Halloween is upon us

Are you being frugal this Halloween?

We’re trying to be, using costumes we already had or dress up outfits that the kids have had.  According to receipts I received from my wife we spent only $5.50!

Daughter is being Wilma Flinstone.  I think the only thing we bought was a big bone for a prop and orange hair spray, already had the outfit. 

Son is being Darth Vader.  He will wear black clothes with the cape and talking helmet that he already had. 

The other daughter is going to be an angel, buying a halo is all that was needed. 

Last but not least my youngest is going to be a pirate, he pretty much had it all already. 

Spending Plans can be VERY Intimidating the First Time

     Back at the end of May the wife and I did our very first spending plan with our new found intensity to get out of debt.  I go through putting the initial estimates into the spending plan, this is because I’m the nerd and getting the numbers going is fine with me.  Don’t think my wife doesn’t do anything because what she does is very very important in the process.

     Even though I’ve been keeping track of utilities on my Where the Money Goes spreadsheet it is different trying to spend the money before we see it. I can guess the amounts using past bills and paying attention to what we’ve been doing for the past month but trying to actually forecast close to what the actual bill will be is harder than I thought it would be. Of course bills come before the first of the month so that helps get some concrete numbers in place instead of just guessing.

The hardest part is trying to get all the expenses that come up each month into the plan.  School supplies, vehicle expenses, music needs, clothing, etc.

I input everything into the plan the way I think it needs to input and allocated, and then print it out to go visit with the wife.  She gets handed the spending plan on a piece of paper to review and make changes to.  She can make any and all changes she wants so long as she makes the ending numbers result in all money being spent.  I try to insist she makes at least one change because she can’t really agree with me on everything.  Can she?  Maybe I’m just totally awesome if she does :).  Anyway I keep quiet and say nothing because I’ve already gone over it.

With the monthly spending plan in place we both agree that nothing gets spent outside these categories without first talking to each other.  Another reason we will talk later is that say we spend all of our grocery money; we’ll need to find where to take money from to cover the shortage.

I’ve enjoyed working together with my wife on this spending plan a LOT!

Our Debt

     I’ve been debating whether I wanted this information on a blog that others could see, for the past couple months actually.  In the end I decided it really doesn’t matter if anyone sees it, this is mainly for me to keep track of but at the same time would be nice if anyone reads this to see them.  I’m just your average guy with a family (of 6) that is trying to get out of debt and be in control of my money.

Credit Cards       11119.88
Student Loans    5578.31
Vehicle                 13652.47
                Total   30350.66

Notes – All those numbers are from 6-1-07.

Credit Cards – These initially weren’t an issue before I got laid off in 2000, but then we started using them to support ourselves.  Since then it has just been too easy using them for wants instead of practicing better self control.

Student Loans – Pure stupid tax here as I’m not using the education in ways that I got the loans for.  However, I wouldn’t be who I am today with going through the experience.

Vehicle – We bought a new van for the wife and family a few years ago.  This wasn’t the best decision but with some recent bad luck with used cars paying extra for the security was well worth it.  Yes, the value goes down once you drive it off the lot we did think long term in wanting to keep the vehicle until it falls apart.

Our Plan

 I’ve got all my Financial Documents together and am now ready to get our plan underway.

1. Take all of our savings and investment account (excluding 401k) down to a $1000 cash emergency fund and a $1000 extra emergency fund.  I put my extra emergency into an Emigrant Direct savings account.  The savings account can easily be moved to the bank account for use.  The cash fund will be used for immediate emergencies and built back up quickly when used.  These will be used to fight Murphy and to pay off property tax at the end of the year.

2. With $2000 set aside the rest is put towards debt, starting smallest to largest from the debt snowball.  This helped us pay off Lowes, Chase, Furniture and Student Loan #1.

3. If we didn’t already have a few 0% credit cards then at this step I would have begun looking for some to transfer current cards to.  You want cards that have no transfer fee if possible.

4. Use our Spending Plan to spend every dollar on paper for the next month before actually spending it.  Some of the expenses we’re trying to plan for are Christmas, school supplies and drum lessons.  Make sure that each debt has the minimum payment applied.

This is exciting to finally feel in control and have a plan of attack to eliminate our debt.  I can’t wait to be in complete control of our money, have it work for us instead of us working for it.

Getting out of debt confession

 

I realized that I hadn’t been completely honest about why my wife and I are trying to get out of debt.  Yes, we did get on the same page and that has helped a LOT but there is more to it.

For a couple years I would say she has been bringing up going to Disney World with the kids.  After I read a couple books and we started talking about them I asked if she still wanted to do this.  Of course her response was, YES!  Well I think I finally found a way her getting what she wants, Disney Land, and me getting what I want, debt free, could work together.

