Dumping Debt Series

Okay so I'm SUPER behind on keeping you guys updated on our Total Money Makeover and apologize that I've completely dropped the ball on this. 

Here's a snapshot on where we're at with dumping debt.

 ***I wrote this back in April but never posted it. I've added even more of an update at the bottom***

 

Things have been a little rough financially since moving to New Jersey. Everything is so much more expensive....food, rent, auto insurance, and of course the fact that any time we want to go home we have to purchase tickets instead of just spending money on gas(yes we've been budgeting to pay for those flights but it's still an extra expense we didn't have before). AND we are paying out of pocket for Andrew to fly back to Oregon for all of his military obligations...a tough decision we had to make but feel good about what we decided (yes you may think we're crazy). Anyway, the first couple of months of living here we haven't had a whole lot of extra money to put towards debt.

BUT, on a good note we have been able to use cash envelopes which we weren't able to do in Canada. How cash envelopes work is at the beginning of the month or twice a month...however you want to do it, you get cash for different categories that are budgeted and place them in your envelope labeled with those categories. Then before you make a purchase you have to decide which envelope it comes from and use that cash to pay for the items. When the envelope is empty, no more spending till the next month when you fill it back up! For example groceries, we budget $285 for groceries (that amount was perfect back on the west coast but we've found that we may need to bump it up a bit now since things are not as cheap but we haven't done so just yet.). So, every time I go grocery shopping I take money from the grocery envelope and pay for the items...it's pretty simple. It really helps stay on track because you "feel it more" when you spend cash...you literally see the money going out rather than just swiping a card and looking at it later. It keeps you on track! Things like utilities don't have cash envelopes because we just pay them online with our debit card. 

As for our debt, remember we paid off the Army Career Starter Loan in Oct. and only have Andrew's school loan left. During our move we were not paying more than just the minimum because we wanted to make sure we had extra money for the deposit on our rental and anything else that may come up. So to say it quite frankly, we have not been making any progress for several months now. It's disheartening because we haven't made any advancements toward our goal and August 4 will be here before we know it! Plus, here's another thing, remember how we were banking debt money in our savings when we were expecting Anneliese....well we're right back at that again. If you don't remember, the reason is because Dave Ramsey suggests to pile up a bunch of savings (extra money that would have originally been paid towards debt) when you are expecting a baby or a job loss. That way you have extra money to take care of things if need be. It really helped us last pregnancy because we had to pay the doctors out of pocket and then we got reimbursed from insurance a little bit later (that's how the Global plan worked, since we were living in Canada). With Anneliese's delivery, her and I were both healthy and we didn't need to use any of that money we had saved and so that was the big payment in October that bumped us over the halfway mark. SO, assuming this pregnancy and baby is just as healthy we will be able to put any money we've "banked" towards loans but no sooner than October.

I'm going to be honest, Andrew and I were bummed that even if we are able to save enough money to pay off loans (but it'd be sitting in savings for baby emergency) we wouldn't officially be debt free till past our goal of Aug 4. We started to think and discuss if we really actually needed to bank money or if we'd be okay without saving extra during this pregnancy. Then of course shortly after that discussion Andrew was listening to Dave Ramsey and a lady called in asking our exact question. Dave had a good point, he said "even if insurance covers 100% of bills, what if the baby had an emergency and needed to be flown to a specialty hospital....wouldn't it be nice to know you had extra money to be able to hop on an airplane without worrying about how to pay for that ticket, hotel and food?" That was a good enough explanation for Andrew and I, so we've started putting extra money in savings rather than towards our last debt. Besides, assuming we are blessed with a healthy delivery and baby, that money will go directly towards our debt anyway, it'll just in in October or November instead of August....not really a big deal is it? The answer is no...haha...but it still took us a little bit to get past the idea of not making our goal. 

So that's where we're at. Still trying to figure things out with our budget here in New Jersey and banking any extra money we have for baby emergency.

