Today is day two in the spending no money plan so that we can get rid of debt Dave Ramsey style. We're doing the Total Money Makeover. We couldn't do much about our basic bills but our variables like groceries, gifts, clothing, extras are very variable. I was pretty shocked when I pulled up how much we spent on gifts last year. We're pretty generous with ourselves and others relative to our income.
The idea for this plan mostly came from my husband. I was mostly content to float along month to month, make ends meet, and consistently pay off the debt at a monthly rate. Most of our debt is what most people consider "good debt." We have a home equity loan, student loans, mortgage and a very small smattering of credit card debts (which were going to be paid off by the end of the summer anyway.) My husband, on the other hand, hates being in debt and spent most of his adult life debt free with money in the bank. My first reaction to the plan was mega-stress thinking "I can never buy fill in the blank (yarn, clothes, books, extras, vacations) ever again." I made some last minute yarn purchases so feel better in that regard. I have a lot of yarn. Once I get it all in the mail, I'll take pictures and post them so that I can be reminded of how much yarn I really do have. Anyway, now I'm used to the idea and am looking forward to being on the other side of it. It will be hard but after seeing where we were blowing money and where we can cut corners, it is feeling more and more possible to be debt free. Our monthly bills for student loans combined adds up to $650 a month and it would take another fifteen to twenty years to pay them off. I think we'll have a party once those are paid off.
One thing I like about the plan is that you pay off the smallest balances first instead of focusing on the highest interest loan. You do this because it gives you the feeling of success sooner which makes it easier to keep with the program and not slide back into old spending habits. Our highest interest loan is our biggest and is my student loan from the Conservatory. Thinking of working on paying that loan off is emotionally paralyzing and is probably why trying to pay that one down first has never worked. That loan represents a mass of emotional confusion. I try to persuade myself that it wasn't a complete waste of money. That having a Masters Degree from the San Francisco Conservatory of Music in French Horn Performance has enriched my life somehow in spite of the fact that I rarely pick up my French horn and have no real plan to be really active as a musician, though it might be fun to play some down the road. Then I feel really guilty about bringing that kind of debt into my marriage. So every time Eric and I have talked about paying off debt in the past, the focus has been on that student loan and I've become a puddle of guilt and the weight of failure and waste and wrong choices regarding getting that degree which I really don't use all paralyzes me emotionally and makes the thought of paying off that debt hugely overwhelming so I go shopping to cheer myself up (convincing myself that I'm only buying stuff I need or that doesn't cost very much) and lo and behold we don't have any extra money to pay extra on the loan. Funny how that happens. So now we'll get our momentum going on less emotionally stressful loans and I'll feel like it's possible and we will make that loan go away and will save a ton of money on interest. Just think what we could do with an extra $650 a month!
I think this is another "welcome to being a grownup" thing, learning and practicing self-denial now so that we can have more money to spend in the future. Our culture is not very good at delayed gratification. We deserve it, why wait, we'll have enough money to pay it off. The long term of this money plan we're doing is that we'll only buy cars with cash (which boggles my mind) or pay cash for home improvements. Every purchase will be made with money that we have. Isn't this what we try to teach our kids by having them save up their allowances? They can't buy their coveted toy until they've saved enough money. Well, now to hold myself to that same rule. It's going to be hard but gratifying.
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That's the way Josh and I do everything, cash only. We took a mortgage out, obviously, but the down payment, closing, and all our home improvments are in cash. The mortgage and some school loans are our ONLY debt.
ReplyDeleteIts hard and takes patience but it's a very stress free way to live. Good luck!