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Getting Out of Debt in November 2013

2K views 47 replies 10 participants last post by  skinnyloveBC 
#1 ·
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
 
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#3 ·
Subbing in for the new month.
 
#4 ·
Also following!

Can I ask for advice here? We had gotten into really good shape right before my daughter was born (because I had been specifically planning for that). We lived below our means, had paid off all CC debt, were current on all our bills, and had saved up about 6 months worth of living expenses. This made it possible for me to leave my demanding full-time job, shift careers, and work part-time starting about 6 months before our daughter came along.

We were upside down on our mortgage (because of the recession & huge drop in property values in our area) and our condo needed major repairs, the complex was going downhill fast due to lots of foreclosures, etc. We did a short sale for which we owed nothing at closing but experienced many setbacks during the process that did end up costing us a lot of money from our savings. Now we're renting but happier overall.

Then the year after my daughter was born I did a horrible job of managing our finances (money management is NOT one of my DH's many strong points, so I've always done it). I was careful about not spending on clothes, travel, etc., and we made several major thrifty changes, but I got overwhelmed with work and baby, didn't stay on top of bills, and splurged for convenience to stay "sane" -- things like takeout, some help with cleaning, etc. Our credit card debt is back up to $10K and our savings are down to about $7000. I know. This is totally dumb.

I lost a part-time consulting job a couple of months ago - $1200 or 1/3 of what our monthly income has been for the last 2 years. So things are really tight now.

On paper I can't really figure out how to make it work. I know it is possible to live on much less than what we make, but in practice I'm not sure what else to cut (besides things like coffees & occasional lunches while at work). We've already eliminated nearly all of those convenience costs I mentioned earlier, buy clothes maybe once or twice a year, cook at home as much as possible, pack lunches for work, buy whole foods & cook from scratch as much as possible, drive fuel-efficient cars, don't have cable or for gym memberships, don't often go out and do pricey things. We could spend less on groceries, although I feel that if we can afford them, certain foods and organic produce are important to our family's health.

We do live right in the middle of a fairly high COL area (Miami). I know a lot of families here that share one car or don't have one at all, and DH and I spent time as a one-car household pre-baby, but I can't figure out how we'd "amputate" a car since DH has to drive a lot for work, public transit here is horrible & our own particular time/logistics would make it unfeasible AND expensive. Both DH and I have chronic health conditions that require substantial $$ toward RXs every month and regular specialist visits. DH has a boat & pays monthly for its storage but is absolutely not willing to part with it. :( I've accepted after several years that it isn't worth fighting over.

Anyway, I want to get back on track! Looking forward to following this thread.
 
#6 ·
Are you keeping a written cash flow plan? Makingure you account for where your money goes before it is gone really helped Dh and me put extra money toward our debts and no get into more indebtedness.
 
#8 ·
Yeah, the written cash flow plan includes dates you get paid, which bills will come out of tht paycheck and what other expenses will be paid with that paycheck like groceries, gas, medical expenses, etc.

I use a spreadsheet for mine, dates of paychecks across the top, expenses itemized down the left. I use direct withdrawal for most my mortgages and utilities and school loans so I don't
get hit with late fees . I write those expenses that are generally the same every month under the pay period I would need the money to pay them, fill the box with green meaning I have seen the statement for the month, and put a comment to specify the date it will be paid. I check my online banking to see if the expense has been paid, then turn the color from green to yellow. For things I might buy several times in a pay period I have multiple rows in that expense section with the names of the most common places I shop ( grocery store names0and gas station names for example ). when I use my debit card, I will type it the amount I spent and mark it green until it clears online banking and I adjust the budget amount left for that pay period.

Making each column come out to zero has helped me put more money in savings (where I have several sinking funds for things like Christmas, car registration, car repair, stuff that i know will need to be paid but couldnt be simply cash flowed in one pay period ) I use capitolone360.com for these sinking funds that way I am not tempted to use the money except in an emergency or the event that it was saved for is coming up. It takes a couple daysto transfer the money back to my account but it has been priceless for actually saving for our family.
 
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#9 ·
ok i just paid off my studentloan :) i just did a budget for this month i should be able to save 350 this month and and maybe almost 450 for dec and jan is a 5 wk month so maybe more. I do a weekly budget and was paying the student loan with anything i had left. with my tax refund and savings my savings will be 6400 in feb and i was hoping to get a house there are a few in the area for 25k the payments will be about 290/m which is less than i'm paying on rent but to put 20% down it will take me down to 1400 in EF which isn't fully funded and any other closing costs might eat that up think it would be ok to only put 10% down? pmi on 25k isn't alot.
 
#12 ·
Yay! Congratulations, Pollyanna! That is awesome!!