Hope this all makes sense...I always feel like I try to cram so much information in one big breath on these posts. If you have any questions feel free to ask! =)

**Update** So I wrote this post back in April. At that time we were super bummed about not making our goal. However in April we received a large amount of money for "Tax Equalization"...meaning Andrews employer was making up for taking too much out of his paychecks when we were living in Canada since they weren't exactly sure how much to take out, with us living in a foreign country and all. Seeing that large amount in our savings (remember? our baby bank until Oct) has helped us to be okay with not making our goal and now we're trying really hard to add to it so that maybe we can just make ONE final payment...how awesome would that be?
And for those wondering, we only have about $20,000 of debt left!

Taken from Dave Ramsey's Instagram

 

Dumping Debt: Exciting Quick update

I know I'm WAY behind on our Dumping Debt Series...I apologize for that. I keep reminding myself to write a post but just can't seem to sit down and get it done. However, I don't want to miss this milestone in our Total Money Makeover (TMM), so I'm writing a quick post to tell you last night we made a payment that bumped us over the halfway mark!!! AND we have paid off all of our Army Career starter loan, so we only have Andrews student loan left!
 I still intend to update you on the rest of our TMM from the past couple of months.

Happy Halloween!

$25,031.25 paid off

$20.702.45 left

Celebrating with some Halloween cupcakes that Malachi and I made at a playdate.

Dumping Debt: 4th Month

I just posted March's Dumping Debt...now lets see how long before this post is actually ready to go.
**OK, it's May 29th and I still haven't finished this post, so long for getting Aprils month done early!**

We've changed a few things up this month, had some mental struggles and have given into some indulgences, what can we say we're only human right? Get ready, it's a long one this month!

Positive experience this month: Family's generosity and persistence allowed Malachi and I to fly to Portland to see Andrew's Grandma, and little gifts we were given for Easter to treat ourselves. Plus, I felt we spent a lot of money on groceries because of Easter, but we actually didn't go over budget for food!

Challenges/Unexpected expenses this month: I love listening to Dave Ramsey's radio show, it motivates me hearing other peoples' debt free scream, I learn A LOT about different aspects of finances and it always gets me excited for the Budget committee meeting with my handsome husband. However, what I haven't shared with you all, because I've been reluctant to do so, is that most of the meetings, at some point, I end up in tears. I'm not sure if I can actually blame it on being pregnant or not, I don't like to but that could be a reason I get so emotional. As much as I am excited for all of this, I always end up confused during our meetings. For example: It's hard to keep track in our paperwork when we are paid in US dollars but then have to pay utilities in Canadian dollars....or having different bank accounts with different incomes (Kiewit in one and Military in another, USAA's regulations for accepting their Career starter loan), and last but not least getting paid weekly. I loved the fact that we got paid weekly when living in the states but now that we are in Canada, it's pretty annoying. The reason being; we have to make sure we bring enough cash to exchange to pay for rent and utilities otherwise we have to make another trip to the states. Yes we can do a wire transfer but it ends up being $30-40 with all the different bank fees and such...that's actually conservative, I think when we calculated it all up it was actually in the $50's. I think it's ludicrous to pay those fees and refuse to do so, when it cost less to just make a trip...however it's just not always convenient when you have a little one and in your third trimester. Anyway, being paid weekly means we may not have enough in our account at that time, which then means making another trip to Bellingham. Also, getting paid weekly is hard to work out in a budget. I mean if we get paid say, 3-4 days before the new month has started then half of that weeks paycheck goes to the new month right? 

When we started all of this Andrew figured out the average of each month and that's what we've been using for our budget paperwork...we figured that would incorporate the money that splits between two months and so on. What I don't get is; we've gone over our budget every month, but always have extra money in our bank account. Now if you remember there were times that we had extra money, by God's grace (cashing in our credit card points) but if you look at our paperwork, it just doesn't make sense, we really shouldn't have the extra money that we do at the end of each month, but still be over in all of our paperwork. Every time we go through the paperwork I just feel like a failure because we're always in the red but then our bank account still has plenty of money in it. Maybe I should just be happy that we have extra rather than the opposite, and it's a blessing. But my control side of me wants to know how this is happening, and I get upset when I can't make sense of things. What we've decided though is to no longer use the average but add up how much we're actually going to earn for that month and base our budget on that. And if there's a day or two in the new month that was included in the previous weeks paycheck, we'll split that paycheck up so those days are accounted for. Hopefully that will make things better. Don't get me wrong, I'm still excited and looking forward to our budget committee meeting this weekend, I like the challenge of all this but do get a little upset at times.

