Monday, December 21, 2009

Dumping the Debt

I'm on a roll this morning, so let me share some thoughts on debt. As I said before, Ryan and I have knocked out 17k in the past year. Actually, the past nine months. If you knew our net income, you'd be pretty amazed by how much money that really is. But it's not as simple as not spending.

First of all, we sold Ryan's car. He had a note and expensive insurance due to some driving mishaps, and honestly, we couldn't afford paying for that car. Luckily we came within about $100 of the loan amount when we sold it. Our wonderful in-laws loaned us a car for awhile, but it recently died. My parents have allowed us to drive my old Civic. After the new year, though, when I return to work, we'll be a one car family. Since Ryan and I work at the same place, we'll be OK for now. When we buy a new car, it will only be *new* to us. It will be affordable and practical.

The second thing we did was create a detailed budget. For example, we have $300 a month to spend on groceries and toiletries. Considering I know smaller families who spend $200 a WEEK at the store, we're going pretty bare in comparison. But if you don't buy processed foods, you save a ton. Don't buy meat and you'll save even more. It's a myth that you need meat. Do you need much of anything? Honestly, our lifestyle change has caused a little heartache over eating out or shopping. Yet we don't feel deprived. Personal recommendation: Have fun money set aside in the budget. Ryan and I get $40 each per month.

Our third task was to never use credit. Ever. If we can't pay cash, we can't afford it. We've missed this goal a few times, but I'm not upset about it. It felt really good to have Christmas be a cash holiday.

Another big task was to pay bills immediately. If the cash goes directly to debt, you don't spend it on silly little incidentals. It also saves on interest.

In addition to these substantial tasks, we've done a few other things:
1) Meal planning 2) Bi-weekly budget meetings 3) Selling stuff we don't use 4) Itemizing our charitable donations for tax purposes 5) Analyzing our tax withholding to maximize paychecks 6) Not using paper products 7) Using the library often 8) Rarely buying alcohol, especially at restaurants 9) Having no shame over hand-me-downs 10) Making our lifestyle changes clear to our families and friends

#10 makes some people uncomfortable. Too many people live beyond their means. I've known people who dip into savings to buy junk that doesn't last. Or to eat at Red Lobster. Not worth it guys.

One thing people wonder is whether we're miserable all the time because we're saving. Well, first of all, we're not saving yet! When we finish paying our CC debt, then we can start. Saving right now would be silly when we have debt left. But we're not miserable. Sometimes we're angry, very very angry, in fact, at ourselves for creating this worthless debt in the first place. Now, though, we're looking forward to building wealth and living happily and debt free. It'll happen soon enough.

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