Here's DR's plan:
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. Working on it
0.3 Do a written budget Working on it
0.4 Temporarily stop all retirement contributions N/A
0.5 Get current on all the basics (Shelter, Food, Utilities, Basic clothing) Done, except for some clothing needs
0.6 Amputate "toys" (bikes, boats, ATV's etc) to help snowball N/A
0.7 Cut lifestyle (Cut cable, cell, extras, eating out) and/or get a second job to raise $1000 EF. Need to reassess cell phone, internet, and netflix bills.
0.8 Get current on ALL bills Done
BS1 $1,000 to start an Emergency Fund Will have this once we receive our tax refund.
1.1 Chop up/freeze CC's (You have an EF now) In the freezer!
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
1.4 Amputate cars that you can't pay off within 24 months DH has a car payment-won't be paid off in 24 months; can't get rid of it. Car is a Toyota Matrix, so hopefully will last for a long time after it's paid for.
BS2 Pay off all debt using the Debt Snowball
2.0 Do the debt snowball, paying all your debts from lowest BALANCE to highest. Working on paying off $1,500 in credit card debt-will pay it off completely once tax refund arrives. Have close to 80 k in student loan debt-I'm not focusing on heavily paying that off, because I will be on the Income-Based Repayment Plan, and hope to have it forgiven after 10-15 years, since I will be working within the public school system.
BS3 Three to six months of expenses in savings Working on it. Not sure what the ideal target savings goal is.
3.1 Start car replacement fund Have a 1996 Volvo wagon-determined to drive it until it falls apart, though I'd love a different car (Mazda 5) Not sure if it makes sense to prioritize this savings goal, or plan on just having a car payment.
3.2 Save up 20% for home purchase OR pay down existing mortgage to the point you can drop PMI. Thinking about trying to put 5 k from student loan excess refund into an account to start saving for a down payment.
3.3 Start furniture or other non-essential stuff replacement fund Not focusing on this now.
BS4 Invest 15 percent of household income for retirement Checked out Roth IRA's today-most seem to require a $1,000-$3,000 minimum initial investment.
BS5 College funding for children Not going to focus on this for the next few years-prioritizing saving for a house, etc. Our children's grandparents and great-grandparents have all opened college savings accounts for them-feeling thankful for that, and taking Suze Orman's advice that while there are always loans available for college, there aren't for retirement! Going to focus more on this goal once they are a bit older.
BS6 Pay off home early N/A
BS7 Build wealth and give! Invest in mutual funds and real estate Counting our yearly contributions to NRDC & WFCR as this.
My main questions are:
How many different accounts do you all have? My spouse and I each have an individual checking and savings account (we found this reduced conflict/confusion to have a small amount to spend as we'd like w/out having to check-in with the other person), a household checking and savings account, and a savings account for each of our kids. I feel like the $ for an EF, short-term savings such as $ for holiday gifts, insurance premiums, etc., and long-term savings goals like the home downpayment need to be in separate accounts to avoid the temptation of transferring the $ into our checking account. But, when it comes time to apply for a mortgage, will the bank look poorly on too man account? Thinking that the home down payment should be in CD's potentially.
Our main challenge is establishing a budget, monitoring spending, and sticking to it. Also avoiding spending on a credit card. While I have a genuine need for some clothing now, I historically have a terrible track record of over-spending on clothing, and not even keeping it! Fickle Gemini, am I. :)