Remember how I mentioned Andrew just likes making graphs and excel spreadsheets...well I've joined him in the "nerdyness.". While he was at work one Saturday I made our very own Debt Free Thermometer. I emailed it to him as a joke and a little bit later I got this picture back:

 Now it's on our wall ready to be filled in. At the time of the picture, April 26th, the red line is at 16%! =)

Helpful tip this month: One change we made this month is we've put a stop to our Debt snowball, we are only paying the minimums on the loans and saving the extra money to go towards our baby's birth, just as a precaution. Then if everything turns out fine, we will put all that money setting aside straight towards loans once the baby is home safe and sound. This is something that Dave Ramsey has suggested from the beginning but we have just started to do. His reasoning is in case there is an emergency we will have extra money set aside to deal with it. Our reasoning is since we are up here in Canada, we have to pay out of pocket for Doctors appointments and then get reimbursed by our insurance. So we need that extra money available and I am so thankful for having this insight before we give birth! God has taken care of us in that way majorly! We've already had to give a $2,000 deposit to our doctor so having that money available as been a huge blessing.
Dave Ramsey suggests this for anything major that may happen in the near future, like the possibility of a job loss, moving etc.
Also, something I never mentioned is in March we cashed in some savings bonds that we've had this whole time. It's so tempting to just hang onto them as a back up plan, but we're continuously told that the interest the bonds are accruing is nothing compared to the interest gaining on our loans. It only makes sense to cash them in and put towards loans. But remember they've gone into our "baby emergency" account as of right now....hopefully in June or July it will be clear that baby is totally fine (God willing) and we can make a nice huge payment towards our loans! Which we are very much looking forward to!

Dumping Debt: 3rd Month

I've been debating if I should combine March and April since April is practically over already...man time is flying by. Didn't we just celebrate Christmas? But as of now I'll just stick with March.

March wasn't too bad, at least it didn't seem like it to me, Malachi and I stayed home all month (that may be the one and only month all year!) so I felt good about the lack of spending needed for this month, like extra gas and food that comes with traveling. And actually stayed on budget in all those categories, even with my sisters visit during their spring break. However, Andrew had his 2 week military training in Alaska. We knew he had this training coming up and we added a little extra into his Drill column, but for some reason we didn't adjust realistically and it ended up over budget. Dave Ramsey always says it takes at least 3 months to finally get a budget on track with reality but it's been three months and I sure feel like we are struggling to get it adjusted correctly. I blame it on the fact that Andrew gets paid weekly rather than monthly or twice a month and the fact that we live in Canada but get paid in US dollars, more on that in April's post.

Positive Experience this month: To add more money into Andrew's Drill category we took some away from groceries. Which honestly kind of seemed fun, seeing as grocery shopping is kinda like a game for me now rather than just a chore, like it used to feel. I like the challenge of going to the store, keeping a running total as I add items to my cart and staying under my goal for that shopping trip (and when I say trip I mean trip. It is cheaper to drive to Bellingham WA, which usually takes about an hour, one way; fill up on gas and do our grocery shopping there rather than here in Canada, and then bring back enough cash to exchange for rent and utilities. I usually just coordinate those trips with my prenatal appointments so it didn't seem to ridiculous as I was killing two birds with one stone). Anyway, I was able to stay within the slightly reduced budget for groceries this month, making me wonder if we could reduce it even more and be okay...

Challenges/Unexpected expenses this month: Like I mentioned above, Andrew's military training set us back a bit, not really unexpectedly...we just didn't plan like we should have.

Helpful tip from this month: I can't think of a helpful tip for this month regarding finances only, so I'm going to share a quote that I like helping me to remember that with God all things are possible:

Let nothing disturb you,
Let nothing frighten you,
All things are passing away:
God never changes.
Patience obtains all things
Whoever has God lacks nothing;
God alone suffices.
 

-- St. Teresa of Avila

Budget committee meeting before April

I think Andrew only likes Budget committee meetings so he can make charts and graphs...he LOVES this aspect of all this!

