Paying Down Debt – September 2015

It was almost exactly two years ago when Randy and I took our first Financial Peace University class.  We entered into that room as a hopeless married couple who was $82,000 in debt {and that number doesn’t even include our mortgage!}.  Two years later, we have paid off almost half of those awful student loans.

Click here to see our new balance.

I was so so hoping that this would have been the month we hit the halfway mark, but we didn’t quite make it.  We should, hopefully, get to that point next month.  I’m still proud to say that we were able to pay off $2,637 in September.   

Here is what we did this month to go above and beyond our regular payments:

  • I had an above average month in profits from selling Bondbons {if you placed an order, thank you!}
  • I supervised a detention on Saturday morning {no, it’s not like the Breakfast Club}
  • Randy did a few side jobs of auto and house repair
  • Our gas bill was $60 less than usual {every little bit helps}
  • We {kind of} refinanced on our house {it’s a long story . . .}, and we were able to use money we did not have to pay for the month and apply it to the debt
  • There are several other odd jobs we did {such as line judging, teaching cake pop classes supervising the ACT, and being a home bound teacher}, but we haven’t been paid for them yet.  An update on those next month.

My sweet husband has worked like a dog this month, but unfortunately his construction business has not been profitable for us due to many factors out of his control. Luckily he has a steady income with teaching and the construction is just supplemental. This has obviously been quite frustrating to us, but I have faith that October will be a better month.

I want to mention that if we just worked our teaching jobs, we would be able to pay off about $1,000 a month.  That’s not good enough. To pay our debt off faster, we have to do some major overtime. We have to be intentional.  We have to cut a lot of luxuries out of our life.  We have to watch every penny.

I don’t share what we do and how we pay extra to brag.  I share this each month to show the masses that this is possible.  Hopefully this is an encouragement and inspiration.  If you look for opportunities, are willing to work, and live below your means, you will be surprised at what you’re able to accomplish.  Between teaching full time, being a mom, a wife, a small business owner, a volunteer, and working extra jobs, I get about 5 hours of sleep a night.

I love my sleep, but right now, I love seeing the balance of our debt go down more.

Stay tuned for our next update on November 1st.

Love,

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Paying Down Debt – August 2015

August is hard, friends.

That’s when school starts back up, and since everyone in our house is either a teacher or a student, August means we have to readjust to a life of packing lunches, lesson plans, homework, carpooling, grading, learning new names, and actually showering on a regular basis (I speak the truth, people).  All that sucks up a majority of our time, which doesn’t allow for much money-making to throw at our debt (or for me to blog, which is why it’s been awhile, sorry).

Our required minimum payment for the student loans is $400/month.  With what we budget, we typically pay down at least $1,000/month.  In the midst of going back to school, this month we were still able to pay off:

$2,541.  

You can check out our current balance here.

Not bad.  I will be honest, though.  Even though that is a lot, it’s hard to see those numbers compared to last month.  Those numbers are also not going to get us to our goal to be debt free by January 1, 2017.  That means we’re going to have to kill it going forward.

Here is what we did in August to pay down our debt:

  • I made a decent profit through my Bondbons business.
  • My husband put in many hours with his Promise Painting and Contracting Business.
  • I was paid for a few cake pop classes I taught at Sweet! in July.
  • We discovered an issue with our home security system and received a credit.
  • I was paid for working on a curriculum committee through my school district over the summer.
  • We budgeted earlier in the summer to visit my parents in Ohio.  We ended up spending way less than what we allotted, so the leftover money went toward the debt.

I also wanted to touch on our compound interest.  It’s the devil when it’s working against you. When we got serious about paying off our student loans nearly two years ago, we were paying $10.93 just in interest PER DAY.  Today, our daily interest is $6.61.  In two years that is a difference of:

$4.30 PER DAY

$129.60 PER MONTH

$1,576.80 PER YEAR

I delight in the fact that less and less of our hard-earned money is going toward interest and more and more is paying down that principal.

