Monday, August 20, 2007
Friday, August 10, 2007
The Plan
In following with Dave Ramsey's "baby-steps" plan...I am back to step 1. First, I need to save up an emergency fund of $1000. It should probably be more, but that is a good start.
After that, the goal is to pay off the $900 we owe on my husband's car. It is our smallest loan and also our lowest interest loan. But, the car probably won't last another year, so we want to own it, incase we need to sell it or trade it in for a more functional vehicle.
Once that is paid for, we will begin to put all extra income toward Credit Card #1. It has over $10K owed, and the highest interest rate 14.24%.
When that is paid off, we will focus on putting all extra income toward Credit Card #2. We owe $9600 on that one, but at a lower interest rate of 10%.
When that is paid off, we'll focus on paying off the student loan. And somehow during that time, we need to either save up for another car or take out a car loan. I expect it to take 3 or more years to clear out all of this debt, but I guess it all depends on our commitment and our income over those few years. Once our daughter is done with daycare (Sept. 2008) we'll have an extra $800 a month to put toward paying off the debt.
I am not sure about the mortgage, we may want to move by the time all of the other debt is paid. I really want to focus on eliminating the $30K of car, credit card, and student loan debt first.
So, that is the plan. I'm going to use this blog to keep track of spending and earnings and most importantly- debt reduction progress and strategies.
My goal date for eliminating all debt except the mortgage is September 1, 2010. That will also be the month of our 10th wedding anniversary- maybe we'll be able to afford a trip to celebrate!
After that, the goal is to pay off the $900 we owe on my husband's car. It is our smallest loan and also our lowest interest loan. But, the car probably won't last another year, so we want to own it, incase we need to sell it or trade it in for a more functional vehicle.
Once that is paid for, we will begin to put all extra income toward Credit Card #1. It has over $10K owed, and the highest interest rate 14.24%.
When that is paid off, we will focus on putting all extra income toward Credit Card #2. We owe $9600 on that one, but at a lower interest rate of 10%.
When that is paid off, we'll focus on paying off the student loan. And somehow during that time, we need to either save up for another car or take out a car loan. I expect it to take 3 or more years to clear out all of this debt, but I guess it all depends on our commitment and our income over those few years. Once our daughter is done with daycare (Sept. 2008) we'll have an extra $800 a month to put toward paying off the debt.
I am not sure about the mortgage, we may want to move by the time all of the other debt is paid. I really want to focus on eliminating the $30K of car, credit card, and student loan debt first.
So, that is the plan. I'm going to use this blog to keep track of spending and earnings and most importantly- debt reduction progress and strategies.
My goal date for eliminating all debt except the mortgage is September 1, 2010. That will also be the month of our 10th wedding anniversary- maybe we'll be able to afford a trip to celebrate!
Things We've Been Doing to Save Money
Over the past couple of years, we've been trying to save money. All of our furniture has been hand-me-downs or purchased used- mostly on Craigslist. Also, we frequently clean closets and sell items on eBay or Craigslist. Unfortunately, we don't have many items left to sell, and since we've been trying to spend less for over 2 years, we actually don't have many possessions, other than second hand furniture. We decided that we will not be having any more children, so we did make a good amount of money by selling a lot of our daugther's baby items...and we usually donate or sell clothing as soon as she grows out of it.
We've had birthdays and other holidays where we buy one small gift or nothing at all to save money. We don't travel much, and only get a sitter and go out for a "date night" once every couple of months. We rent movies for $1 at the grocery store, we borrow library books, we attend free town events, and visit free museums and parks. We try to limit our spending to 3 locations- Gas Stations, Grocery Stores, and Target (since they are cheap and have just about everything). Dining out has been cut back, but it is still a work in progress. I make bi-monthly menus and only buy food on the grocery list, and usually only food on sale. Little steps like this should be saving us money, but getting caught up or getting ahead with debt repayment is still difficult.
My husband recently started his own business from home- so he'll work full-time at his regular job and do side jobs on nights and weekends. I will take over more of the childcare duties while he does this work. Hopefully this will get us the money we need to get out of debt, but of course we have to be concerned about taxes as well.
I have created a monthly budget, which I will probably post and discuss later. This does help, but we have been unable to stick to it because we always have unexpected events that end up putting us overbudget. We do keep track of every penny and have a calendar in the kitchen where we write down every purchase every day and how it was paid for. We try to stick to the debit card, but that is usually empty by the end of the month, and then we need to rely on credit cards.
We've had birthdays and other holidays where we buy one small gift or nothing at all to save money. We don't travel much, and only get a sitter and go out for a "date night" once every couple of months. We rent movies for $1 at the grocery store, we borrow library books, we attend free town events, and visit free museums and parks. We try to limit our spending to 3 locations- Gas Stations, Grocery Stores, and Target (since they are cheap and have just about everything). Dining out has been cut back, but it is still a work in progress. I make bi-monthly menus and only buy food on the grocery list, and usually only food on sale. Little steps like this should be saving us money, but getting caught up or getting ahead with debt repayment is still difficult.
