Category Archives: budget

Thread on our Lower-Middle Class Family

It’s been a while. We added a new child to the family in October so I’ve haven’t had much time to blog. The following is actually a series of tweets from yesterday. I did make a few small grammatical/clarifying/organizational edits, but it’s basically a series of 15 tweets:

Looking at our income and all these tax numbers…

We are basically lower-middle class. A one income family with 3 kids.

From all the talk, one would think we are dirt poor and cannot survive. Yet we do. Pretty comfortably, I might add. Here are a few thought as to why.

  1. The only thing we owe on is our house.
    1. It’s descent size but not massive. Two kids will share a room until one of the 3 move out. *gasp* And we prefer it that way, shocking I know.
    2. We only have a house because my husband (as a single man) purchased a town home way below his means. And we lived in that “semi-inconvenient” town home until we had 2 kids and the profit of a sale would cover a house down payment.
    3. We also don’t owe on school loans because we bought nothing but needs for several years. (All extra money went to pay them all off.) Not having those helps tremendously.
    4. We drive 2007 & 2008 vehicles. No loans on those. One was bought used, with cash (other is a hold over from single days)
    5. While we use credit cards for convenience, we never carry a balance.
    6. Having little to no debt (just the house remember) frees up a lot of money every month. Less locked in payments and less waste to interest
  2. Having only one income provides opportunity for saving money
    1. I cook most of our food (healthier and cheaper). I have the time to clip coupons, find the best sales, and make meals from scratch. It’s a lot more difficult to do this when time is limited
    2. Our monthly budget for gas and clothing is lower than most. Not only do we drive less, we don’t need work clothes (helps that our one income earner also works from home)
    3. We don’t pay for any child care (except an occasional date night)
  3. Probably the most significant, we define “comfortable living” very different than most
    1. All of our needs are met (first!) Food, clothing, shelter, water, power, transportation, these items are always covered. We recognize this and are extremely grateful that our income covers the basics. Some are not as fortunate.
    2. We have such great peace of mind that the basics are covered, we get to really enjoy when there is extra to cover the fun stuff.
    3. We value getting a deal. We truly enjoy finding deals and bargains. We love shopping thrift stores. We love store brands. It doesn’t make us feel “less than” because we don’t value the pride attached to brand-name or new. The reverse is actually true. It makes us feel like we are smarter than others wasting money.
    4. We get to live our value of people & quality time over stuff. We trade money and a second income (which buys nicer stuff) for what we really want – joy, peace, love, less stress.
    5. Our idea of fun is different. We do lots of free activities with the kids. We drive for vacation and have adventures on our journey (see things you miss on a plane)
  4. For me, growing up as a preacher’s kid has impacted my world view in regards to money
    1. I trust God will provide for my needs. First and foremost, spiritual needs, but also physical needs.
    2. We (similar to my upbringing) have a wonderful community and support system. Should something terrible happen financially – we know our God provided support system would step up. And we do the same for others.
    3. Not having much money as a kid, I saw my parents work to cover needs and then some. We were loved and didn’t feel like we missed out.

In summary, our world view regarding money is very different than most.

Because of that, we can live comfortably with less. Practically speaking, we work hard to live this way. (Physically, emotionally, and intellectually)

The resulting freedom: Absolutely Worth it.

/End of Tweets

***Long time readers will know this, but I’ve blogged extensively on how we got out of debt. Starting in Jan 2012. We paid off 46K in 22 months. If you want to read about that, look for the “by the number’s” posts. To be fair, we were dual income for most of that time, pre-kids.

*PS: In the blog post editing page, I got the code to do a nice ordered alphabet list nested in an ordered numbered list. (Point 1. A, B, C, Point 2. A, B, C etc.) It’s driving me crazy that the actual post isn’t reading the code correctly but I don’t have time to fix it. Sorry. “Hashtag Three Kids” ;-p

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GULP

Has it been over a year since I last blogged!?! We’ve been in the trenches, grinding out baby step 3.

