Yes – it’s been a while. We’ve been busy in part, starting in on the entire point of this post.
For 2012 – we are getting out of debt. Everything but the house. How are we going to do this?
1. Go through Dave Ramsey’s Financial Peace University — I made a request late last year via facebook if anyone had an unused kit they could lend us. Turns out a very kind friend gave us their old textbook & cds. The kit was practically brand new – several pieces still wrapped in plastic. Yesterday, we started out strong, listening to the first 3 lessons, so we are in the middle of putting together our monthly budget
2. Make a budget and stick to it — (something we are learning from FPU) We’ve always been good about not spending money we don’t have on a regular basis (our debt is typical student loans, along with medical bills and one HVAC system), but we don’t have a written monthly plan. This step is tricky since the one member of the household is self-employed. It’s tough to try and write down hard numbers (which are still kind of based on estimates). The goal, plan for lower than expected. If we continue to live below our means, see it spelled out as such on paper, we’ll have a much easier time directing everything above the expected amount as available to use in our debt snowball.
4. Use the debt snowball — We are planning to pay off several smaller items right away, leaving one Large Student loan. Because the other debts will be gone, what we would have used for those monthly payments can now all be used against the one remaining loan. Can you imagine paying 3 times the monthly minimum on something? Just think – the extra amount (equal to 2 addition monthly minimums) will all go DIRECTLY TO PRINCIPLE. Sweet! This is the key. By knocking out chunks of the principle, the payments pick up speed each month, with less and less going to interest, and more and more going to principle. Ultimately knocking out the debt much quicker and saving us thousands in what would have been interest through the years if we just stuck to the minimum.
5. Continue to sell unneeded / unused possessions on Craigslist — The last portion of 2011 saw us raising around $430 from selling items on craigslist. The plan is to use this extra money to toss into the debt snowball – for even more principle deduction. (as part of this same plan – really any extra, unexpected money will be used the same – even some of our cash Christmas presents. It may be “boring” but ultimately, it’s a fantastic Christmas present. Think of all the future stress that will be eliminated. Thanks to all of our loved ones who inadvertently helped us with this cause!)
6. Food, Envelops, and Emeals — We are going to continue using emeals (Highly Recommend them! Save money & time planning out your meals – Check it out Here). Even when we are busy, three planned meals a week saves us time and money. Plus, we are going to work on using a cash / envelop system to buy all groceries and when we eat out (or order in). It’s a proven method to make you keenly aware of how much you spend on food – which in turn will help us make wiser choices. Keeping in mind, every dollar we can cut from the food bill moves over in the budget to chip way at debt.
So there you go. That’s the plan. By the way, it’s not a resolution, it’s a goal. Something we started working on ending off 2011 and we are making great strides as we start out 2012.
And you know what – I’ll allow for a bit of realism to creep in that says “you never know what unexpected events are going to happen in 2012. Some of that “extra debt snowball” might realistically be needed to pay for other items in order to prevent accruing new debt. So – don’t be too disappointed if some of your debt carries over to 2013.”
Yep – I know. But even if that ends up being the case:
1. We didn’t go into new debt to pay for unexpected events & 2. We still made SIGNIFICANT forward movement. That momentum will be so empowering and encouraging.
I’ll keep you posted on how it’s going.