Stay tuned for our next update on October 1st.

Love,

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Paying Down Debt – July 2015

You guys,

I’m pretty pumped.  This July was probably the most productive month we’ve had since we’ve gotten intense about paying off our debt.  On average, we typically pay down about $1,000 a month, but this month we killed it.

We paid off $4,561.

Whoa.

You can check out our debt snowball progress here.

We also finally got our balance below $50,000 for the first time ever.  If you haven’t read our full debt story yet, $50,000 was Randy’s original student loan amount when we married in 2004.  After denial + accruing interest {that grew an additional $26,000} it took us 11 years to get our debt back down to that original amount.

ELEVEN YEARS.

Isn’t that dumb?

If we would have tackled our debt back then, we wouldn’t be in this situation.  All we can do now is push forward so we don’t have this regret in the future.

So . . . how did we have such success this month?  We made some smart moves and worked our tails off.  Fortunately we are both teachers and have extra time this summer to do so.  I usually catch up on my sleep during the summer.  Not this year.

Here is what we did to put such a huge dent in our debt this month:

  • I taught summer school for a month.
  • My husband put in about 70+ hours a week with his Promise Painting & Contracting business.
  • We both supervised the ACT test on a Saturday morning.
  • We were able to lower our monthly home security bill {money saved applied to debt}.
  • Our kids didn’t have piano lessons for the month {money saved applied to debt}.
  • I changed one of my checking accounts.  This account grew interest, but I had to keep a minimum balance of $500.  With the interest rate now only 0.01%, that means it only grew about one cent/month.  So . . . I had $500 just sitting there to gain $0.12/year? That makes zero sense.  I called the bank and switched to a non-interest earning account and put that $500 toward the debt.
  • Randy fixed a couple of cars for people {he used to be a certified mechanic}.
  • We had a garage sale.
  • I taught several cake pop classes. 
  • I was fortunate to get a lot orders for my Bondbons business—including a large wedding this month.

Pretty monogrammed bondbons for a July wedding

Pretty monogrammed bondbons for a July wedding

Phew.  There were some nights I was up until 2:00 AM dipping bondbons in chocolate with tears in my eyes—wanting to give up.  Then I see results like that and it reminds me that it will all be worth it.

Stay tuned for September 1st for our next update.

Love,

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Our Debt-Free Journey

Money disputes is one of the leading causes for divorce.  My husband and I have definitely had our fair share of arguments in this category.  I have always been a penny-pincher, while Randy is more of a free spirit.

When we married in 2004, we each contributed student loan debt.  I brought along $15,000 and Randy had about $50,000.  Randy was previously married with three daughters {you can read our family background here}. Factor in an enormous amount of child support with two measly teacher salaries = we were barely making it.   I was good with money, but I had never done a true budget.  Plus, there wasn’t much to budget anyway. I remember one instance when we only had $0.10 in our bank account and the next paycheck wasn’t coming for three more days.

The $65,000 student loan debt seemed overwhelming.  So, we did what any overwhelmed person does.  We slept in a “comfortable” bed of denial.  It was something we tried not to think about . . . it would be paid off someday . . . Plus, we even saw a financial adviser who encouraged us not to worry about our student loans and mortgage because those were “good debts” to have.  This seemed to give us permission to stay in denial.

Fast forward a couple years.  Randy and I each went back to school to earn a master’s degree. We decided to defer his loans so we could pay for his graduate school in cash. I continued paying the minimum payment on my loans, which was only $100/month.  That seemed doable.

Fast forward a few more years.  Randy finished graduate school {yay!}, which meant the time had come to start paying on the old student loans {ew!}.  I honestly had not looked up the balance one single time since the deferment.  There are no words to describe the pit in my stomach when I opened up that statement.

$76,000.

