, with funneling every extra penny we paid an additional $250.00 a month
Mini-van - $214.00
Personal Loan- $345.53

As soon as you pay off the smallest  loan in full, you move on to the the next. Your next payment will be minimum payment plus the payments you were making before. So, $300.00 (Dept. of Ed) + $214.00 (Mini-van) = $514.00 total payment on debt #2.

Once you get the snowball going it is amazing how fast the debt disappears. It took us 21 months to completely get out of debt. We set up a budget, we put cash in our envelopes, and put every extra cent towards our debt.

Confused? Questions? Ask in the comment and we'll get back to you. 
June 2011 kids

How to get out of debt, part 3

Last week you were given the challenge of figuring out where your money is going.

I know this can be difficult at first, but trust me it gets easier as you figure out how to do your budget. It takes practice. Every month, we sit down and write our budget. As promised last week, I am going to show you our old budget. Please spare your judgment on our finances. We know that our worth is not determined by how much we make.

The first thing to keep in mind when making your budget is you need to have money in the 4 basic categories: housing, utilities, food, and transportation. There has to be a roof over your head, lights for the roof, food for the belly, and a way to get to work.

Here is what our budget was like 2 years ago this month. At that time, we were working with a budget of $3570.00.

Giving: $196.00
Housing: $921.00
   -Rent & renters insurance
Utilities: $440.00
   -Cable
   -Electricity
   -Gas
   -Internet services
   -Cell phone
   -Trash
   -Water
Food: $375.00
    -This included our grocery and eating out money
Transportation: $535.00
    -$175.00 for insurance
    -$200.00 for gas
    -$100.00 for car tag renewal
    -$60.00 for the repair envelope
Clothing: $35.00
Medical: $15.00
    -We try to put in at least the co-pay amount each month into an envelope
Personal: $195.00
   -$100.00 for Simon's part-time preschool
   -$50.00 for hair cuts
   -$25.00 for toiletries
   -$20.00 for extra spending
   -This area would also include any personal items (subscriptions, cosmetics, child support, child care, pet supplies, gifts)
Entertainment: $12.87
   -Blockbuster movie program (that we've since canceled)
Debt: $763.00
   -$218 car payment
   -$345 credit line
   -$200 extra debt snowball


This week keep working on your budget and see if there are any areas you can cut back on. Pull out your bills and figure out what you pay each month. Keep track of your grocery receipts. Put it down on paper.