Dumping Debt: 5 Biblical Principles

I wanted to share 5 Principles of Biblical Finance from Dave Ramsey. 

I have to constantly remind myself that we are just managing the money that God has given us, and not become possessive of it.

1. Become Debt Free:
 "The rich rules over the poor, and the borrower is slave to the lender." Proverbs 22:7
"Owe no one anything except to love one another, for he who loves another has fulfilled the law." Romans 13:8

2. Live on less than you make:
"In the house of the wise are stores of choice food and oil, but a foolish man devours all he has." Proverbs 21:20

3. Save Money:
"The blessing of the Lord makes one rich, and He adds no sorrow with it." Proverbs 10:22

4. Live on a plan, budget:
"For which of you, intending to build a tower, does not sit down first and count the cost, whether he has enough to finish it—lest, after he has laid the foundation, and is not able to finish, all who see it begin to mock him, saying, 'This man began to build and was not able to finish'?" Luke 14: 28-30

5. Always Give:
"Now this I say, he who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. Each one must do just as he has purposed in his heart, not grudgingly or under compulsion, for God loves a cheerful giver. And God is able to make all grace abound to you, so that always having all sufficiency in everything, you may have an abundance for every good deed." 2 Corinthians 9: 6-8

Dumping Debt: 2nd Month

Ok here's the scoop about "dumping debt" in February. Again, sorry it's late...these posts will most likely always be a little behind. 

If you follow my blog you will have seen that February was a rough month. We lost two people in our lives and it definitely took it's toll on us...in basically all areas. Financially speaking it totally busted our budget, but with God's timing it all worked out. Just like it always does when he's in charge (why is it hard to remember that?)

The reason we went over (by hundreds of dollars) is because of our trip to Corvallis for our friend's funeral. In which I stayed 10 extra days, resulting in additional purchases such as; groceries, Andrew's train ticket back up to Canada, gas bought for both cars since Andrew then headed back down to Oregon the following weekend for military training, outings while in Corvallis and so on and so forth. Of course it was totally worth it and we both agreed with all of this but if you take a look at our paperwork for Feb it looks like a total mess (from a budgeting standpoint). Now, your wondering where Gods grace comes into all of this? Well at the end of January or maybe it was the very beginning of February, we had cashed out all our points from credit cards, (so that we can cancel them and not continue to go into debt). That money was initially tagged to go straight to loans...however it was used for the extra expenses this month required instead, hence Gods timing for cashing out the points was perfect. Thank you for that blessing Lord.

Positive experience this month: First: chatting with a friend and her husband while we were in Oregon, who had originally peaked my interest into Dave Ramsey back in June of 2012. It was fun to see their excitement for us as we explained our goal of being debt free before Andrew turns 30 and we really enjoyed chatting with someone who really understands what we are doing and totally agrees with it. 

Second: because we are on a budget we feel we have more control over our money, this allowed us to make a much needed unexpected donation this month. I don't want to go into much detail about the donation but we used some of the extra money that we would have put towards loans, for that donation instead. It was my Husbands generous spirit that guided us to decide to do such a thing and on the amount to give. I'm glad we did it, even though at first my strict nature wanted to see the amount budgeted for loans to actually go towards the loans. I've put this in the "positive category" instead of "unexpected expenses" because it was a blessing to be able to make this donation, and we feel it was only because we are more aware of our finances due to our Total Money Makeover.

Challenges/Unexpected expenses this month: as you read above, our trip to Oregon incurred extra expenses.

Helpful tip from this month: again I can't write a post without mentioning grocery shopping, seeing as that's where I spend most of our money, other than paying bills. I can't believe the difference in buying products when I'm actually paying attention to what I am buying. For example my favorite apple is Honey Crisp....oh they are SO delicious! But at Winco, the last time I was there they were over $3 a pound...when Gala, Braeburn (they seem to rotate) are only $.98 a pound! I had no idea there was such a difference...and the taste isn't that bad, only a small sacrifice to pay to be debt free...haha. Anyway, if you really pay attention while your grocery shopping, you can save lots of money.

