Where Am I Going? – Part II: My Plan of Attack

In my crusade to pay off all of my debt, I’m combining basic strategies I’ve learned from PF blogs, Dave Ramsey, and Suze Orman into a plan that will work for my situation.

I’ve already got a small emergency fund ($400) and I’m contributing $25 a month to it indefinitely. This is a pretty small fund, but I’m very healthy, my car is in good condition, and I rent. Murphy can certainly come knocking on anyone’s door, including mine, but these things make it pretty unlikely I’ll have an emergency that my insurance and a few hundred dollars can’t solve.

My debt snowball is currently at a solid $250 a month, but I’ve been able to get it above $300 most months through alternative income.

First on the endangered debts list is the AES student loan. Of the debts with an interest rate, this one is both the smallest amount and the highest rate. It’s also the company that I despise the most because they’ve been difficult to work with in the past. I’ll be thrilled to rid myself of this one.

Next up is the US Bank credit card. This card is currently at 1.9% interest, but the rate expires in September of 2008, so I want to eliminate it before then.

After that I’ll pay off The Bank of My Friends. This is a small debt that’s technically at 0% interest because I sort of borrowed it from myself. As soon as the credit card debt is gone, I’ll knock this out with my next snowball payment.

At this point my parents’ patience will finally be paid (literally) off. They’ve been incredibly nice about the money they lent me; they aren’t charging interest and they’re letting me stop payments until the credit card is eliminated. This is the debt I’ll feel the most satisfied about paying off.

During the course of paying down the previous three debts, I’ll have been paying the minimums on my car loan and the Chase credit card, which was an eighteen-months-same-as-cash LCD TV purchase. The Chase debt will get eliminated by the time I write my last check to The Bank of Mom & Dad, and the car loan will be gone within a month or two after that.

At this point, which is about a year and a half away, my debt snowball will be at least $600 a month and the only thing left will be my two monstrous student loans. The private loan has a higher variable interest rate, so I’ll attack it first and have it gone in about three or three and a half years (five years from now).

Depending on what my job/salary situation is at that time, I’ll probably back off on the debt repayment slightly so that I can split my focus a little. I’ll use half of the snowball, which will be upwards of $1000 at this point, to pay down the federal student loan. I’ll use the other half to save a larger emergency fund, contribute to my 401(k), save for a car, and save for a down payment on a home (in that order). There’s a long road ahead before I get to that point, however, so for right now I’m taking it one step at a time.

I’m planning on being debt free except for the federal student loan in five years, and debt free except for the mortgage in twelve years. I can practically feel the weight lifting off me already, and I know it will feel even better when I actually (finally!) get there.

This post is part of my Financial Revolution Series, which is my personal financial story. Each post gives a piece of the story, detailing how I got into debt and how I turned things around.

Next Time on TVG&M: …To Sum Up

Where Am I Going? – Part I: Goals

Here are the goals I have set up for myself:

Immediate term (Present – 2008)

• Pay off AES student loan by January 2008
• Increase Emergency Fund to $1000 by March 2008
• Pay off credit cards by March 2008
• Pay off The Bank of Friends by May 2008
• Increase net worth to -$93,000 by December 2008

Short term (2009 – 2010)

• Pay off The Bank of Mom & Dad by April 2009
• Pay off car loan by October 2009
• Increase net worth to -$60,000 by December of 2010

Mid term (2011 – 2013)

• Have no high-interest, unsecured debt by December of 2012
• Includes everything except federal student loan and mortgage
• Start contributing 15% to retirement investments by January 2013
• Increase net worth to -$30,000 by December 2013

Long term (2014 – 2022)

• Increase net worth to $0 by December of 2015
• Save $30,000 for house down payment by December 2016
• Pay off federal student loan by December 2019

I’ve always been a very goal-oriented person. That trait is how I got to law school, which is how I got so far into debt, and I plan on using the same trait to pull myself back out. The goals I’ve set up are both attainable and measurable, and they have the added bonus of being things that I want very badly. The charts in the sidebar are a huge motivator for me, and I’m looking forward to watching them go to the right, pixel by pixel.

