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Getting out of debt in DECEMBER!

post #1 of 25
Thread Starter 

Do you want to get out of debt? Start living on a budget? Be able to start saving? Then this is the thread for you! Some of us use Dave Ramsey's method but please join us even if you're following someone else/your own plan. All are welcome!

 

Here's DR's plan:

Pre-Step 1: Get current on your debts and do a budget
0.1 No new borrowing.
0.2 Talk with spouse and get him/her on the same page as you concerning finances.
0.3 Do a written budget
0.4 Temporarily stop all retirement contributions
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing)
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF.
0.8 Get current on ALL bills

BS1 $1,000 to start an Emergency Fund
1.1 Chop up/freeze CC's (You have an EF now)
1.2 Get Health insurance NOW if in the US
1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died.
1.4 Amputate cars that you can't pay off within 24 months

BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest.

BS3 Three to six months of expenses in savings
3.1 Start car replacement fund
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI.
3.3 Start furniture or other non-essential stuff replacement fund

BS4 Invest 15 percent of household income for retirement

BS5 College funding for children

BS6 Pay off home early

BS7 Build wealth and give! Invest in mutual funds and real estate

Here's the link to Dave Ramsey's website: http://www.daveramsey.com or if you want a good DR discussion forum, http://www.llnoe.com is good but hardcore. Gail vax Oxlade's Til Debt do Us Part is great tv show, very motivating. Her website is: http://gailvazoxlade.com/blog Others like Suze Orman or Mary Hunt, really doesn't matter whose method you use, just start the process to getting out of debt

 

Welcome.gif

post #2 of 25
Thread Starter 

I just realized we've been DR'ing for almost 3 years now. It feels like only a few months ago!

 

We've gotten ourselves ahead substantially and kept ourselves out of trouble through a lot of pretty big transitions (cross-country move, schooling, career-starting)....next year with DH being a full time student and me on Mat. Leave receiving only 55% of our income for 12 months will probably be our biggest challenge yet.

 

On a more December-y note...any great holiday plans? What are you doing to save $$? Indulge cheaply? Gift giving?

post #3 of 25

Hi,

 

I'm back again for my third month of DR (no where near you Eirual!), still BS2.  Last month I worked a ton of overtime and we made some huge debt payments (the rule with my overtime pay is that it goes to debt payment the day it hits the account... we aren't even tempted to spend it that way).  Our budget also includes our debt snowball payment, which is based on our living expenses and base pay.  We're really starting to hit a groove, and because our minimum payments go down every month we can see our progress even though that money is rolled into our snowball.  Anyway, since I'm doing overtime and getting paid every couple of weeks, I get to send in my extra every couple of weeks, and DH and I celebrate every "blow for freedom" with silly dancing and so on.  It's brought us closer together as a family.

 

DH might get laid off soon, and as we were running the numbers we realized that we'll be okay on one income even if he doesn't take unemployment (don't worry, he will) and I stopped doing overtime.  That wouldn't have been true three months ago.  How do we find ourself in this wonderful situation?  Because we paid our debt so agressively and our minimum payments are much lower than they were a few  months ago.  It's amazing how much it increases our financial security -- getting laid off would have been a disaster three months ago, now we are free to see the positives, like him being able to spend time at home with DS so we don't have to give him over to a substitute caregiver.  Plus we've learned to live on a budget, started meal planning and therefore eating home a lot, etc.  And because we did it gradually, we weren't particularly traumatized by it.  Dinner is a lot more fun at our place now, and I started FlyLady too so we can have people over for dinner where previously we would have gone out.  Again, it's cheaper and at the same time people like it because it's more personal.

 

I was originally a little bummed about how low key Christmas was going to be this year -- it's our first year doing it on a budget, and we both used to buy whatever we wanted if it was "the perfect gift".  Multiply that by unrestricted people we were giving to, and it was a mess.  This year we have a strict budget.  Anyway, it's turning out that we're actually a lot happier and more excited, because this year it isn't about finding the perfect gift, it's about being creative with what we have.  It's more work, but actually more fun.  He likes to cook, so I'm making him a family cookbook with lots of cool family pictures and such on the outside, and inside our favorite family recipies.  A nephew is getting a cut out book (just one of my old textbooks with the middle cut out so he has a secret place to keep stuff).  DS is getting wooden blocks I'm painting myself, as well as some soft blocks I'm sewing from scrap fabric.  DH is getting him some inexpensive musical toys (a cowbell, maracas, etc).

 

In general, I feel like my quality of life is getting better, not worse, now that we're spending less.

 

Best,

Anka

 

post #4 of 25
Thread Starter 
Quote:
Originally Posted by AnkaJones View Post

...