A summary of 2015:

Chasing a toddler around while trying to survive the Texas heat, while pregnant. That’s right! We added on! In August we met our second little boy.

And seriously – paying medical bills, being pregnant, keeping the toddler alive, meeting the new baby, dipping in and out of the emergency fund because of slow work & medical expenses sums up all of 2015.

SO…. I picked the blog back up as things start to settle down.

AND because we have a new update!!!

Quick summary from when we started this journey in January of 2012 until now (4 years):

*Paid off 46K in debt in 22 months (Read our “by the numbers” posts starting in January 2012 to see how we did that.)

*Paid for items without going into more debt: A minivan, foundation repair, new hot water heater, a couple of mattresses, a washer, as well as a garage renovation

*We welcomed 2 children into the family (which resulted in maxing out our deductibles 2 of the last 4 years. 6K and 12K!)

*Experienced 1 layoff – and from that point on have only had one income

*Experienced a couple of slow work cycles

This last year (2015), similar to when we were paying off debt in 2013 and our first son was born, we were really cautious. We also had to pre-pay my OB early in the year. After the deductibles were reached, and we got our pre-pay money back, we were able to put a little bit more toward the emergency fund. My husband had a couple of large projects come up in the fall, right as we were calculating medical expenses.

Overall, we ended 2015 being a little discouraged. In rough estimates, 2015 resulted in 25% drop in income.

One super positive note from this stat is our extreme gratitude that God continues to provide for our needs. We have the four walls (food, transportation, shelter/utilities, clothing) covered no problem. We are so thankful for starting this journey 4 years ago, it gave us the tools and skills to keep a close eye on every dollar in, every dollar out. A 25% drop in income is very likely to cause disaster. For us, it did not.

The year ended and we were relieved to see it and it’s expenses go away.

And then, something unexpected happened.

January 2016. A couple of big, outstanding checks arrived. We never know when checks will come in – and honestly, we almost have to live as if they won’t. Having a client owe money is very different, and less secure, than having your employer owe you a paycheck.

When the checks arrived, we were amazed. It was what we needed to FINISH OUR 6 MONTH EMERGENCY FUND.

That’s right— we are FINALLY DONE with baby step 3!

*Phew* big sigh of relief.

We can now move on.  It’s possible we will have to dip into the fund again, and finish it, and use it, finish it, etc. – but we are choosing to mentally move on. We won’t abandon the fund and be without a safety net, but we also need to start focusing on some other items.

Our specific plan is a little in the air.  It will be some type of step forward, perhaps baby step 3b, or baby step 4 (or a combination of the two).

Baby step 3B is a down payment.  We would like a slightly different living situation. While we do “own” our home, the equity if sold today, will not be enough for a 20% down payment for the type of home we are looking for in our area.

Baby step 4 is investing 15% of  income to retirement, making use of all tax-free options as best as possible.  We have invested in the past, and have made small contributions in the last 4 years, but we would like to get that up and rolling to the full 15%.

And with that – while we are not done with the baby steps – I’m probably done blogging about our baby steps journey. The first three steps are the hardest, but they are also the most measurable. For more info on the baby steps – and to see how you can get started, visit Dave Ramsey’s website.

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Baby Step 3 Progress

It’s been a while since I’ve had any baby step updates. We have finally some decent progress to report.

Quick summary – In October we finished paying off debt (baby step 2).

We started our 6 month emergency fund, with a “50% of the way there” starting point.

In February, we reported we were at 53% of our goal.

Since that time, we are excited to report we are now at 65%!  After a slow period, we were able to increase 12% since February. We credit this to a huge shift in some of our expenses.  We were finally able to get our medical insurance figured out, so that decreased our monthly bills. We were also able to make some adjustments to our cellphone and electricity bills. The positive double whammie of lowering these bills is that 1. we have more money to go to the emergency fund each month and 2. our monthly expenses are lower than the total “6 months of expenses” emergency fund goal is lower.

