This update is a little late – but at least it’s here, right? Here’s the big news: I own the title to my 2007 Yaris! That’s right – I own my Yaris now! I’ve had the paperwork for a few weeks. I think I officially paid off my car April 15th, I believe. I couldn’t be happier. Well, I’d be happier if that was the end of my debt; alas, it is not. So I continue onward.
I had a small set-back when my back acted up and I had to deplete my Emergency Fund (EF) to pay for the chiropractor appointments. But now my car is paid off and my EF is fully funded again. (Insert sigh of relief). My attention will now go to the smaller of my 2 student loans. I’m guessing this part is going to take some time.
I’m trying to get aggressive with it so that it will take less time. But this whole discipline thing with money is rough. Changing habits and lifestyles is a hard thing to do. Especially when I KNOW there is money in the bank and I should eat my groceries but I really want to go out to eat with my friends. I’m not saying it can’t be done, cause it can. And I’ve gotten better; but there’s room for improvement.
My goal is to have this loan paid off in one year. I also will be saving up for a trip to Europe planned for 2013, so that will slow it down a bit. But I think it’s a reasonable and aggressive goal.
It’s finally happened. After months of hard work and determination, I have finally paid off my Credit Card! It was my smallest debt item with a balance of $750. My budget was still not perfect and it was hard getting used to not using my card, but I managed to work through the pain. The night I cut my card up was a little un-nerving, but with $1000 in my savings I felt pretty confident.
I did have to tap into my emergency fund twice in the past few months. Once, because I parked illegally and was towed (yes, my own fault – I know), and the other was to pay for some chiropractic care I desperately needed. So today I filled up my emergency fund and paid off my credit card, and I still have money to live on for the month!
I am still working with my budget, I think there are tweaks that need to be made here and there; but over all, my spending habits have plummeted. I hear myself saying, “Oh, I don’t need to buy that latte, I have coffee and creamer at home that’s just as good!” Or, “That’s not on your list, Emily, put that back.” These things would have never run through my mind before, but now I’m so conscience of what I’m buying and where my money is going. The other night I went out to a nice dinner and didn’t regret it one bit because I had planned for it. I anticipated spending that kind of money, and I didn’t have to feel bad about it the next day. It’s such an awesome feeling! So I’m ready to tackle a bigger balance and keep winning!
Next stop: Car payment. I’m guessing that since it’s scheduled to be paid off in June of 2012, it won’t take too long to finish it off early since now I’ll be paying about double each car payment.
This past paycheck I met my first financial goal! I got my baby emergency fund totally funded and was even able to give the extra to start baby step 2! I have about $24,000 in debt 😦 Car payments, credit card (which I chopped up a few weeks ago!) and two student loans. I’ve done the math and if I can stay on track then I should be able to be out of debt and out of baby step two in a little under 2 years (about 20 months). It’s gonna take some serious discipline but I think I’ve got it in me.
Now if something happens to me, like my car breaks down or something equally as terrible, I have an emergency fund to cover it so I don’t need to open a credit card. And in the event that something does happen and I tap into my emergency fund, I stop over paying on my bills and refill the fun STAT! It’s a good system. I don’t think that I’ll be truly relieved until I get to fully fund that account (3-6 months of expenses) but I have to go one step at a time. Dave’s system makes sense to me, and let’s face it, it’s worked for millions of people!
I’ll update again as I pay off these debts. It’s a game of winning, and I’m pretty competitive. I love that Dave’s system is so simple and easy to do once you buckle down and decide that it’s time to make some changes and stick to them.
Let’s get this bad boy rolling. I mentioned in a recent post that I need to get myself on track financially. Well, I’m starting now. I could only tell myself I needed to make a real budget for so long. It’s time to get off my butt and do it. As in, not just make one work on paper but make it work in real life. A friend of mine, Lauren, had really tried to help me see how to do it, but try as she might (and she really did do a lot) I just never really committed myself to do it. We sat there and worked on a google document together and she helped walk me through things that needed to be accounted for but to me it was just numbers and too overwhelming for me to be able to have the discipline to only spend $100 on groceries and then keep ALL THE RECEIPTS! I didn’t even try. I mean, I just tried to spend less. I knew it was important but didn’t have the goal in mind. Her system works for her, and she’s great at being disciplined with it, but I couldn’t do it.
Enter, Dave Ramsey.
Maybe you’ve heard of him, maybe not – either way he’s changed the way I view my money. He has written a few books, but the one I’m reading is called “My Total Money Makeover”. He spends the first two (rather boring but educational) chapters debunking generally accepted ‘truths’ about money. He helps see the flaws in trying to keep up with the Jones’s, cause in fact, they are broke! This is a hard part for me since I like to have the freedom to buy the nice things when I want them. Shopping whenever I want, or eating out when everyone else does helps my self-confidence. It’s stupid, but it’s the truth. After he debunks these ideas he introduces the first baby step: building an emergency fund.
In this step your goal is to get $1000 into a savings as fast as possible. This savings should be completely liquid – as in you shouldn’t get a penalty to tapping into. Either cash or even a mutual fund. To get there, a budget must be made. This is the step I’m on. I’m close and should finish it up with my next paycheck. I’m actually pretty excited about it. To have an account like this will be really helpful so I don’t have to panic if an emergency pops up. Now since I kind of had a head start on this fund I didn’t really have to budget too much to get this step done. So while I’m almost finished with this step, I’m just starting to budget. With his book I also got a wallet type thing that came with envelopes. These envelopes are for cash. So when I say I only get $10 for coffee for this pay period, I mean it. I can’t get anymore coffee if I’m out of cash! Same for groceries, eating out, gifts and my iphone fund 😉 (I’m getting an iphone – it’s happening…hopefully sooner rather than later). So you catch my drift. This way instead of having all this cash in my account I can tap into with my debit card now I have clear-cut boundaries in envelopes and once I’m out of cash for that category – I’m out!
The next baby step – the one I’m stoked about – is the debt snowball. In this step you get out of all your debt (excluding your home mortgage – lucky for me, I don’t have one of those!). The idea is simple. It just takes some serious elbow grease, if you will. Buckling down and getting intense. First you have to get current in all your debt, check. Then list all your debts from smallest balance to biggest, check. Now that you’re paying your minimum payments on all your debt you can attack that smallest debt you have. All that extra money I found to put into my $1000 savings account I apply to my smallest debt payments. And now that I have a nice budget going I have actually found “Extra Money”. So instead of paying $20 on my credit card payment, I can do more like $300 a month on it. So I do that for a few months and I’m one debt down! Then instead of saying, ok that’s now and extra $300 I can spend I will apply that to my next debt payment. For me that’s my car payment. Now instead of paying only $350/mo I can pay $650/mo! I’ll be done with that debt in no time! And then the next debt I add $650 to my minimum payment I’m used to paying and BOOM! We’ve got a snowball effect! Dave says it should take 18-20 months for even the worst case scenario people to get out of debt (other than their house) depending on their intensity. So since this is where I’m at, I’ll stop here and then when I get to the 3rd baby step we’ll proceed on. But don’t worry, I’ll keep you posted on my success in these first two steps!