My husband recently started his own business from home- so he'll work full-time at his regular job and do side jobs on nights and weekends. I will take over more of the childcare duties while he does this work. Hopefully this will get us the money we need to get out of debt, but of course we have to be concerned about taxes as well.
I have created a monthly budget, which I will probably post and discuss later. This does help, but we have been unable to stick to it because we always have unexpected events that end up putting us overbudget. We do keep track of every penny and have a calendar in the kitchen where we write down every purchase every day and how it was paid for. We try to stick to the debit card, but that is usually empty by the end of the month, and then we need to rely on credit cards.
Actual Numbers (or pretty close)
I have everything down to the cent on an spreadsheet that I frequently update, but here are the debt numbers (not including mortgage):
Car Loan: We only owe $900, but the 12 year old car will definitely need to be replaced soon after it is paid off.
Student Loans: About $9,100 and 3 years left on that loan.
Credit Card #1: $10,000 at 14% interest
Credit Card # 2: $9,600 at 10% interest
The estimated cost of daycare this year: $10,500
Car Loan: We only owe $900, but the 12 year old car will definitely need to be replaced soon after it is paid off.
Student Loans: About $9,100 and 3 years left on that loan.
Credit Card #1: $10,000 at 14% interest
Credit Card # 2: $9,600 at 10% interest
The estimated cost of daycare this year: $10,500
About My Debt
I've read many blogs, and everyone has a story as to how they accumulated their debt. Mine isn't too complicated. My husband and I met in college, accumulated lots of debt with student loans- we consolidated our student debt together in 2000 when we were married. In 2003, my daugther was born and we moved from Massachusetts to North Carolina (for the lower cost of living and better weather). I was planning to be a stay-at-home parent, but that didn't work out. I was unemployed for 7 months, and my husband was unemployed for 9 months. We had about $30K saved up for a down payment on a house at that time, but most of that went to living expenses while we were taking care of an infant and job hunting.
In 2004, we found jobs, and were approved for a mortgage. 2 weeks after we moved into our first home, my husband's car needed lots of repairs, so we had to buy another one (a used one). In October, 2004- my husband's job went full time and we needed to put our daughter in daycare full time. So, that's when it became difficult to make ends meet- between the mortgage, car payment, student loan, and high cost of daycare- we've been floundering ever since. We have been accumulating more credit card debt- mainly from home maintenance and repairs and numerous car repairs.
We've been trying to use the snowball method to pay down the debt. We had paid off about $3,000 in the past 12 months, but last week our cars needed thousands of dollars in repair...so we're pretty much in the same situation we were in last year.
Here's how our monthly payments break down right now:
25% to the mortgage
25% to daycare
25% to our debt- auto loan, student loan, 2 credit cards (unfortunately usually only the minimum payment)
and that leaves about 25% of our salaries for food, gas, utilities, and other expenses...and even with budgeting, this is not enough.
In 2004, we found jobs, and were approved for a mortgage. 2 weeks after we moved into our first home, my husband's car needed lots of repairs, so we had to buy another one (a used one). In October, 2004- my husband's job went full time and we needed to put our daughter in daycare full time. So, that's when it became difficult to make ends meet- between the mortgage, car payment, student loan, and high cost of daycare- we've been floundering ever since. We have been accumulating more credit card debt- mainly from home maintenance and repairs and numerous car repairs.
We've been trying to use the snowball method to pay down the debt. We had paid off about $3,000 in the past 12 months, but last week our cars needed thousands of dollars in repair...so we're pretty much in the same situation we were in last year.
Here's how our monthly payments break down right now:
25% to the mortgage
25% to daycare
25% to our debt- auto loan, student loan, 2 credit cards (unfortunately usually only the minimum payment)
and that leaves about 25% of our salaries for food, gas, utilities, and other expenses...and even with budgeting, this is not enough.
Wednesday, August 8, 2007
Welcome
Welcome to Fountains of Debt. This is my first blog post. I'm not sure how interesting this will be for others to read, I am creating this blog to keep better track of my debt repayment process and really to motivate myself. Everytime I have a setback or make a bad financial decision, I will have to confess to it here in my blog. I have been following Personal Finance Blogs for about a year now- my favorite is No Credit Needed. Reading his stories about getting out of debt and now saving for the future have really been inspirational for me.
I've had my own personal blog/journal on another site for 6 years, so I am not new to being open about things online. However, this public blog about how I spend and save my money will be a new experience for me. So please, read on if you're interested- help motivate me and/or call me on my mistakes. Enjoy!
I've had my own personal blog/journal on another site for 6 years, so I am not new to being open about things online. However, this public blog about how I spend and save my money will be a new experience for me. So please, read on if you're interested- help motivate me and/or call me on my mistakes. Enjoy!
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