July 2013

“A journey of a thousand miles begins with a single step.” ~ Lao-tzu

July is one of our leaner months. We get paid weekly so some months we have four paychecks and some months, five. July has four. Our only nonrecurring expense is my husband’s niece and nephew’s birthday party at the end of the month.

Previously we would have spent at least $40-50 on each of them. This year our budget is $25 each. This is hard for us as the birthday extravaganza is a little overwhelming. My sister-in-law is a caterer and throws a huge bash with at least 80-100 people and the piles of gifts are a bit intimidating. The only consolation is the children receive so many gifts they probable don’t even remember who gave them what.

One of my challenges this month is the food budget. I want to reduce our weekly allotment from $150 to $140. This doesn’t seem like much but it could make or break the budget. I will probably have to put some items back at checkout the first few weeks. We also reduced how much we set aside for the baby. I usually spend $200 a month on baby items, not including baby food and diapers. I reduced this to $150. He is finally slowing down in his growth so hopefully we won’t need to buy as much clothing as previously.

Unless we can scrounge up some extra income, we will have $430 to pay toward our smaller car loan. With our minimum payments on our other two debts, this will bring our debt snowball to $37940. $430 is not very much but I know we have some bigger income months coming up so my hope is we will gain momentum by the end of the year.

So our debt snowball at the end of June was:

Car loan 1	(4,136.91)
Car loan 2	(6,721.76)
Sallie Mae	(27,799.08)
Total	(38,657.75)

 

And at the end of July as it stands it will be:

 

Car loan 1	(3,713.05)
Car loan 2	(6,470.45)
Sallie Mae	(27,756.61)
Total	(37,940.11)

 

 

 

The Budget

One of the very first steps we had to take on this journey was to create a budget. I am the nerd in the family so it was left to me to build a zero based budget every month. I love spread sheets, so I went to work creating our plan.
In the past, we would agree on the budget but things would come up or we would want to go out with friends and the budget would suffer. The other problem was I created a very complicated budget which my husband hated to deal with (poor guy would get this glazed over look in his eyes at every budget meeting).

This time around I created a simplified budget sheet for our future meetings. We are going to treat the budget as a contract and adhere to it. IF a true emergency comes up, we will need to have another meeting and agree to any changes.

The other commitment we will need to make is every extra dollar we can find needs to go towards the debt. In the past, we would sell items on EBay or get an unexpected bonus and use that extra cash to splurge. Right now as the budget stands, we are going to average $1220 dollars a month towards our debt through the end of the year. This is still not enough to reach our goal. We will need to find other ways to make money besides our day jobs if we want to kick this debt in nineteen months.

I started using Dave Ramsey’s Envelope System and it has been a great help in the areas I have the hardest time with. Groceries are always a challenge. My husband and I are very health conscious and eating healthy is more expensive than if I just bought Ramen Noodles and Kraft Macaroni and Cheese. I am hoping by using the envelope system and a shopping list we will be able to save at least forty dollars a month on groceries, hopefully more.

Our biggest obstacle is ourselves. Sticking to a budget requires self control and communication. As long as we can stay on target, we should have our smaller car loan paid off in December 2013. That will leave our larger car loan and our Sallie Mae Student loan. It will just take perseverance and a bit of passion but I know we can do this.

Back to Basics

For those of you who don’t know of Dave Ramsey and his plan, I will cover the basics. If you want to check out Dave, his radio show, and all of his great products you can find him at DaveRamsey.com. I highly recommend his book The Total Money Makeover
as this is the best place to start your own money makeover. Before you can run with your money, you need to learn how to walk again. Dave has a great, easy to remember guide called the baby steps.

You need to learn to walk before you can run.

Listed below are the seven baby steps:

Baby Step 1: Save $1000 for a mini emergency fund

Baby Step 2: List your debts smallest to largest and pay off as fast as you can. This is called the Debt Snowball.

Baby Step 3: Save a fully funded emergency fund of 3-6 months of expenses. You could also start saving towards a down payment on a house at this point as well.

Baby Step 4: Save 15% of your income towards retirement.

Baby Step 5: If you have kids, start saving for college.

Baby Step 6: Throw every extra dollar at the mortgage and get your home paid off.

Baby Step 7: You’ve reached the finish line! Now it’s time to build your wealth, give, and spend all that extra money you will have because you are out of debt with a paid for house!

We are currently in baby step 2 and paying down our debt. As of this date we have just shy of 40k in debt to pay off consisting of two car loans and about 28k in student loans. Our goal is to knock this out in 19 months. This is going to be one of the hardest things we have ever done but it will be worth it. Our future as a family has got to become our priority rather than the impulse for instant gratification. We will share our journey and all of our trials and tribulations and hopefully our journey will inspire you to start your own.

• http://www.daveramsey.com – Get REAL debt help: Dave Ramsey’s Total Money Makeover Plan