Next time on TVG&M: My Plan of Attack

Where Am I Now? – Part III: The Odd Effects of Living on a Budget and Paying Down Debt

I knew that after such a serious change in attitude and behavior, my life would be significantly different. I've been living frugally and paying down debt for about three months now, and many of the changes I expected to occur have occurred.

• I definitely feel less stressed out when I think about money
• I no longer pay late fees or a bank fees
• My total debt has decreased
  

In addition to these, there have been a few oddities, things that seem almost counter intuitive but have happened just the same.

Money
The biggest effect has been that I have more money to buy what I need/want, and I feel no guilt when I buy frivolous things. When I started all of this, I fully expected the opposite effect: that without the use of my credit cards, I'd never be able to buy stuff I wanted, and if I did, I'd feel guilty about spending the money on stuff instead of paying down debt.

In actuality, the budget has been immensely helpful in letting me see the big picture of where all of my money is going. It has enabled me to make accurate decisions about spending, with all the facts in mind, so there's no worry or guilt. I’ve stopped randomly spending money on a bunch of stuff I didn't need or even want very much, I have a lot more money for things that I do want and need.

One specific example of this was a haircut. I’m not fashion or beauty conscious in any sense of the words. I’m a jeans and t-shirt girl (if the t-shirt has a comic book character or symbol on it, all the better), I rarely wear make-up, I don’t use product in my hair, etc. I do, however, need a haircut once in a while, but since I’m not into that kind of stuff, I don’t think about it very often, and pre-financial revolution I spent so much money on crap that I never felt like I had enough money for one. Talk about priorities out of whack. When I had my financial revolution, I hadn’t had a haircut in about eight months, and I needed one pretty badly. I put it in the budget, and voila, I got a haircut. It felt very strange to go to the salon knowing that I not only had enough money, but that the money was best spent there and not anywhere else.

Mail
Another odd effect is the amount of mail I get from credit card companies. I consolidated and/or paid off my credit cards, so the number of monthly bills went from 5 to 2, but I actually get more mail from my credit card companies now. Sometimes three or four offers a day. They miss me! They want me back! They'll give me all sorts of *special limited time only* offers if I'll start spending their money again. Consequently, my shredder has been making itself very useful lately.

Health
Before my financial revolution, for some reason I equated cheap food with unhealthy food, but that's not always the case. In season produce is some of the cheapest food around, and grocery shopping in general is WAY cheaper than eating out all the time, especially if you shop the sales and don't let food go to waste in your fridge. I’ve lost a few pounds in the past few months, and I feel a lot better about myself for it.

My Mother
My mom is a math-brained person. She’s worked in the tax and/or payroll field for over twenty years, and if I had a nickel for every time I’ve whined for help from her on financial matters, I’d be a millionaire. Lately, however, she’s been asking me for advice. I helped her set up a budget and she and my dad have done very well sticking to it. We’ve also had conversations about frugality, retirement savings, investing, credit card vs debit card vs cash usage, etc. Over the years she’s often complained that my sisters and I are all art-brained people like my dad and that she feels left out sometimes, so it’s been really neat to share this stuff with her, and I think it’s brought us closer.

These few odd things are only some of the positive effects I’ve noticed as a result of my financial revolution. This whole journey has been an eye-opener for me, and I’ve been so blessed through it that I often wonder why I spent so many years thinking that finances were too difficult to understand.

This post is part of my Financial Revolution Series, which is my personal financial story. Each post gives a piece of the story, detailing how I got into debt and how I turned things around.

Next Time on TVG&M: Goals

Where Am I Now? – Part II: Nuts and Bolts

At this point, I’m doing pretty well. I’ve gotten a grip on my debt, organized a budget, and pared it down to the essentials plus a few goodies. But how do I keep track of all of this stuff? What tools do I use to save and spend?

Glad you asked. Basically I use five tools: Microsoft Excel, a checking account, a savings account, cash, and a debit card.

Microsoft Excel
The most important tool I use is a system of three Excel workbooks. The first workbook is my budget, which keeps track of my monthly income and expenses, as well as my total debt and my weekly meal plan. The second workbook keeps track of irregular spending like car maintenance, magazine subscriptions, gifts, etc. The third and final workbook is a price book, which helps me lower my grocery bill by keeping track of prices.