$26,000 more than the original balance. That’s what happens when interest accrues daily at 5.25%.  The $26,000 wasn’t from buying a car or a lavish vacation.  It was just stupid interest building while we didn’t pay a dime on the loans.

Fast forward another year.  We were still fairly in denial about the debt.  We faithfully paid the minimum payment {which was $399.06/month!}, but again, I never checked the balance.  After twelve months, we finally got a statement in the mail.  A year’s worth of payments was $4,788.72, so I figured I’d see a decent reduction to the balance.

Nope.

New balance = $75,202 after one year.

Seriously!?!?!  Where was all our money going?

INTEREST.

Let’s do the math:

  • The 5.25% interest rate on a $76,000 loan is $3,990/year.
  • That’s $332.50/month.
  • Our minimum payment was $399.06/month.
  • That means we were only throwing $66.56/month to the principle while the other $332.50 was going to the flipping interest.

After a year of paying $4,788.72, we only paid down $798.72.

We felt completely hopeless.  At this rate, it was going to take us over 30 years to pay off this debt {not exaggerating}.  Not to mention I still had over $7,000 left on my student loans—making our total debt over $82,000 {NOT including our home}.  It seemed like we were just going to be stuck paying $400/month forever.  Do you know how much money that will equal after 30 years?

$144,000—almost three times the amount of the original loan of $50,000.

Um. No thanks.

Once again, we went back into denial mode.  It was better not to think of it—if I did, I would start to cry . . . or start licking Nutella straight out of the jar.  {I’m an ugly crier and Nutella is delicious, so . . . I usually opt for the latter.}

During the summer of 2013, Randy and I had a mature disagreement about finances {read: knock-down-drag-out screaming match}. At the end of the “discussion,” he suggested we take the Financial Peace University class by Dave Ramsey {aka FPU}.  I had heard about this, but knew very little.  At this point, it seemed like the class was our last hope. When looking for a class in the area, to our surprise we found out our own church was offering it.  Coincidence? We signed up and started that September.

Y’all.  Financial Peace University changed our lives and our marriage.

During the first session, Dave Ramsey explained the 7 Baby Steps.  The concept honestly sounded scary at first because it meant changing our “comfortable” habits, no more debt-denial, and completely reallocating our money {in some radical ways}.  After crunching the numbers, doing it “Dave’s way” meant we could pay off our $82,000 in student loans in just FIVE YEARS.

Not 30.

FIVE.

Regarding money, for the first time in our marriage we were in agreement and had hope. There was a glimmer of light at the end of that long, dark tunnel.

In just five months we paid off all my student loans.  At the previous rate we were going, that would have taken us six years!

We were able to do this by simply reallocating our money.

We:

  • pulled out money from our savings account to pay it down
  • stopped saving for our kids’ college
  • reduced our retirement contributions
  • got cheaper car insurance
  • started paying cash for groceries
  • rarely dined out or shopped for new clothes
  • started making my own laundry detergent and other cleaners.
  • You guys, we even cut the cable {I thought my sports-loving husband would willingly have himself castrated before ever giving up ESPN—so you know he meant business}

After paying off my loans, we started throwing all that extra money toward Randy’s.  Even though the debt snowball helped us gain major momentum, we still felt a heavy burden. There is a reason the Bible says, “The borrower is slave to the lender” (Proverbs 22:7). Our financial adviser was wrong.  There is NO such thing as “good debt.”  I don’t care if we get a tax exemption or not.

We needed to get this paid off ASAP.  The only way this was possible was to start making more money and get even more intense.  In addition to teaching, I started supervising more detentions and ACT tests on Saturday mornings; Randy gave plasma and worked on friends’ cars.  Then in January of 2014, I launched my teeny tiny cake pop business called Bondbons, and Randy started Promise Painting & Contracting, LLC in February of 2015. Just about every bit of our net income from our businesses goes to the student loans.

To everyone who has ever purchased a bondbon or hired my husband to paint—you are helping us chip away at these chains that have us in financial bondage—for that, we are eternally grateful.

