Here's to fifteen years together!

Goodbye, student loan!  I won't miss you at all!

I just sent the final payment for a student loan that has been a part of my life since 1997.  Fifteen years after dropping out of a private college, those general requirement classes are finally paid off.

Direct Deposit Advance - $0/$550
Store Card 1 - $0/$323
Credit Card 1 - $0/$400
Line of Credit 1 - $0/$510
Credit Card 2 - $0/$685
Store Card 2 - $0/$2,798
Auto Loan 1 - $0/$4,140
Student Loan 1 - $0/$1,951
Student Loan 2 - $886/$3,148
Credit Card 5 - $1,716/$1,700
Credit Card 4 - $2,713/$4,577
401k Loan - $1,772/$2,400
Line of Credit 2 - $3,052/$5,000
Student Loan 3 - $3,209/$5,614
Credit Card 3 - $4.718/$5,150
Student Loan 4 - $4,820/$6,048
Auto Loan 2 - $4,978/$10,000

TOTAL REMAINING - $27,864/$54,944


Our "July Fund" of $3,500 is complete as well. This will cover Perry's missing income and our mostly-camping vacation with the family. We're going to have so much fun!

We are planning to buy a vehicle from a family member in June. My 10+ year old sedan is still running well, but it is getting harder and harder to squeeze three kids (all with booster seats) into the back. I've been putting off even thinking about getting a different vehicle because I hate the idea of having a car payment. I grew up one of three kids who shared the back seat of a sedan, but A) we weren't all the same size, so we didn't all need the same amount of space like our three almost-seven-year-olds, and B) the sedans of the 1980's were significantly roomier. We hope to save up enough to pay in full, but that may not be feasible without dipping into our savings. If that is the case, we plan to fork over everything we've saved and pay off the rest as quickly as possible. We're still debating what will happen with my car.

More good news!  I had my annual review last week and I am getting a small raise. Working hard pays off, kids!

Beginning the Next Chapter

We did it!  We survived wedding planning and we got hitched!  And we did it all without adding to our debt!  It was incredibly stressful at times, but mostly we had a lot of fun creating a day that was purely "us."  We threw convention out the window and wrote a ceremony that was meaningful for our family and created a reception that was relaxed and fun.  It couldn't have gone better.

Now that our nuptials have been completed, we're working toward combining our finances.  I'm finally leaving my big chain bank and moving everything to Perry's credit union.  We've worked through our monthly budget expectations and September is the first month that we're using a joint budget.  We planned not only for all of our living expenses, bills, and debts, but also for Christmas gifts, Perry's annual month of unemployment, and a small family trip next summer.  We underestimated our income (we didn't count overtime) and overestimated the things we need to pay.  We both have additional income from overtime and freelance projects, so we feel like we've set ourselves up to be successful.

Perry works at the local high school, but is not technically a teacher (more like an assistant teacher and AV tech).  He has been financially strapped every July/August because his contract includes 11 months of employment.  Unlike regular teachers, he cannot distribute his pay over 12 months.  Every July, he is off work without pay.  While he has always gotten by, his month off from work has required spending less money on fun than he normally would rather than taking full advantage of the time off.  Next year will be different.  We'll have enough saved to replace his income and we're taking the kids camping.

We've prioritized our saving and spending and have decided that it makes the most sense for us to save not only our $1,000 emergency fund, but also enough to replace his July income before we delve back into debt repayment.  We'll aim to have $3,500 in our savings account at all times.  We'll have to dip into it every July, but we'll continue to contribute to it monthly so that by the following July, it is replenished.

I'm really excited to dig into our finances and work toward long-term financial stability.  Perry isn't excited quite yet, but he's not unwilling.  Seeing some progress is what got me excited, but he hasn't yet been a part of those exciting moments when the final payment is made on a debt that has been a part of the family for years.  I'm sure that he'll love seeing the numbers drop and the bills dwindle despite not a big nerd about math and spreadsheets like me.

I'll update soon with our combined debt load.  Eek!

Aiming for $7,500 by the end of July!

I took my first step in this journey on February 5th of this year when I put $1,000 in an Emergency Fund and made my first big payments toward my debt. It is now almost five months later and I have paid off a grand total of...

