Saturday, March 26, 2011

Cinching the belt

I mentioned in a previous post that my family has gone on a debt diet. Actually, I prefer to think of it not as a diet, but a lifestyle, because the goal is permanence and the word diet seems temporary in nature. However, given my adoration of alliteration (did you catch that?), I will refer to it as the debt diet.

Almost two months ago, my neighbor and friend, Angie, told me that there was a book I had to read. In the past months and over the course of a few long walks with our boys, she and I had confided in one another about the challenges and stress of our finances....feeling like we're living paycheck to paycheck even though we make decent money, worrying what would happen if something catastrophic (or even relatively minor for that manner) struck that would impact our ability to work, stressing about our retirement, just generally wondering what we could do to get ourselves into a better place financially.

Prior to this conversation, I had set a goal for 2011: to reduce our family's debt. I had previously been focusing on this, but while I was working hard at it, I couldn't for the life of me figure out why I seemed to be spinning my wheels. The credit card was never used for recreation or luxuries. All of our credit debt was basically from situations where we needed money right at that very moment for something essential: dental work, vet bill, new roof (CHA CHING!). There was not a whole lot of fun in our budget, so I couldn't figure out where to trim the fat. We were already quite lean. Nonetheless, I worked furiously to pay extra on our bills. It was getting me nowhere.

You may by now be wondering, why does she keep saying 'I'? Well, the finances are my gig. I'm in charge of the bills in the house. No worries, I still have a husband.

So anyway, Angie rushes out of her house one Friday when she sees me walking by and thrust this book at me, The Total Money Makeover (why is there no underline feature for blogger??? Irritating) by Dave Ramsey. She tells me that I need to She knows how to solve her debt issues. She has a plan. It's not that hard. The book makes it simple.

I read it right away (I can take a hint). I blew through ninety pages that night (usually I get through about six pages of reading before I pass out) and skimmed the remaining pages to have an idea of what was to come. My husband came in later that night and I basically tackled him. I know how to solve our debt issues. I have a plan. It's not that hard. The book makes it simple. He needs to

Mr. Jaguar and I had a long talk that night and he got right on board. We took the second half of February to get everything in order so that we could get this debt diet into full swing come March. The first two goals were to create a monthly budget and make a list of our debt (I made a poster. What up, overachievers?) The next goal was to save $1,000 as a mini-emergency fund. By the start of March, we had $283.44 set aside and got started on month #1 of the budget.

March is coming to a close in just a few days and I'm proud to say that our emergency fund is complete and our first and smallest debt, Kohl's, is paid off. Beyond that, it looks as though we will save about an additional $400 towards our second smallest debt.

This would be a good spot to mention that, unlike many other financial advisors, Dave Ramsey recommends paying off your debt from the smallest amount to the largest, rather than paying off debts with the highest interest first. This allows you, as debts are paid off, to take what you would have paid to those now satisfied debts and put it towards your next debt more quickly. He calls it the snowball effect. My husband and I made a couple minor tweaks to this (we moved our two credit card debts up a smidgen on the priority list), but for the most part we are sticking with Dave.

Back to what I was saying about saving money, I am shocked that we were able to save that much money. Shocked. But we did it. And I can't wait to do it again next month. Are you wondering how we did it, especially when we were already on a super lean budget? More on that later.....


Jennifer said...

I AM wondering how you did it. We don't have any debt, but we also don't have any savings, and we can't figure out how to trim our expenses. Maybe I'll have to track down this book.

Kelly said...

...patiently waiting for Part II.

P.S. I LOVE that you're blogging again!! :)