Another important item to note is that we recently purchased a new (to us) vehicle.  And we stuck to our budget and paid cash!!!! 😀  So… we are now the owners of a nice, 2007 Honda Odyssey. It did mean that we had to use $9,300 that WOULD have gone toward the emergency fund. Obviously, that’s a decent chunk of change that would have increased our percentage saved, but we wanted to purchase a vehicle that would best meet our needs. And more importantly, have ZERO monthly payments.  My old jetta was getting up there in years and miles and VW’s are known for having expensive repairs. We hope to increase the size of our family in the next handful of years, which will also make the jetta obsolete. So we said good-bye, traded it in, and came home with a minivan.

Since October, it has been slower than we expected to make progress on Baby Step 3. However, we think we are in a good place.  With lower expenses, and one huge looming expense (the vehicle situation) already taken care of, we are set up well to make some large strides. Stay tuned…

 

 

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Emergency fund… slow going

So, we are now at about 53%* of our emergency fund goal.

While we have only saved 3% since becoming Debt Free in October, we are actually encouraged that we were even able to save that much. While money going out to pay for debt does not happen anymore, we have had significant increases in other bills.

We’ve had a few situations create bills we didn’t plan on. Diapers, along with the price of fresh organic produce for baby food (I’m making Z’s food), have been creating some instability in our budget. I’m still breastfeeding the kiddo and believe it or not, this means I eat way more food than I ever did while pregnant.

However, the biggest item that is currently holding us back is our medical insurance premiums. We estimate that for the three of us, our monthly premiums are just shy of DOUBLE our home mortgage. Yes, you read that right. Granted, our mortgage is not massive (we’ve been wisely living in a home that my hubby purchased 9 years ago and he did not bite off more than he could chew), but still… this is an increase of 1160% since January 2013. (gulp!) Yes, again, you read that correctly.

Some of this increase is quite understandable, I went from being fully covered, to having a very small amount taken out of my check, to being laid off. Tack on an additional family member and we were bound to see increases. We get that. However, this is an absurdly high amount. It did not help that during this time of life change for us, the insurance market went into total meltdown/chaos. Our insurance broker even told us “Sorry – I can’t help you. I have no idea how to answer your questions at this point and I might not even be in business in a few months.”

That being said, we are working on a couple of options and hope to see our monthly premiums decrease significantly in the next couple months as we work to make changes. AND we are so thankful to be out of debt. Again, the margin created by not having debt and not throwing money away on interest, has allowed us to weather this medical insurance storm.

*100% will be 6 months of expenses as suggested by Dave Ramsey’s Baby Step 3. We saving 6 months over because we are a small business family where income is not always the same every month.

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What’s Next?

When I blogged about our goal for 2012, we started out by saying we were going through Dave Ramsey’s Financial Peace University.

From that, we learned the 7 baby steps. Getting out of debt (all except for our house) was only step 2. We have a long way to go. 🙂

So what’s next? Naturally, step 3, which is a fully funded emergency fund. Dave recommends is 3-6 months of expenses.

I wanted to lay some ground work for this step.

First, we will be going for an entire 6 months of expenses for our emergency fund. We felt that with the feast or famine nature of a small business, it would be better if we had 6 months.

Secondly, I will not be posting exact dollar amounts when I report on progress for this step. We felt it was a little to personal of financial information to have out there in the world, letting everyone basically know what our monthly income averages. Instead, I will be reporting using percentages, with 100% fully funded being the obvious finish line for this step.

Third (and you might get mad at us for this one), our first progress report on this step is…
We are now at 50% of our goal.

Say what!? Ok, here’s why. Baby step 1 is a $1,000 emergency fund. From the get-go (prior to our even being married) my husband has been a super saver. When, in our second year of marriage, we talked about starting the baby steps, we decided that it was ok to continue to hold the 3 months of emergency fund aside that he already had in savings and to not put it toward debt at that time like Dave says.