$6,279.94

Wooohooo!!! I broke $6k!! I'm going to aim for $7,500 to be paid off by the end of July. It is an aggressive goal for the next month, but I want to be half-way to my $15,000 goal by the end of my first six months of really working at this. I haven't been working as hard as I could have been at times, but I need to keep my nose to the proverbial grindstone.

Speaking of challenges, have you read the most recent report on the cost of raising a child? The average American family spends $222,360 to raise a child from birth to age 18. My cherubs being born a mere two minutes apart means that I have the divine privilege of spending somewhere in the vicinity of $444,720 before I give them the boot. I'm pretty sure they're mostly going to eat nine of the next fourteen years of my income with the way they go through pints of berries and cherry tomatoes. We're going to have to find a way to expand our farm off of this little apartment deck.

Don't get me wrong. They're worth every penny, but the girls were born as a two-for-one deal and I'm going to do everything I can to keep those deals going. Either I'm going to have to be diligent about my frugality or they're going to have to find a way to break into showbiz. Maybe we should try a two-fold approach. That's it. We're starting a band. Please leave your band name suggestions in the comments below.

We've crossed another threshold!

Total paid since starting this project on February 5th, 2010: $5,068!!

and my $1,000 Emergency Fund is still actively preventing emergencies from occuring. It's amazing how few emergencies happen when you're prepared.

I'm one-third of the way to my 2010 goal. I am right on track to pay off $15k this year! Maybe I can achieve a -0- net worth by the end of the year. I could be worthless! : )


Thank you so much for the comments and kudos! I think I'm a pretty average American debt story. All I've done differently is choose to talk about the financial mess I've created and the hard work and sacrifices that it is now taking to make a better life for myself and my girls. Having the support of regular readers and those just passing through keeps helps to keep me motivated, so thank you, thank you, thank you!!

If we someday adopt the metric system, will I have to call these kilometerstones?

As of this morning, I've made two big accomplishments.

1. I paid off another credit card!  This is the last card from my college credit card debt and I am so happy to finally be rid of it.
2. With the payments made today, I've crossed the next big marker on my debt-o-meter.  I have now crossed the $4k threshold for debt paid off.  That means I've paid off more than 11% of my debt in under three months!

So, here's the update in numbers:

Direct Deposit Advance - $0/$550
Store Card 1 - $0/$323
Credit Card 1 - $0/$400
Line of Credit - $0/$510
Credit Card 2 - $0/$685 - PAID!!
Student Loan 1 - $1950/$1951
Store Card 2 - $2,638/$2,800
Student Loan 2 - $2,765/$3,148
Auto Loan - $3,735/$4,140
Credit Card 3 - $4,376/$4,577
Credit Card 4 - $4,910/$5,150
Student Loan 3 - $5,610/$5,614
Student Loan 4 - $5,904/$6,048

Total paid to date:  $4,131.05

(plus I have my $1,000 Emergency Fund in the bank, which didn't exist before this process started)

All of those little balances are out of the way.  The remaining larger balances look a little daunting, but I'm determined to keep the momentum going.  I'm going to skip over Student Loan 1 for now and knock out Store Card 2.  Student Loan 1 has a whopping $6 monthly payment which must be spread over about 72 years or so, but it has an incredibly low 3.25% interest rate.  Store Card 2, meanwhile, sports a 25.24% interest rate and a $80 minimum payment, $56+ of which goes to interest every month.  I'm looking forward to the day that I never again have to look at a statement with a double-digit APR.  In fact, when I'm through paying off this debt, the only interest rate I ever intend to see again might be for a mortgage.  Maybe, but we'll see.  Maybe I'll just save up for a house and pay cash.  Or maybe I'll build one a little at a time as I can afford whatever Lincoln Logs are needed to build a real-people house.

If I can keep going at this rate, I can be debt free in less than two years.  That would be amazing.  Most or all of this debt is going to be gone before the girls start kindergarten.  That means that I'll be in savings mode throughout most of their school years.  I can't believe that as a single mother raising twins I'm going to be able to pay for both of them to go to college by myself!  Paid-for college is going to be a reality!

the baby steps

I've mentioned that I'm following the incredibly simple debt-reduction plan taught by Dave Ramsey.  To give you an idea of what exactly that plan is, here is a list of the seven "baby steps" he teaches as a means to get out of debt and build wealth.


