No, not Elsa steps. Baby steps of the Dave Ramsey financial plan! We've hit the first one (saving for the small emergency fund) and just paid off two debts. So we are on baby step #2: the debt snowball. If you don't know what this is, it's pretty easy. You list all your debts, except mortgage, from smallest to largest. It doesn't matter what the interest rates are. Once you pay off the first debt, you take the minimum payments and add it to the next minimum payment for the next debt. So if debt #1 was $150 with a minimum payment of $25, but you paid it off, the $25 is now free to add to the next debt. So if debt #2 was $300 with a minimum of $25, you now have $50 to pay on it instead of the $25. And you just keep rolling those minimums to the next debt after you pay off the top of your list. Now that we paid off the first two debts, we have $89/month to pay on the third debt instead of the $25 minimum required before. Sounds simple, right?
The hardest part of the plan is creating your budget, sticking to it and paying cash for everything. You cut up all your credit cards, but you keep your debit card. So if we get paid at the beginning of the month and have budgeted $500 for groceries (which for us includes toiletries, diapers, formula, food, etc.) then I take out around $250 in cash per pay period and keep it in an envelope. When I go to pay for my purchases, the money comes from that envelope. When it's gone, it's gone. Same with restaurant money. We have an envelope for dining out and we pay cash for those meals. If we only have $1.50 left in it, then that's it until the next month. On your budget form, you record every penny that comes in and every one that goes out. When you see the cash leaving your hands, you are less likely to want to spend it. The emergency fund set up during the first step is to pay for things like a dead car battery, small home repairs, or other small emergencies that normally you would throw onto a credit card. Then once you snowball your debts down to zero, you save up three to six months of your salary in case you face a major emergency, like a layoff. That one will be super hard to do.
It's not a quick fix and just like when you try to lose weight, you have to really commit to changing your lifestyle instead of going on a fad diet. Treat the problems, not the symptoms. If we want to replace all the windows in the house, we save up for it. No more financing. It is definitely hard only because it's hard to change your behavior and the culture of debt dependence. I'm only half way through the book and I already notice how marketing for credit cards and cars target young people into thinking that it's normal and expected that they have cards and car loans to keep up with the Joneses. Crazy life.
So I mentioned my new couponing shit, right? Today I scored some damn good deals and I was excited to see how much I saved. And yes, I do have a small stockpile in my basement, but that's partly because our "pantry" is just a tiny closet. The kitchen has very little storage space.
I received credit for bringing in reusable bags, shopped the sales with the store rewards card and also brought in a bunch of coupons. This was my biggest savings in a single purchase.
My little stockpile. We also have extra paper towels and toilet paper in the basement.
I'm freakin' EXHAUSTED on top of tired on top of an approaching comatose state. After two hours of shopping and then preparing meals, taking care of the wee one and lovin' on the pups, I'm ready to call it a day. Hope you all have a good one. Tschus.