 

In general, I feel like my quality of life is getting better, not worse, now that we're spending less.

 

Best,

Anka

 



SO TRUE!!

 

It's amazing how the security in knowing you can take financially whatever life throws at you spreads calmness to the rest of your life and whacks your priorities into line creating such a sense of peace and true happiness.

 

I can't help but think about how stupid-perfect of a household Dave Ramsey and the Fly Lady would have if they got married. They're both brilliantly insightful to pretty much all areas of household management when merged together. A potent combo!

 

post #5 of 25

As we came home from a local theater production's "community night" (free admission), DH and I were talking about just that - how much there is to do that is free or low cost. Of course that depends on your locale and we might just be lucky, but we find that the more we keep our eyes and ears open, the more gems we find. We also find fun in things that do cost money but yield us a take-home - I'm thinking about picking fruit as an example (and it's cheaper than buying at the store anyway!).

 

I posted in the December thread last year, and I'll quote a snippet:

 

====

Here's where we are now, hopefully I can look back on this post in Dec 2011 and say Yay, we made a lot of progress!

 

EF - $802.71

Mortgage - $104,506.36

Student Loan - $17,066.56

 

Supposed net worth - $-20,428.51 (ugh)

====

 

Now we are here:

 

EF - $4,121.90 - whoa!

Mortgage - $102,334.62

Student Loan - $15,254.66

 

Not bad! I know others would have done much better, but we did this on a tight budget rather than the cut-out-lattes-and-BMWs route that DR followers seem to take.

 

The net worth is tricky because my figure of -$20k last year did not take into account some retirement savings that I wasn't thinking about. Also we got a fat tax return a few months later that helped a lot. So, while I can't compare the two numbers, my net worth today is -$120. It's was in the black a month ago but we had to use some of our sinking funds for planned and very necessary expenses, so it's not that we went backwards (the expenses were planned, etc. - I'm talking about stuff like filling up our oil tanks and taking DD to the dentist, stuff like that). I have good hope that the next time it goes in the black (sometime this month!) it will STAY there! I also admit this number is kind of meaningless because I assigned a value to our home a year ago but who ever really knows how much they can sell their home for, and how quickly. But at least that number is the same as last year so it's sort of comparable.

 

We are in BS3 but not following DR to the letter. I cannot stand not sending at least a little extra per month toward both debts, so while I understand and agree with the principal of focusing on one thing at a time, since our budget is tight and we're not going to finish anything for a long time, I'd rather feel like I was chipping at the debt. We send about $25 extra a month to the student loan, and about $80 extra to the mortgage.

 

So, looking ahead to 2012, this is my plan: With the tax return, use a small portion ($250?) to buy a freezer, so that we can take advantage of sales, bulk buys, and seasonal pick-your-own fruit (I can, but I prefer frozen fruit). And put the rest into the savings.

 

When we have $10k in savings (hopefully in 2012! - the tax return will be a big chunk of that, maybe $2k or $3k right there) I will continue to replenish it but will then turn my focus toward the mortgage. I don't see us paying off the mortgage anytime really soon but if we can pay it off in 15 years instead of 22, that will be an accomplishment in and of itself. Obviously I'm not gazelle-intense, but I am not willing to disrupt my family to that degree for 5 years (a long time to a child!) - I've thought about it and I own that decision and am happy with it.

 

Onward and upwards!

post #6 of 25

Oh, DR and Flylady would have made quite the couple!!!!  The striking thing about both of them is what incredible psychological insight they have.  Feeling like you have to get everything perfectly clean all at once is so discouraging that you don't even start.  Feeling like you can never pay off your debt is so discouraging that you don't even start.  Flylady starts with a clean sink so you know you can do it, and have something to look at that's clean even if nothing else is at the beginning.  DH starts with your smallest debt so you can celebrate your first debt paid early on and be encouraged

post #7 of 25

Ok, DH got fired, then got another job, then got another interview. I'm still plugging along at my work. We have too many bills and not enough money. The holidays was going to be super tight, but my Grandpa sent us $500, so yay! Not so very tight.

 

I'm disappointed about how slowly things are moving, but, oh, well. I just need to get my spirits back up.

