Wednesday, July 28, 2010

We're Diving In!

That's how it feels at least--like a huge plunge into a financial whirlwind that feels really scary, uncertain, a little dangerous and risky. Although, I know once we take the plunge and are floating, even swimming in the new "normal" financial realm, we'll become quite used to the shifts and turns we'll be making and be satisfied and proud of our accomplishments and ability to "hold our own" in the mess! Yep, you guessed it we are going to go through The Total Money Makeover by D.R. Last night as we decided we really were going to go all in, I was starting to get a little panicky, but the quickly got SUPER excited about the possibility of being completely debt-free. Doesn't it just sound magical and peaceful. I can't wait!! :) So, here we are, taking one baby step at a time and walking into what will be a life changing, powerful adventure.

So for those of you who haven't heard all of the Dave Ramsey stuff, I'll give you the quick run down. First order of business is to get a budget and stick with it. You have to literally assign a place in your budget to EVERY dollar. Then, you leave the credit card option at home, cut up or hidden and pay cash for everything. This right here is going to be a challenge--keeping to a cash only budget without cheating. So, we have done a quick budget, mostly estimates right now, but it gave us a good idea of where we have a little extra to work with. Throughout the process you revisit the budget every month to make changes that may be necessary, so as we move through this we'll have a better feel for the real situation. Once you have the budget in place, you move onto the first baby step: start up your emergency fund.

The start up emergency fund is $1,000. The exciting news is that we can already cross that one off our list! :) YAY!! One down, six more to go.

Next, you hit your debt hard. Baby step #2: The debt snowball is going to be the most challenging of all. This is when you start getting a little "crazy" about pulling every penny from every where to put toward debt. Sacrifices are inevitable, changes are likely and selling things is a must! So, this is where we are. Getting serious about cutting back any where we can and adding extra income any way we can. We'll be  paying extra payments every month until we can declare freedom from all and any creditors! :) Hallelujah! I'll explain the other baby steps later.

Let me explain a little better the "snowball" analogy a little better to give you a feel for how it really works. You first list out every debt you have from the smallest balance to the largest balance, except for your mortgage. Then, you take the first one and you add every bit of extra money toward it every month until it's paid off. Then you take all the money you were paying toward that bill and the extra every month and put it toward the next largest and so on. In the end you're putting large amounts each month toward the last bill and paying it off quickly.

Our current game plan:
1. Move to the cash budget ASAP and stink to it!
2. Set $1,000 emergency fund aside for EMERGENCIES
3. Make a goals chart and reward system for each $1,000 mark of debt paid off
4. Pay off the first amount in full with remaining savings and extra money from this month
5. Have a garage sale
6. Sell larger items with value on online sales websites
7. Put extra income raises and extra shift income toward debt
8. Lower our contributions to our retirement and put that amount toward debt
9. Pick up odds and ends jobs to help bring in extra income to pay things off faster
10. Make sacrifices along the way to find "extra" in the budget
11. Save for all large purchases to pay with cash.

It's gonna kick our butt a little...maybe a lot, but I can't wait to cross off our first $1,000 off and watch as it snowballs it's way out of our life!! :)

If you have other ideas or cool ways that you've paid off debt let us know--we are always open to hearing other success stories and maybe giving them a try too!

5 comments:

  1. This sounds similiar to a plan Marty and I are working with from Crown - the Crown Money Map. You can order it online for free. It starts with the emergency fund, then credit cards using the money from previous payment card for next and so on, then consumer debt. It's nice - they have nice scripture passages for each step too.
    I love your motivation. Seems our families are on the same path. We are trying to live simpler, be realistic, and get out of debt as much as we can as well. I'll follow your journey. :)

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  2. Cinnamon SchwinnJuly 29, 2010 at 9:16 AM

    Chelsea,
    Scott and I went through that a few years ago at church. We actually started that process a short time before we took the class. We sold our house in Fox Run to pay down debt. We used our equity in that house to pay off a large amount. Sort of painful to sell a nice house and have to buy one that needs so much repair! Anyway, the only debt we have now is our house mortgage. It is wonderful not to owe money on any credit cards, cars, etc. And, it's amazing how little our family of seven can live on... compared to what other smaller families need. Be encouraged! It will be difficult a lot of the time, but the end goal is so worth it... and biblical! I always go back to scripture where it says that debt is a curse, but children are a blessing. I've also heard it said once that we apply for curses and we reject blessing. So true! Anyway, persevere and remain faithful and you will be free :)!

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  3. Jessie, I didn't realize Crown did something like that. That's great! Did you find it on their website? The difference with ours is that the type of debt doesn't matter as far as when you pay it off. You start with the smallest balance regardless of type/interest rate. Thankfully we only have our student loans left to pay (other then the house), so it doesn't matter, BUT just getting out from under those will be wonderful! The amount we pay for them each month really could be used in so many better ways. It's fun to see that we have other friends along the same path too!! :)

    Cinnamon-I didn't realize that's why you sold your Fox Run house. That's awesome that you only have the house payment!! Did you follow the Dave Ramsey steps? So are you at the steps where you're doing the 15% to retirement and saving for kid's college funds? I'm looking forward to that stage! :) Yeah, I love how Dave Ramsey had some biblical principals for each aspect too. Debt really is a curse! :( It's horrible. Can't wait to be free from it!! We'll be having a big party!! :)

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  4. Sorry Chelsea, Crown Financial is what I meant. Not the college. ;)
    Yea, we are tweaking the plan a bit to pay off high interest first as well. Some months we have been able to stay on track, other times things have come up and we have had to falter but it's good to have goals and to sit down and talk money as a couple about once a month. It has really made a difference in our communication. We also this next month are figuring out a cash budget for each Marty, me and the kids meaning we get like a cash allowance each week and when it is gone, it is gone. We'll see how it goes.

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  5. Ohh!! Haha!! I never would of thought of that! ;) I'm excited for you guys! I know we've really been working hard on it, but haven't been full force tackling the debt, so I think that's what will be different now. So, I'm hoping that means it'll go quicker! ;) We do a cash "allowance" for spending money for each of us too (just the adults right now). It's not very much but allows for some freedoms and it's nice for extra occasional treats! :) It's been an obvious difference b/w me and Drew--his is all gone fast and I save mine for months! :) It's funny. Good luck with yours!!

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