Next week I will talk about our debt snowball and how we got it rolling.

~~~~
Blogging with my husband is hard work. Who's bright idea was this again?

Does that budget add up? Please tell me there aren't any mistakes because I am not going to find a calculator.

Oh, sweet Jesus. I am tired. Goodnight.

June 2011 kids

How to get out of debt, part 3

Sorry to all those who were eagerly waiting for the post. We were a little behind with the holidays.

Who's ready to start their cash flow plan?  The idea is to take everything (almost) to cash. We still pay our bills online, but everything else we pay with cash. We used the envelope system as laid out by Dave. (You know, Dave Ramsey? These are his ideas. We must give credit where credit is due.)

Before you can use cash, you need to have a budget. Every dollar goes some place. The question is where. Where does it go each month? How do you spend your money? Do you live paycheck to paycheck? Every dollar that you want to spend, needs to find a home on paper. It's time to set up a budget.

Here are a couple sample budgeting forms:
http://www.daveramsey.com/tools/budget-forms/
http://www.daveramsey.com/tools/budget-lite/

We use the gazelle budget from the second link. I like the layout and it is easier for me to read. If you are a fan of Windows Excel, you can find a couple templates there. They are pretty good.

According to Dave, here is how your budget eventually should look: 
Charitable donation: 10-15%
Savings: 5-10% (How's your emergency fund coming along? Once you have $1000, hold off on this step.)
Housing: 25-35%
Utilities: 5-10% (cable, internet, cell phones fall into this category)
Food: 5-15%
Transportation: 10-15% (gas, insurance, repairs, tags and taxes)
Clothing: 2-7%
Medical/Health: 5-10%
Personal: 5-10%
Recreation: 5-10% (vacations, date night, family night out)
Debts: 5-10%

Once we set the monthly budget, we pull out cash and place it into our envelopes. We do our budget every month. We have envelopes for the little things and the big things. Example? Car repairs envelope. We put money into this every month because I know, eventually, we will need things like oil changes and new tires. Same thing for our car tags, doctor appointments, and Christmas envelopes. Even though we don't need it right now, eventually we have to go to the dentist. 

Don't forget, we desperately wanted to pay off our debt. What is amazing is that because we had a budget, we still had the cash to do what we wanted. We lacked nothing and everything seemed possible to us at this point. Trip to the circus? No problem. Clothes for school? In the budget. After we set the budget, any extra pennies went towards our debt payment.

This week, take some time and figure out where your money is going. Write down your bills, rent, gas, food, utilities, eating out, clothes, cell phone, and personal spending. Figure out how much you spend and where it all goes. Don't live paycheck to paycheck any more.

Next week, we'll show you our budget.


June 2011 kids

How to get out of debt, part 2

We are moving on in our series, Monday Money. Just a disclaimer note, we are using everything we have learned from Dave Ramsey. If you can find one of Dave's classes, PLEASE take it. We are willing to help, but these are his ideas and he can teach you much better. Or, head to the library and check out his books. (They are free at the library, remember?!)

I'll let Matty take it from here. I'll be back this week. It's our anniversary and you know that I have things to say about that!

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Ok, credit cards are gone?! Chopped up, thrown away?! I won't lie. This was hard for us because of the "what-if'" factor. What if we have an emergency, want to order something online, or even want to reserve a hotel? What if our car breaks down? Credit cards even help build our credit! (Credit- an imaginary number.) However, we had already decided that we were in this to win this! We were not going to let our debt control us. We chopped, we discarded, and moved on!

Keeping those "what-ifs" in mind, we planned and saved for a mini-emergency fund. A mini-fund consists of $1000.00 cash sitting somewhere, just in case. Just in case my car breaks down. Just in case the air conditioner goes out. Just in case the cat gets sick and needs $300 worth of care. (True story.) People do this different ways. We put our emergency fund in a Money Market Account, that has transfer or check writing capabilities. Others put it in a regular savings account at their local bank. I have even read stories of people putting money in a coffee can and hiding it someplace where it would be inconvenient to get to, unless there was a real emergency. It doesn't really matter where you put your cash as long as it is only used for an emergency.

You'll find that you have much less emergencies, once you are actually prepared. This is also the hardest step because you have to decide that you are willing to change. Are you willing to change?

This came to us somewhat quickly. We had tax return money come in about the time we started this thing. We also took any extra cash we had and put it into our account. It didn't matter the amount of cash, whether it be $5, $10, or 100 bucks. If we had it, we put it there. Saving must become a priority. Your emergency fund is not an investment, it is insurance.

Bad things do happen. Protect yourself. Have insurance. Get $1000 in the bank.

Anyhow, since we started a serious budget, I think that we have only touched our emergency fund one time. It is a good feeling knowing that the money is sitting there, just in case. We now don't need the credit card for an emergency. We are prepared. We have the cash and we don't pay for things later. You can either learn to manage your money, or the lack of it will always manage you.

We have learned and are learning, cash is good!

Get moving. Make sure those cards are cut up and start looking for extra change. Ready? GO!

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Please feel free to share, re-post, and pass the word. We want everyone to have the ability to control their money.
June 2011 kids

How to get out of debt

Ya'll are in for a big treat. I might have mentioned it one or ten thousand times that Matty and I are debt free. When we started our journey of love (7 years! Of rainbows! And babies!), I had no idea that we would have no money, really have no money, get out of debt, buy a house, and help others get out of debt.

I didn't know that I'd be married to a hot kid cop either. Life is just full of surprises.

Ya'll ready for your surprise? Hot kid cop is going to guest post. We're going to jointly blog each Monday and call it Monday Money. Clever, eh?
Hot kid cop

Each week, Matt will pop in with practical baby steps on how to get out of debt. He'll start small and build up. Most importantly, how to create a budget, use cash, and pay down your bills. We'll answer questions and if we don't know the answer, we'll find somebody who does. We will even, gasp, share the details of our budget because there is no shame in money.

Your value is not determined by how much you make.

So without further rambling, I give you Matty:

After numerous requests to post on our debt journey, I have finally made the time to post a little something. This will have to be broken up over a couple different posts. I gotta keep you comin' back!

Watch out, he's armed
(Audrey here. Get it? Coming back? I'm sorry. I can't help myself.)

The first thing you need to do is have yourself a bit of debt. We, personally, accomplished this over time: a hefty $28,000 total. With this feat accomplished, we were turned onto (Audrey again: did he just say turned on?) taking Dave Ramsey's Financial Peace University. We jumped in head first and made the decision to make our debt disappear.

Here's step one. Are you ready? The very first thing we did was cut up every credit card we had. Yep, every last one. We made the decision to no longer spend money that we didn't have. We only had one credit card with a balance, which we moved into a simple interest personal loan with a lower interest rate. This allowed us to pay down the balance much quicker.

I'll wait while you go get your scissors. Go, now. Cut them up. All of them. Even the ones with no balance.

Snip. Snip.

There is no turning back. Until we discuss budgeting and cash, continue to use your debit card but only use the money in your checking account. You can't spend money you don't have. The reality of paying off debt is this: You have to want it! Saying it and believing you can do it are two different things. YOU NEED TO WANT IT, TASTE IT, BREATHE IT!

Who's with me? (Shameless plug: feel free to spread this around the internet. Link up, comment, share the love. Let's get out of debt together. Okay, I'm leaving now. Over and Out.) I can't promise that getting out of debt is easy. I can't promise that it's not stressful. I can't promise that we have all the answers. I can promise that it's worth it. It is our choices that matter.

It is as we will it.
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