Baby Step 1
$1,000 to start an Emergency Fund
Dave frequently refers to this Emergency Fund to as "Murphy Repellent," meaning that Murphy's Law ("Anything that can go wrong will go wrong.") seems to apply far less to those who are prepared to deal with the unexpected.  It is crucial to keep perspective on what is truly an emergency when considering using this money.  Is it really an emergency?  Could I save money to cover this expense rather than pulling money from my Emergency Fund?


Baby Step 2

Pay off all debt using the Debt Snowball

The Debt Snowball pays off all debts except a first mortgage.  Dave suggests paying off the lowest balances first.  Pay the minimum on everything except the lowest balance and put everything you can toward that creditor until it is paid off.  Then take the amount you were putting toward that balance and attack the next lowerst balance.  As each balance is paid off, the snowball grows and more money is available to pay toward the lowest balance each month.  Learning to live on a budget and within your means (living on less than you make) is the only way to get out of debt and stay out.

Baby Step 3

3 to 6 months of expenses in savings

After the debt is taken care of, it's time to beef up the Emergency Fund.  More savings means you're better prepared for bigger emergencies should the arise.

The next several steps overlap or occur simultaneously. With the first three steps, you are digging out of a hole and ensuring that you are prepared to handle emergencies without incurring debt. The remaining steps are about building wealth.


Baby Step 4

Invest 15% of household income into Roth IRAs and pre-tax retirement

This is just the start of retirement preparation unless you're already on the verge of retirement.  Once the rest of the Baby Steps are complete, more may be invested.  My company matches 401(k) contributions, doubling the first 1% and matching the next 3%.  That means that if I put in 4% they will put in 5%.  That's free money!

Baby Step 5

College funding for children

R and K will be starting college at the same time, so this step is a little intimidating.  R declared the other day that she wants to be a doctor.  Later the same day, we were driving past the private college that I attended briefly and she told me that was where she wanted to go to school.  Granted, she is not even four years old yet, but I want to support her big dreams.  After all, I want to be in a nice nursing home someday!

Baby Step 6

Pay off home early

Home mortgages are the only type of debt that Dave Ramsey understands as a necessity for most people.  He would prefer that everyone pay cash but that's not an option for most people.  He provides some guidelines for those looking to buy a home:

1. Utilize only 15-year, fixed-rate mortgages.
2. Your monthly payment should be no more than 25% of your take-home pay.

Using these guidelines helps you to keep the cost of your home within your means and if your payments are reducing your mortgage balance at a faster rate, equity in your home is built more quickly.

Baby Step 7
Build wealth and give!

With the first six steps out of the way, you can invest more in your retirement if you'd like.  You can give more to the philanthropic organizations that are important to you.  You can even add more cash to the fun envelopes!  A fortune cookie I got recently said it best: 

"If you continually give you will continually have."

So those are the Baby Steps!  That's not so hard, is it? :)

This blog is now open to the public.  Feel free to pass it along to anyone you think may enjoy or benefit from it.  The links over there ---> might help me pay my debt down faster if I find myself with some followers who click on them now and again.

I'm adding labels to my posts so specific topics can easily be found.  I've also added a net worth tracker.  It's not much to look at right now, but it'll be fun to watch it change.  I'm a nerd for math, graphs, and spreadsheets so all of this is kind of fun for me.  I like paying bills.  How weird is that?

Please leave your answer in the comments below. :)

another one bites the dust!

I had my eye exam on Friday and discovered that I don't need new glasses. The glasses that I have are my current prescription.  It hasn't changed in seven years!  New glasses have now become a want rather than a need, so they're going to wait.  The money I had set aside to pay for my glasses has now been applied to my debt!  I have paid off three creditors this month and have $1,000 in the bank for emergencies!

Store Card 1 - $323
Direct Deposit Advance - $220
Credit Card 1 - $350
Line of Credit - $465
Credit Card 2 - $685
Student Loan 1 - $1,640
Store Card 2 - $2,800
Student Loan 2 - $3,145
Auto Loan - $4,005
Credit Card 3 - $4,470
Credit Card 4 - $4,910
Student Loan 3 - $5,615
Student Loan 4 - $6,025
 
According to the Debt Snowball Tracker that is part of my budgeting software, I have paid off $1,303.15 of my debt since I committed to this journey.  This includes both the larger payments I've made to pay off creditors as well as my regular payments to those still in progress.  I still have a long way to go, but this is an amazing start.  Next up is my Line of Credit.
 