We bought our house in June (before deciding to try to follow the financial peace method) with nowhere near 20% down. Our monthly PMI is high, of course, but what really struck me was the PMI premium. They charged us $4000 to be paid at closing just to "purchase" the insurance. Our house was pretty expensive (cost of living is high where we are), so maybe the premium would be less on a cheaper home? Just something to be aware of.
 
#14 ·
A mortgage broker/lender would be able to give you more specifics. There are also federal credits/assistance based on income and where the home is located. Have you spoken with a realtor or lender to see what assistance you might qualify for? If the rates continue to rise, it may be worth it to get something sooner than later. It sounds like you are very disciplined, Pollyanna. I admire that!

ETA: I remember there being PMI-specific deals based on credit score and income.
 
#15 ·
shh don't let dave hear you say that. ;) it is called creative finaincing aka too broke to buy a house. it is ok i will wait and i'm not going to get the best rate anyways my credit score isn't high enough. just hoping this frig lasts til spring because at this rate i won't have any appliances left in this place that work. and the landlord sucks at fixing things around here.
 
#16 ·
Hi Mamas!

I'm rejoining here in hopes of having a bit of accountability. I was active in these threads a while back and managed to pay off 25k in high interest creditcard debt and save 12k while dealing with bouts of unemployment, underemployment, and a surprise pregnancy. So these Getting Out Of Debt threads served me well!

I just had a baby in June and managed to get through Maternity leave without getting back into debt, though that was accomplished by dipping into the savings a bit. So now we're back down to just under 10k and our goal is to be in the 12-16k range. We're low income, though, so it's tough. DH works full-time as a(n underpaid) security guard and I'm currently working part-time in the local school district. We have a 3 yr old and a 4 month old. We live in a high COL area but managed to get housing through a non-profit so our rent is really reasonable, and we don't currently own a car. We get around mostly by bike.

So, I'm hoping to go back to school part-time, starting Fall 2014, to get my credential. The plan is to finish the credential in 2-3 years (so, VERY part-time schoolwork) and hopefully land a full-time teaching job by the time my youngest is starting preschool. I'd like to pay as I go so as to not accumulate any debt, and we'll probably have to buy a car so that I can drive to the University to do my coursework, because it's really too far to use public transport.

Unfortunately, once we paid off the last of the debt I found it kind of tough to maintain momentum working towards our goals. We're still short of our Fully Funded EF goal, AND we need to save for a car! I'm going to need to buckle down and really stick to budgeting again. So hopefully I can use this thread for support and motivation.
 
#17 ·
Also, I have a question for you mamas--when it says 3-6 months of expenses for the ffef do you calculate that as 3-6 months of actual expenses--exactly what you currently spend each month--or a skeleton budget of monthly necessities?
 
#19 ·
Pollyanna - how about the new puppy? I don't see a budget column for the new guy - even if you put dog food expenses with your food budget, there will be the other costs to factor in - toys, shots, planned or unplanned trips to the vet. Perhaps it's hard to tell how much to budget for the puppy but I think it would help to set aside something each month.
 
#21 ·
With our dog we spend about $150-200 per year at the vet for his yearly "checkup" and shots (costs I am sure vary widely depending on where you live and if you opt out of certain shots etc...) There's always at least one unscheduled visit to the vet per year for him (about $70 usually) - we live in the country - he gets into things ;-) We spend about $100 per year on toys and treats for him (we are pretty indulgent, I am sure this could be much less)

That works out to be about $30-32 per month for us. That's with putting the dog food in with the people food - which we do because my partner buys the dog food at the grocery store when he shops for the family.
 
#22 ·
Realized I hadn't responded to a couple of comments...

@pollyanna02, I hesitate to use any more savings to pay a big chunk of the credit card. I've used some to pay off recent bigger charges here and there. But the savings is our emergency fund & it's pretty much equivalent to only 2-3 months of expenses or about 5 months' worth of rent right now. I just set up an autopay of $100 to the CC bimonthly so at least there's that. I also have an automatic transfer set up of $150/mo to savings but maybe I should pay more to the CC for now?

Re: cash flow plan, I'll look around and see of I can find some kind of template. It's hard because my DH is notorious for spending money without checking to see what's going on with our bank account.
 
#25 ·
How massive? Just commiserating here, we are currently "ignoring" 25k of student loans because I'm hoping to have some of it forgiven for public service work or whatever, teaching... But that's probably not a wise choice. Probably save a bunch if we just continued to "go gazelle" and pay off the student loan.

Usually I'd suggest that you use your savings to pay off debt, but at 6% that's like a student loan. The way I see it, when you're paying low interest rates the most important thing is determining what makes you feel powerful. For me, that means a healthy savings account. I know it would probably be smarter to use our 10k to pay off half my student loans, but then I'd feel like we have no safety net. Plus, seeing 10+k in the bank just FEELS good, you know?
 
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