 

Pre-Step 1: Get current on your debts and do a budget
0.1 No new borrowing. Okie-dokie.
0.2 Talk with spouse and get him/her on the same page as you concerning finances. DH is fine with what I decide... ;)
0.3 Do a written budget Need to update it, but... yes.
0.4 Temporarily stop all retirement contributions Done.
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing) Actually, we're pretty well caught up.
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball What toys? Why do these budgeting things always make it sound like we are living The Life?
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF. We cut cable, cell is our only phone, no eating out, no shopping, no "entertainment" of any sort besides what's at home. Again, not exactly living The Life.
0.8 Get current on ALL bills So easy to say, but this is where we get hung up. Medical bills from the kids' births, student loans, bills from 10+ years ago that I've never had the money to pay off... I'd love to just magically find the extra money, but we don't make much more than what our (absolute necessity) bills are.

BS1 $1,000 to start an Emergency Fund
1.1 Chop up/freeze CC's (You have an EF now) No can do. I have to have revolving credit to boost my credit score. However, it's ONE and it gets paid off every month.
1.2 Get Health insurance NOW if in the US Have it. It's required for my work.
1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died. Again, required.
1.4 Amputate cars that you can't pay off within 24 months We own our cars free and clear. We actually need to upgrade one fairly soon.

BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest. Yeah, see 0.8 above. I am SO looking forward to getting to and past this stage.

post #8 of 25

Well, medical bills bumped us from working on our emergency fund back to pre step .8, but we are holding our own and not falling further behind o the other bills so that is good.  We are just plugging away.

post #9 of 25

Hi PaigeKitten, it's nice to hear from you again!!!  Congrads on your baby (even if, I'm assuming, those are the medical bills that bumped you back).  I hope you and the baby are well.

 

Best,

Anka

post #10 of 25

Pre-Step 1: Get current on your debts and do a budget
0.1 No new borrowing.-Done
0.2 Talk with spouse and get him/her on the same page as you concerning finances.-Hard to get him to keep track of tips from work and any spending out of that but we are in a pretty good spot communication-wise.
0.3 Do a written budget-Have a budget on Mint.com
0.4 Temporarily stop all retirement contributions-Didn't have this in the first place.
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing)-Our rent is expensive ($1200) we are in a high cost of living area. Current on other items except for trying to find thrifted clothing for DD as she grows out of clothing she has now. I have to work really, really hard to resist any clothing spending for myself-that is my weakness!)
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball-Didn't have this in the first place.
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF.-Not cutting cell phones because we don't have a home phone. I know we should cut the YMCA membership but it is what I have to look forward to once new baby arrives in order to provide some structure/social interaction in my life and try to avoid post-partum depression like I had with DD. It's $42.50 a month and they provide childcare. Ugh!-should probably cut it :( Rather than completely eliminating any spending on food or an occasional event which I feel is setting an unrealistic expectation, I am setting a budget of $25 a month. We eliminated Netflix and the $9/month cable we had. Area's of the budget to focus on reducing/saving are: Gas, oil changes, utilities, groceries, gym, any stuff for house, baby/kid supplies, toys and books (only buy thrifted anyway), haircuts, toiletries, clothing (mostly thrifted but need to stick to a budget), gifts, and any entertainment spending)
0.8 Get current on ALL bills-Done except currently our family has been paying for DD's childcare while I have been finishing grad school and my sister (she has lots of $ and was feeling generous) has been paying for our cell phone bills. I feel like it's our responsibility to try to take these over A.S.A.P.

BS1 $1,000 to start an Emergency Fund-Think we are going to try to put at least $500 of tax refund toward this.
1.1 Chop up/freeze CC's (You have an EF now)-I think this will make the biggest difference for us in terms of our financial health. I have terrible self-control with credit cards and not having access to them is forcing me to learn to live within out means and reducing a lot of the guilt/stress that comes from over-spending/living beyond our means.
1.2 Get Health insurance NOW if in the US-Done.
1.3 Get Life insurance NOW if you have considerable debt/your family couldn't make it financially if you died.-Done. It's $100/month
1.4 Amputate cars that you can't pay off within 24 months-Can't get out of our car payment without paying a huge penalty and then being w/out a car. Payment is $375 a month and there is about $17,659 left on it. 2008 Toyota Rav-4

BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest.-Doing this toward $11,000 worth of credit card debt. Yuck! I have made such poor choices :( Trying to put $360/month toward paying off debt.

BS3 Three to six months of expenses in savings
3.1 Start car replacement fund
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI.
3.3 Start furniture or other non-essential stuff replacement fund

BS4 Invest 15 percent of household income for retirement

BS5 College funding for children

BS6 Pay off home early

BS7 Build wealth and give! Invest in mutual funds and real estate

post #11 of 25
Quote:
Originally Posted by AnkaJones View Post

Hi PaigeKitten, it's nice to hear from you again!!!  Congrads on your baby (even if, I'm assuming, those are the medical bills that bumped you back).  I hope you and the baby are well.