Dumping Debt: First Month Down

I've tried writing this several times and keep getting stuck...then with being out of town for the last 10 days I continued to put it off. Well here it goes, even if it is a month late.

SO, we survived our first month on a budget! It wasn't really that bad...we did have some surprises come up, but like I said we survived and we were able to make a nice big payment on one of our loans...oh it felt so good. Kinda nerdy, I know, but it's fun!

Beginning of January: First Budget Committee Meeting.

Almost a year ago when we first attempted to live on a budget, we came up with some numbers to stay within (very generous numbers cause we had no idea where to start) and found an app on our phones to keep track of what/where we spent money. Needless to say, it was a disaster, we kept using the excuse that we didn't really know what was realistic so if we went over it was OK. Plus, if I remember correctly, we didn't name every dollar. Meaning we didn't allocate all of our income into categories, so that at the bottom of the budget page, income to outgo didn't equaled zero. We only created a couple of categories, like food/gas/utilites/rent. Basically, we half heartily made a budget and then didn't even stay within the budget amounts. But our biggest mistake, was that we didn't come together at the end of the month before the new month started and go over our budget. Essentially, we had already given up.

BUT NOT THIS TIME! Here is proof: (second budget meeting)

Budget Committee meeting for February

This time we made sure that every dollar that we earned in January was accounted for, we made enough categories this time to do so, which helped us tremendously. By doing so, we created an actual budget, and even though it was our "first" month we tried very hard to make each budgeted amount realistic and forced ourselves to stay within those means.

Positive Experience this month: Grocery shopping! I have always felt like I spend so much money when I go to the grocery store. This time it was so nice to have Andrew with me (he took the afternoon off for our ultrasound appt in Bellingham) to help stay on budget. I had made a list of items we needed to get and made a column next to each item to write down the price of that item and price per unit. With his help we were able to keep a running total while we shopped. And guess what? It worked great! We had budgeted $100 and our running total came to about 40 cents off the actual amount paid, which was $91.75. We were even able to buy a couple of unnecessary items (like chocolate chips for cookies) because we knew how much money we had left in our budget, before we even checked out! We were so proud of ourselves =)

Challenges/Unexpected expenses this month: For the month of January we had two unexpected/additional expenses: a speeding ticket we had received during Christmas break and an ultrasound bill payment that we didn't know our insurance wouldn't cover entirely. We placed them in our debt category and paid them off right away since they were our smallest debt. Then used the rest of our budgeted money for debt to put towards our other two loans. It really wasn't that big of a deal but kind of a bummer that our very first month we couldn't put the entire amount budgeted for loans toward them exclusively.


Helpful tips from this month: We created a category in our budget which included: Auto insurance, weddings this summer and our baby's birth. These are things that we want to have extra money saved for when they come up. For example we don't pay auto insurance monthly but we are putting money away every month for when we need to pay that bill, which is quarterly. Weddings and birth are things we want to have money set aside for. What was very helpful for me, seeing as I am a visual person, is we transferred this money to a different bank account. That way, at the end of the month this money wasn't sitting in our main bank account, seeming like we have extra money left to go towards loans. I needed to see the money go somewhere, in order for it to feel like it was being used. I hope that makes sense and I would highly recommend doing something like this if you need to put money aside and have troubles seeing that that money is already accounted for.

Alrighty well that's the scoop on our first month. February is soon to come, hopefully.

Dumping Debt: The 7 Baby Steps

Real quick, I thought I'd share the 7 Baby Steps for your Total Money Makeover:

Baby Step 1: $1000 to start an Emergency Fund

Baby Step 2: Pay off all Debt, using the debt snowball

Baby Step 3: 3 to 6 months of expenses in savings

Baby Step 4: Invest 15% of household income into Roth IRAs and pre-tax retirement

Baby Step 5: College funding for Children

Baby Step 6: Pay off home early

Baby Step 7: Build wealth and give!

We're in baby step 2, paying off our debt. Here is a little description from Dave Ramsey's website about using the debt snowball:

"List your debts, excluding the house, in order. The smallest balance should be your number one priority. Don’t worry about interest rates unless two debts have similar payoffs. If that’s the case, then list the higher interest rate debt first. 