By the end of 2014, we got the debt down to $60,000 {$22,000 in just 16 months}.  I looked at Randy and said, “I want that to be $30,000 by the end of 2015 and $0 by the end of 2016,” and he said, “Okay.  I will work even harder.”

Mathematically, it’s not possible at our current rate, but I have faith we will meet this goal.

When we first started this journey, I had an inner battle.  Before FPU I had been convicted about giving.  I’ve tithed since I was a little girl {and we still faithfully tithe now}, but I wanted to do more in terms of both time and money.  Something I struggled with is the fact that I am putting forth so much time, energy, and money toward this debt—it’s depleting me of my resources.

Debt is paralyzing.  It keeps you from investing in a better life for you and your family.  It hinders you from being generous—outrageously generous.  I want to volunteer more at my church, serve the homeless, and go on missions trips. My ultimate goal is to live on half my income someday and give the other half away.

Debt takes all that away from me.  Sure, I could do a little of those here and there, but if I got over this debt-hurdle in just a few short years, just think of all the freedom I would gain for the rest of my life!  I would have my time, energy, and money back to give above and beyond in the name of Jesus.

Let’s do a little math again.

Above I explained that if we paid just the minimum payment of $400/month toward the student loan debt, it would take us 30 years and we’d end up paying $144,000.  

What if we could take that $400/month and invest it instead?  Over the course of 30 years, $400/month in a growth stock mutual fund at 8% compound interest would turn into $547,784—almost four times in the opposite direction.

Getting out of debt and following Dave Ramsey’s 7 Baby Steps isn’t about becoming wealthy and living a life of leisure.  Being debt-free means my kids can go to college and we can retire.  Being debt-free means we can explore God’s creation {travel} and work less.  Most importantly, being debt-free means we can give generously.  We can feed and clothe the homeless, build wells, and care for orphans above and beyond what we could ever do now.

That is why Randy and I each put in 70-80 hour work weeks and still drive old cars.  That is why I roll cake balls until my hands feel like they are stricken with arthritis and why I get up early on Saturday mornings.  That is why I run on five hours of sleep a night, wear old clothes, and eat Ramen noodles like a poor college student.  That is why I blog and share not only this story but all the everythings with you.

This intense debt-free journey, too, shall pass.

Click here to see our current progress.

Love,

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Christmas is Not a Surprise

Hey, you.  I have a little secret to share.

Christmas was on December 25th this past year.

Word on the street is . . . it will be on December 25th this year, and the next, and the next, and the next  . . .

You know what else?  Your kids’ birthdays are on the same day each year. Valentine’s Day is always February 14th, Mother’s Day is always in May, and Father’s Day is always in June.

These events should not be surprises where you are suddenly scrambling for money to buy a gift for your loved ones—or worse—you go into debt because you didn’t plan ahead.

As I type this, it is June 25th—Christmas is exactly six months away.  You have roughly 183 days to plan for the biggest holiday of the year.  You should also plan for every other occasion for which you might purchase a gift.  Never again be that person who says, “Things are just too tight around this time of year . . .”  I was that person who used to utter such words—who didn’t budget for gifts and had to dig under the couch cushions come December.  That way of living is stressful and zero fun.  I finally got smart and figured out how to never worry about any gift-giving throughout the entire year.

Here is my super easy guide to help you have a stress-free gift-giving experience.

  1. MAKE A LIST

Sit down and make a list of every person you anticipate giving a gift to for any occasion from January 1st-December 31st—even if it’s just a small $5 gift you give to some of your co-workers.  Those add up and must be included.