 

Best,

Anka



Thank!  Yup, we ended up with a hospital birth, which we were NOT planning on doing.  I have a feeling after our tax return we'll get that all finished up and the $1000 emergency fund done and then we can really tackle the school loans and loans from DH's mom.

post #12 of 25

I have so much debt it is depressing. I let my ex use my name on things that he swore he would pay but never did. So now I have debt that I know about from my own accounts and things I am not to sure about since I stupidly would signup for things when he would pressure me to. I did a credit check after we broke up and I have over 40K in debt!!! I could not believe how much stuff he never paid off. I guess I just have to start one account at a time and put the pieces of my credit back together.

post #13 of 25

That's rough, mamayogibear.  But yes, just take it one debt at a time and celebrate like heck every time you get one done.  The other problem you might run into is him not making minimum payments (unless, of course, you've just totally given up on him and are making them yourself) -- the late fees can really be killer.

 

Best,

Anka

post #14 of 25
Quote:
Originally Posted by AnkaJones View Post

That's rough, mamayogibear.  But yes, just take it one debt at a time and celebrate like heck every time you get one done.  The other problem you might run into is him not making minimum payments (unless, of course, you've just totally given up on him and are making them yourself) -- the late fees can really be killer.

 

Best,

Anka



thanks Anka! and i have totally given up on him making any type of payments... part of the reason he is my ex now!

post #15 of 25
Quote:
Originally Posted by mamayogibear View Post



thanks Anka! and i have totally given up on him making any type of payments... part of the reason he is my ex now!



I would think that this is the kind of situation where bankruptcy should be considered.  Is that a possibility?

 

post #16 of 25
Quote:
Originally Posted by EmsMom View Post



I would think that this is the kind of situation where bankruptcy should be considered.  Is that a possibility?

 



I have heard that if you get bankruptcy you can not rent a home for a few years. I am currently staying with my parents for the past couple of weeks and hope to leave as soon as I have some money to pay off bills and pay rent. Don't landlords look down upon bankruptcy?

post #17 of 25

It depends on your locale.  In places where there is a lot more housing than "good" renters, you might still be someone the landlord wants to rent to.  If it's a landlord's market, though, you will probably find your housing options limited.  You might still be able to to do subsidized housing, though.

 

If you're still making a little progress every month, probably better to hold off on declairing bankrupcy.  If you're cut to the bone and coming up short every month, you should probably declaire.  The reason for not declairing until you have to isn't a moral thing, it's just that once you declair you're vulernable to a second hit -- for example, say you declair and then wind up in the hospital with thousands of dollars in medical bills; you can't declair bankruptcy again for another six years.  A note about timing: it is generally better to declair bankruptcy once the primary problem is dealt with (e.g., you have a new job, or your medical condition that caused the spiral is taken care of, etc.).  Once you declair bankruptcy, you can't get it again for another 6 years, so you won't be able to tap into the same credit stream you once did (you may find, however, that there are plenty of predatory lenders who are more than willing to give you a loan at exorbatant interest with killer late fees... because they know you won't be able to declair bankruptcy again any time soon).

 

Hope that makes sense.  I think I might have accidentally drunk decaf this morning.

 

Anka

post #18 of 25
Thread Starter 

This may also be a time to look into a debt consolidation company. They'll stop minnimum payments and roll all of your debt into a smaller sum. I'm not sure what the catch is, part of it is you need to stop old habits, but in this case they weren't your habits and they've been stopped so it's not like you'll keep digging another hole while you try to fill this one.

 

May be worth looking into?

 

Good luck, mama!

post #19 of 25

we are still struggling with my disability not being nearly as much as my regular work checks were. Things should really start moving in a positive direction really soon though. My COL turned out to be higher than I had anticipated but still drastically lower than it was. Used to be about $2000 per mo and now it's about $900! We are staying in an upscale place with higher rent than I would like but DH wants to stay here till April when the weather will be warm enough for him to commute to work on his motorcycle. Places up north are a lot cheaper. We are planning on consolidating our storage and moving it up north as well, a savings of $140 per mo. We never were able to rebuild our emergency fund with me injuring my back and making way less money than I was. Moving always seems to cost more than anticipated too. My DH was looking over our budget and thinks we should be able to start rebuilding come first of the year.  I will feel a lot more secure with some kind of savings in place. 

 

ETA I should be back at work on March 1st, fingers crossed.


Edited by trekkingirl - 12/17/11 at 5:45pm
post #20 of 25

I got a promotion... and a raise (a small one, but still).

 

DH got the other job, which pays a bit more and is closer (double-money savings).

 

I'm feeling so much better about life and money.

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