Checking Account
I use the same checking account I’ve had for years, and the bank has been pretty good to me overall. They don’t charge a monthly fee, and their online bill pay is easy to use. They do charge $35 overdraft fees, which I used to get dinged by a lot, but that hasn’t happened since my initial financial revolution, so it doesn’t bother me anymore. It’s not an interest bearing account so I’ll probably switch to ING’s Orange Checking in the future, but my right now credit is not good, so I’m sticking with my brick and mortar national bank.

Savings Account
I recently opened a savings account with ING Direct, which is what I use to store my emergency fund and my irregular spending accounts. All of the money is in the same account, but I use my handy Excel spreadsheet system to track how much of it is for each purpose. Right now I’m working on beefing up my emergency fund, so all of the interest goes there.

Cash
I use cash for regular daily/weekly spending. This includes groceries, gas, and personal items such as soap and shampoo. I get paid every two weeks, so each pay period I get the budgeted amount for each category in cash from the ATM. My wallet has several compartments, so each category has its own compartment. This forces me to watch my spending, because when the money is gone I have to wait until the next pay period to get more.

Debit Card
I use a debit card for irregular spending. This is the money that I’ve saved and tracked in the second Excel workbook. Whenever I spend money out of those categories, I use my debit card. At the end of the month I transfer the amount I saved for all of the categories that month from my checking to my savings, minus any money I spent out of those categories. The only time I alter this is if I buy something expensive (like a plane ticket) that costs more than the amount I saved for everything that month, in which case I would need to transfer from savings to checking to cover the difference.

And that’s it. Those five things keep me in tip top financial shape month after month. They’re so easy to use, sometimes I wonder why I didn’t start doing all of this sooner!

This post is part of my Financial Revolution Series, which is my personal financial story. Each post gives a piece of the story, detailing how I got into debt and how I turned things around.

Next time on TVG&M: The Odd Effects of Living on a Budget and Paying Down Debt

Blog Carnivals: A Few Amusing Stories and Much More

I plan on continuing my one-a-weekday morning posting schedule, but I'll be adding the occasional afternoon or evening post (like this one) whenever I have something extra to say.

A couple of carnivals held this morning included posts from right here at TV Girl and Money. A big THANK YOU goes out to the host blogs!

The 33rd Carnival of Money Stories was held at Moolanomy this morning, and my post on student loan consolidation was included.

Posts included in this carnival that I especially liked:

• Don't Get Me Anything = You Better Get Me a Gift? @ A Penny Closer - I detest the stereotype that women always mean the opposite of what they say and/or are always playing mind games. Some of us say what we mean and mean what we say. Why is that so hard to believe?
  
• Our Journey to Financial Freedom #5 - Setting Goals, Developing Plans and Tracking Progress @ My Wealth Builder - I have a lot of debt, so I probably won't be retiring in my forties, but I did some calculations this morning, and it's not out of the realm of possibility for me to retire in my fifties. That made me smile.
  
• What's a Dollar? @ One Away - An amusing conversation between two friends about the true value of a dollar.
  

The 99th Festival of Frugality was also held this morning, over at Paid Twice, and my Mexican Rice Dish Recipe was included.

• Adoption on the Cheap @ GRACEful Retirement - If I ever have kids I will probably adopt, and it's good to know that it doesn't have to break the bank.
  
• Cheap vs. Frugality Lessons from "Friends" @ FILAM Personal Finance - Carol, are you reading this? Hilarious lesson from a hilarious show. I'm all for leaving with the shampoo and soap they give you, but taking the light bulbs out of the lamps and batteries out of the remotes? OMG. Cheap intervention needed ASAP.
  
• I want it. You buy it. Any questions? @ Brip Blap - The comments are especially amusing as Brip Blap's readers think up t-shirt slogans.
  
• Credit Cards: Impressive Sign of an Idiot @ The Wastrel Show - Well put. I'm working my way out of credit card debt, and once I'm out I will never go back. I don't want to do business with people who pay their employees to think up ways to screw me over.
  

If you're a new reader who came over from one of these carnivals, welcome! I'm a very new blogger so it wouldn't take long to read through the whole archive, but if you just want the basics, check out the about section. If you like what you read, please subscribe via feed or email. Thanks!