I am using an envelope system for categories in which I tend to overspend the most or spend without thinking.  I have envelopes for groceries, restaurants, clothing and entertainment as well as one for fun money.  I have two checking accounts.  One of these is now being used solely for gas.  The reason for the gas account is that it makes it much easier to get gas when I don't have to take a pair of three-year-olds out of their car seats and into a store full of candy to pay for it.  That account is, essentially, my gas envelope.  The other checking account is being used to pay bills.

I'm still tweaking my budget with every paycheck.  I have discovered that I spend less on gas than I thought I did.  It's getting easier to admit that I don't have the money to do some things.  It's also very exciting to have money set aside to have some fun.  The girls and I are getting back into the habit of going to the library on our weekends together.  They love it and it provides entertainment for several weeks in the form of books and movies.  Gabe and I often cook as a form of entertainment and just generally enjoy each others' company.  I have maintained my Netflix account as an inexpensive form of entertainment as well.  We only get one DVD at a time and unlimited streaming movies online, so there is always something to watch if we're lacking things to do.  When we do go out, it's far less expensive with Gabe than most of my social life had been prior because there is no drinking on his part and very little on mine.  I used to buy friends drinks if I was getting myself one so the expense of one drink often doubled or tripled.  They're not cheap to begin with, so this is probably saving me more money than I even realize.

Things are great. My valentine's weekend was low-key and wonderful.  The girls and I are taking a road trip tomorrow to see Grandma Char and Grandpa Doug.  It'll be fun to spend some time with them and the girls always have a great time.  See you soon, mom and dad!

baby step 1: COMPLETE!

I got a big fat paycheck (lots of overtime) and my federal tax return today.  My baby emergency fund ($1,000 in the bank) is now fully funded!  Yay!  I also paid off half of a low-balance credit card.  When my state return comes in, it will buy tires and glasses and the rest will go to debt payments.  What a great start!  I'm going to do my best to keep the momentum going.  Woooooohoo!

stoked!

Looking at my budget for February, I think I'll have my baby emergency fund fully funded plus pay off two credit cards and make a pretty good dent in a third by the end of the month!!  Wooooohoo!  What an awesome start!

I'm so happy I decided to get working on this just as I was getting my 2009 taxes ready.  My tax returns will play a major role in the jump start I'm getting.

Working overtime is also playing a pretty big role.  I've missed having time and energy for the girls over the last few weeks, but my manager is looking into getting access to allow me to work from home.  That will be a big help and allow me to spend more time with the girlies rather than having to shuffle them to their dad or to babysitters when I need to work.  I really hope that works out as there looks to be quite a few more opportunities to work OT in the near future and OT is far easier to work out than trying to find a part-time job to supplement my income while I'm on this journey.

I had a bit of a reality check the other day.  I was talking to Gabe about the possibility of taking another east coast vacation this year.  We had talked about (and Gabe's aunt Sue had insisted) taking the girls with this time.  I thought it sounded like a great idea and was thinking my tax return would allow us to do that, but upon reflection I realized that taking our vacation last year landed me further in the hole and if I want to pay this debt off, I need to be making smart decisions about money all the time, not just when it feels good.  I called Gabe back and suggested that we consider going camping someplace relatively nearby instead.  He thought that sounded like a decent plan.  As much as I would love to take the girls to the beach this year, I know that they won't care if we wait a few years and they'll probably appreciate it more and have loads more fun when they're a little older.

Gabe is one reason that I've decided that now is the time to get rid of this debt.  We've been together for 10+ months, but we're both divorced and in no hurry to tie the knot again.  In the meantime, I want to put myself in a position to be be less of a financial burden if/when the time comes.  I already come with two extra mouths to feed so upkeep on this package deal isn't cheap.  I'd love to be in a position where I'm living, not just getting by.  My goal is $15k this year, but I would love to surpass that goal.  I'm making an effort to make sacrifices now so I can live better later.  My income would allow for a comfortable life if a third of it wasn't going toward debt payments.  I'm going to get there!