I said we could go there but it couldn’t be put on any cards and had to be paid for.  She agreed with this, even though initial response was we have to live our life and you never know what tomorrow can bring.  While I agree with that I just couldn’t handle our finances anymore.  This compromise seems to be good for both of us, even though we stumble along the way.

Sometimes finding a motivation idea for each other can really help move things along.

Credit Cards

 

Do you know what credit cards you have?  What about the ones you never use?  Could there be some still open that you thought were closed?

These are a few of the questions I asked myself as I started trying to get my financial life in order.  To help answer these questions I used AnnualCreditReport.com to pull my credit history from all three credit reporting companies. Another option is CreditReport.com, I haven’t used this site.  These are free reports and you can get this information for free once a year, if you aren’t doing this make sure to do this.

I made a Credit Card Spreadsheet to track all of my cards along with their information.  First going through my drawers to find any existing credit cards I was or wasn’t aware of to input on the spreadsheet.  Then I began going through each of my credit reports finding what accounts were still open and putting that in the sheet.

Cut those credit cards up!  I really loved this part of the whole process.  Once I found a credit card that was already cancelled or I cancelled the card I had a great time cutting those dang things up.  There was such a relief and pure joy from doing that, even to this day I can still feel how great it was to do that.  So, I have a confession to make about a credit card.  I still have one in my wallet, well it won’t work as it has been cancelled, but the fact remains I’ve been to lazy to take it out and cut it.  Maybe there is some emotional tie to it or something.  No!  I’m just lazy and forget about it 🙂

Make a plan to get rid of those bad boys.  I haven’t gotten rid of all mine yet as they still have balances but once the balance is gone I cancel the card and get rid of it.  Even if you only cancel one card that is better than nothing.  Use the credit reports to help you clean up any old accounts and check them each year to make sure someone else isn’t opening accounts in your name.

Another reason to get all your credit card information gathered up is if your wallet gets stolen you have a way to cancel them.

I felt 100% better after getting my finances organized and its made everything I do easier.

Financial Documents

The great thing about going back through my debt steps is I’m finding ways to improve or change what I’m doing.  Some things will help me spend less time on this money stuff while some will just make it easier to accomplish.  Let’s get it on!

Financial Sheets – These will help show your financial picture.  Do you owe more money that your worth?  Have more or less equity than you thought?  Unless you have this broken down on paper and not in your head then don’t know for sure.

What We Owe – This is what I used to get my information organized to see who we owed money to and how much money we have.  I listed each name, amount, as of date and interest rates.  I used this sheet as my main page to fill into the next two sheets.

Debt Snowball – There are different ways that debt can be listed on this sheet, each person is different in what they want to do.  I decided to list all my debt smallest to largest; another way is by interest rate.  Thankfully I had just transferred most of my credit cards to 0% interest cards and so this was an easier decision for me.  For my wife this was the better way to do it because she could see the smaller debt being marked off and see it starting to work.  This can be a psychological more than anything else; you have to change your behavior and the way you think if you truly want to be out of debt.

Equity Sheet – Finally we get to see what were worth, well mine doesn’t include everything but at least I’ve got a picture of my financial situation.  Most of the information is pulled from the What We Owe sheet but still some has to be input and kept up to date.  I’ve seen a big change in mine from just the first few short months I’ve been attacking my debt.  This could have been used to list everything in the What We Owe sheet but for me it was easier to input the information as I came across it in a more random way.

Here are my financial sheets; there are three tabs at the bottom for each of the sheets we discussed.  Most of the information on the What We Owe sheet as I said earlier fills the other two, making the process easier when I update my numbers each month.

I’ll be honest that after I was finished filling my equity sheet that I was both excited and depressed.  It was unbelievable that after all those years of working and earning money I was worth so little.  The excitement came from knowing that I had nowhere to go but up, and in a few short months my equity sheets have gone positive several thousand dollars.

Where the Money Goes

Purpose – This is a good way to find out where your money has been going in the past.  It can also be a way to look at your utilities to follow patterns of use.

How to Use it – I’ve used the past electric bills to track when we use the most energy in the summer months so that I can adjust my spending plan.  Also when you make changes to the way you keep the thermostat you can look in the past to see how your adjustment affected the most recent bill, but you’ll have to look at the price per kilowatt to really know how it changed.

Conclusion – This isn’t for everyone and in the big picture of becoming debt free this isn’t a very important piece, using and doing the spending plan is far more important.  This can really be a useful tool if you spend a little bit of time going over past bills, you’ll get a better idea of where your money has actually gone.  Once you get it set up and use it in conjunction with your spending plan it doesn’t take any time to use.

The spreadsheet that I use updates the numbers from my spending plan with a push of the button.  The sheet in Google can’t be used this way but you can view it there for an example.