The point of the debt snowball is simply this: You need some quick wins in order to stay pumped up about getting out of debt! Paying off debt is not always about math. It’s about motivation. Personal finance is 20% head knowledge and 80% behavior. When you start knocking off the easier debts, you will see results and you will stay motivated to dump your debt." 

 Andrew and I paid off my little school loans within the first couple of months of finishing FPU (Financial Peace University) and it's true, seeing those debts gone really is a motivation. Now we're tackling the big ones; his school loans and the Army Career Starter Loan But we couldn't do it willy-nilly, we've had to make a budget, which will be my next dumping debt post.

Dumping Debt: Invitation to Follow Us on a New Journey

I've decided to start something a little different on my blog for the next year and a half. This past summer I was told by a friend I should do more on my blog...seeing as I thought only family and a few friends follow to keep up with Malachi and our little family, I didn't think much of it, but I feel like this is a perfect opportunity to do something different. But not only different, possibly it will be something that may inspire a follower to do the same.

Andrew and I have decided we want to be debt free. We no longer want to be "slave to the lender" -Proverbs 22: 7. So for the next 20 months I am going to share this journey with you. Here's how it started.

Several different people throughout our dating and in our first year of married life told us about Dave Ramsey and a class they had attended called Financial Peace University. It wasn't until Andrew finished school (adding to my already existing school loans) and after we accepted a Career Starter Loan from the Army to buy our van, did we start to think about how much debt we actually had and became interested in this Dave Ramsey guy. Not really knowing exactly what we were getting ourselves into, we bought the "Financial Peace University DVD Home Study Kit" (at an incredible discount on their website might I add) and started listening to each class while we traveled around Missouri last year. We very quickly agreed with Dave Ramsey's approach to living without debt, building wealth and giving to those in need, and desired to follow his plan. SO, for the past year we've told ourselves we were "doing Dave Ramsey" (or as Dave Ramsey would say, starting our Total Money Makeover)...but really we weren't, I mean we upped the amount we put towards paying off loans but we were not fully committed.
Until now! 

We have set our goal to be debt free by the time Andrew turns 30, which will be in August 2015. That being said, we have created a budget and will need to live off a lot less money so we can put more towards loans and knock these suckers out!...you think it sounds crazy? Yeah it kind of is, but we are SO excited for the goal we have set and look forward to "Living like no one else, so that later we can live and give like no one else." A quote Dave Ramsey uses all the time. Meaning: if you make sacrifices and live like no one else...not eating out, spending very little on unnecessary items, so that you can pay off your debt. Then later you will have the means to save your money and use it to live like no one else, because you won't be a slave to the monthly payments of existing debts and you will have the freedom to do what you want with your money, including building wealth and giving to the needy.

I hope I didn't bore you and if you aren't at all interested, no problem just skip over these posts and keep looking for Malachi =) If you are interested then welcome! Also feel free to click here for Dave Ramsey's website to learn more.

Seeing as this is new for us, there will be many ups and downs and I plan on sharing all of it. Why? Because I myself am a very practical, realistic person. When I ask about something I want all the details, even if they are scary or intimidating. For example, before giving birth to Malachi I asked all my friends who had children for their birth stories and I wanted all their details no matter how scary they may have been (as long as they were ok with sharing of course). So when I listen to callers on Dave Ramsey's radio show call in and tell their story about becoming debt free I am bummed that I can't get all the details, especially during their hard times. I like to know that they are people just like Andrew and I. That they made mistakes or failed at times just like we will. So that is the approach I am taking. I invite you to comment/write/call or get a hold of me in any way if you have any questions or suggestion for us in this process.

Ok I think that's enough for now. I'd like to finish by saying that I fully believe, like I attempt to do in all areas of my life, that this whole undertaking will not be possible without God's grace and help. Because really the money we have is a gift from Him.
So, with Him, may we start our journey to being debt free!

 "You need to be able to win with money. Part of winning with money is getting yourself out of debt, learning to live on less than you make on a written plan, learning to communicate in quality ways with your spouse, building that emergency fund, building that retirement fund, building the kids’ college fund, getting the house paid off. That’s what winning looks like." -Dave Ramsey