Paying Off Debt… The Beginning
Many times people get the idea that they want to pay off debt, but they have no idea where to start! Getting out of debt and saving some dough has been on my mind a lot lately. We are actually really lucky and don’t have much debt. We have my hubby’s car and our mortgage. But money can be a stressful thing. See the hubby is self-employed and his income changes month to month, but luckily he usually makes good money. I, on the other hand, have a two incomes: my stable income working at a local health department and my non-stable blog income and I will be going part time after the baby comes.
We are pretty good with our money, pay cash for most things, and try to save a lot since the hubby is self-employed. But of course right when we felt like we had a good amount of savings crazy things just had to happen. During our renovation we found out that all of our electrical needed to be replaced, making a $3000 job into about a $8000 job and then our taxes were due which ended up costing us double what we thought they were going to be. Luckily, the hubs has been good with our money and we had this in savings.. But this was basically all our savings. Not cool when you are about to have a baby in a few short months and go on unpaid maternity leave!
Creating and sticking to an actual budget!
You’ve probably heard of Dave Ramsey. I started using his free budget took called Every Dollar. Every day I log on and track all of our income (which is varies a lot) and our spending. We have had a “budget” in the past, but it was more like rough guess and we didn’t track every single dollar. So now I plan to track all of our incoming and outgoing money. This has been wonderful for me. To be honest I’ve never even really looked at our bank accounts or our budget. I occasionally ask the hubs how much we have and we discuss big purchases. Otherwise my hands were out of it, thinking this created less stress for me. Yeah not really.
Creating a plan.
First up… Start saving ASAP. Pretty much whatever we don’t spend on necessities goes right into savings. We live decently frugal and have since we got married when I was in grad school and we both weren’t making very much. But within the last 6 months we have been a little more relaxed. So we are trying to get back on track.
Dave Ramsey’s recommended baby steps is to:
- Have a $1000 emergency
- Pay off debt smallest to largest(aka the debt snowball) as fast as possible
- Finish your emergency fund by saving 3-6 months of your expenses.
We have already saved our $1000 emergency fund, so our next step is to save 2-3 months of expenses, and then start really focusing on paying off our debt. Yes yes this is out of order… But that is because our variable income requires us to have a lot of savings (for taxes and such).
How we plan to do that? Living off just my hubby’s income and saving my full time (soon to be part-time) and blogging income, really watching our spending, selling some things, and sticking to the budget!
Next, pay off debt. Since we don’t have that much debt, my main goal is to pay off the car. I hate having a car payment and we really need to start saving for a new to us vehicle for me which we plan to purchase in 4-5 years. My hubby has been really good about paying between $75-100 extra on the payment each month, but I want to buckle down and pay this off in about a year or so.
Lastly, save the rest of the 3-6 months of expenses. Dave may not totally approve of our way of doing things since he says multiple times in his book that you have to do the baby steps the way they are outlined, but when you have upcoming medical expenses and you are going on unpaid leave the hubby and I felt it was wise to increase our savings first.
Stay tuned because I will give a debt update periodically!
Have you wanted to pay off debt? I would love to hear about it!
I, too, am working on paying off debt. I recently finished Dave Ramsey’s Financial Peace University class, which really helped me get on track. I love having a monthly budget to allow me to tell my money where it’s going to go. I feel much more in control that way. And, of course, having my emergency fund helps me relax and not worry about all of the “what if” situations that could arise. I have been able to pay off A LOT of student loan debt in just the last few months, and am on track to have my student loans completely paid off by the end of May (only 2 years after graduating). My car payment should be paid off by August (2 years instead of the full 5-year term). It’s encouraging to hear about others who use similar methods and have the same attitude about becoming debt-free. Best of luck to you and your husband in this journey! -Jessie