Here’s a sample list for you:

  • Birthdays and Christmas {see the next list}
  • Your wedding anniversary
  • Parents’ anniversary
  • Birthday parties your kids will attend {I estimate each of my kids attend seven a year}
  • Weddings {I estimate we attend three weddings a year}
  • Bridal showers
  • Baby showers
  • Engagement parties
  • Valentine’s Day
  • Easter
  • Teacher Appreciation Day
  • Nurse’s Day
  • Administrative Assistant’s Day
  • Graduation parties {I estimate at least five a year for us}
  • Mother’s Day
  • Father’s Day
  • Grandparent’s Day
  • Boss’s Day
  • Sweetest Day {do people really observe this one?}
  • Halloween
  • Thanksgiving

Make a separate list of every single person you typically buy a birthday and/or Christmas present for.  Here’s another list to spark some ideas for you:

  • Spouse
  • Kids
  • Parents
  • Grandparents
  • Nieces/Nephews
  • Aunts/Uncles
  • Siblings
  • Cousins
  • Co-workers
  • Teachers
  • Friends
  • Pastor/mentor
  • Doctor
  • Mail carrier
  • Hair dresser
  • Neighbors
  • Child care provider

#2 SET A LIMIT

Now that you have your entire list made, decide how much you plan to spend on each person for each occasion.  It’s important that you plan this NOW so that you don’t go overboard when you see something that you really want to purchase.  If you have decided ahead of time that you will only spend $50 on your cousin’s wedding gift, but you see something you know she’d love for $500, it’s easier to turn away because you have established that it’s not in your budget. If you do want to spend more for a special reason, look at suggestion #4.

Setting a limit is especially important if you have “multiples” in a situation.  For example, we have five kids.  I make a point to spend the exact same amount on each child for Christmas so that it’s fair. Spend the same on your own mother and mother-in-law for Mother’s Day, etc.

#3 ADD, DIVIDE, SAVE

Now that you’ve decided what you plan to spend on each person for each occasion, add it all up and divide by 12.

You now have your monthly budget for gifts.  

See?  It’s really so simple.

I suggest setting up a separate checking or savings account just for this. Every month I have my bank automatically transfer funds into my “gifts” account.  Whenever I need to purchase a gift, it comes out of there and I have the money for it.  No more scrambling.   You may also want to add an additional $20/month or so just in case you forgot someone or a friend suddenly decides to have a ginormous celebration for their dog’s 12th birthday. {Please don’t invite me to a party like that, btw}.

If your monthly amount is too much for you to afford, then you’re going to have to go back and reevaluate what you plan to spend on each person, or sadly, scratch some people off the list.  Sorry.  Life’s hard.

If you can’t afford the monthly costs of gifts throughout the entire year, how are you going to afford it all come December?  

Or what are you going to do when you have an influx of events? {Four of my nieces and nephews have a birthday in July alone.}

Maybe you work a seasonal job during the holidays or typically get a bonus around December.  That’s great, but I wouldn’t count on that to be my only means of Christmas spending.  What if you got laid off or Bath & Body Works is no longer hiring extra help? You’re now screwed and Christmas is just weeks away.  Not to mention, you still have other gifts throughout the year to purchase and budget for.

#4 SPECIAL OCCASIONS

Momentous occasions are bound to happen . . . your daughter’s sweet 16, your son graduates from college, your parents celebrate their 50th wedding anniversary.  You’re probably going to drop a little more cash on these special events than usual.  When you make your lists and set your spending limits, consider if you have a one of these coming up in the near future and plan accordingly.

Many times, these events call for separate planning and budgeting.  If you plan to help your child with buying a car when they turn 16, that will require a few years of planning for most people.  My husband and I celebrated our 10th anniversary last year.  Instead of gifts, we decided to take the entire family to Disney.  We planned for over three years for that trip so we could pay cash for everything.  This really had nothing to do with our gift budget.

If you’d like to really set a serious budget for all areas of your money, I highly recommend www.everydollar.com.  It’s FREE and the best budgeting tool out there.

I’d love to hear your questions or your own tips about budgeting for gifts.  Please leave them in the comments.

Happy Gift Giving!

Love,

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