A few things influenced this decision.

1. The potential extreme swings of income with a small business. We did not feel at all comfortable with such a small emergency fund.

2. Part of the reason Dave says $1,000 is for motivational purposes. If the emergency fund goal in step 1 is too big, people will become discouraged while saving for that first amount and give up. Since we already had the money, this wasn’t an issue.

3. Dave really wants to put a fire under people. There can be a little bit of panic in the idea that you only have $1,000. He likes people to use that panic to their advantage and start hustling on step 2 so they can finish and get back to saving. We knew ourselves well enough and trusted that we would not have an issue hustling.

4. In situation of overwhelming amounts of debt, taking a large chunk of change out of savings and throwing at debt can be a tremendous leap forward, helping people start the process with great momentum. Before we started in January of 2012, we had an incredible Q4 of 2011. We had a great boost of momentum without raiding the emergency fund. And for our total amount of debt, it would have had only a small impact on the timeline and reduction of interest we paid.

There you go. Our intent was not to be dishonest. And with the last 22 months in the rear-view mirror we know there were a few moments where we really thought even our “Crisis Fund” would be used up and we’d have to dip into the emergency fund. Not blogging about the emergency fund helped me keep it out of sight, out of mind, so that we would continue to hustle.

We are thankful that we gave ourselves some grace, and modified the Baby Steps from the start.

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Major Announcement (AKA October by the Numbers)

Proverbs 22:7 says “The rich rules over the poor,
And the borrower becomes the lender’s slave.” (NASB)

We have a major announcement.

We’re done.

That’s right… 22 months after we started, we are out of debt!

Seriously.  It hasn’t quite sunk in for us either.

DONE!

Feels a little anti climatic, right? 🙂

In Dave Ramsey style….. FREEEEEEEEDOOOOOM!

For a final ‘by the numbers’ here is how the numbers break down:
Extra Debt paid: $5,116

Total Debt paid in October: $5,362

Since 1/1/2012 – Total Debt Paid off: $46,453*

*For the purpose of Baby step 2 we are not factoring in our home mortgage

There you go.

A few more numbers to consider while letting that number, $46,453, sink in.

•22 months
•1 layoff
•6 months on only 1 income
•6 months of steep COBRA medical premiums
•4 months of slow small business income
•1 HVAC system
•3 Student loans
•2 Medical bills
•5 consignment sales
•1 garage renovation
•1 baby born

One item that has been an uncountable blessing, is the support of our family and friends. From gracious understanding on the numerous times we declined going out to eat to the boxes of hand-me-down clothing and piles of gifts for our little boy. We truly could not have done this without the support of loved ones.

Thank you LORD for providing for us.  Thank you for entrusting us with funds and teaching us to be good stewards. Thank you for giving us strength and endurance to do what is right with your money, even when we didn’t feel like it. With the wisdom of Proverbs 22:7 in mind, we choose to not become the lender’s slave.

In closing, while the monthly “by the numbers” posts are done, we will be chronicling our next steps. Dave Ramsey’s baby step 3 is an emergency fund to cover 3-6 months of expenses. Feel free to drop by and see our progress as we move forward, aiming for step 3.

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September by the Numbers

September was terrific!

As I’ve mentioned before, the small business has picked up considerably the last few months. Because the baby was on the way, and we had gone such a long period with the business being slow, we chose to be extremely cautious. Even with understanding the debt snowball was on hold and we were functioning with the ‘crisis fund’ plan, we still decided to limit how much we drew monthly from the business.

All of this to say, we have decided it is now ok to free up additional funds. That’s where our extra money for debt comes from this month.

We are getting so close! It is realistic to believe that we will be Debt Free by the end of the year.

Without further adieu, here are the numbers:

Extra Debt paid: $5,000

Total Debt paid in September: $5,246

Since 1/1/2012 – Total Debt Paid off: $41, 019*

*For the purpose of Baby step 2 we are not factoring in our home mortgage

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