Sunday, July 23, 2017

How to get better traction in paying off your debt

Have you ever felt stuck in your efforts to get ahead in your financial goals? I remember reading once where someone mentioned that some people's problem is not that they don't have good goals, but that some of their goals conflict with each other and it holds them back.

We have a goal to pay off the rest of my husband's student loans from law school in the next 2.5 years. But along the way, we, being homeowners, have also wanted to make certain improvements to our home or yard. Some of them are necessary or improve our quality of life as we pay off debt. And the ones we do make are usually pretty frugal, such as our modest kitchen makeover and our mudroom makeover. But there are other ones that have crept in, like putting new flooring in our basement or replacing our broken television or upgrading to smartphones. None of these are really necessary, and the money diverted to them could hinder or progress in paying off student loans.

I have felt convicted recently about our effort to save a little extra of our income since my husband got a raise about six months ago. Initially we had plans to save as much of it as we could while putting just a little extra toward debt. It seemed like a good idea to have a much larger emergency fund than the often recommended $1000 fund.

Not surprisingly, however, I have noticed that when there is extra money in our bank account, we have a way of spending it. Most of these expenses have been necessary, such as paying for summer activities for the kids, bar registration fees, new tires for the van and more, but still, I'd like to challenge ourselves to make every effort to put any extra income toward debt in the next ten months after basic necessities have been taken care of. We have a decently comfortable amount in our savings account now, and if something big comes up, we have about $1,060 extra dollars a month (which I plan to put toward student loan debt) that can be re-directed toward an emergency because we are on an income-based repayment plan which only requires us to pay $48 per month toward our student loans.

This doesn't mean we won't purchase anything, just what we absolutely need. Shoes for the family fall into that category as does clothing, but when possible I will try to use birthday money/Christmas money gifts to put toward that. I would also like to try and save gift money for home projects instead of always dipping into our savings account.

If you're wondering where you could make cuts, here are some questions that have helped me determine where to make them:
  • Do we really need it? A leaky shower that needs to be fixed because it's damaging subfloor is needed, as are tires so worn that the metal rim is peeking through <gulp>. A replaced, more aesthetically pleasing flooring choice in our basement is not.
  • Will our quality of life be sacrificed in a way that will lead to emotional weakness in pursuing debt repayment? For example, theoretically we could live on only beans and rice to save more money in our grocery budget, but we'd quickly become so demoralized that we might spend more in other areas to compensate and give up on repaying our debt.
  • What will this purchase cost me in terms of time, money, and maintenance? I love to build things and have been tempted to put some of my birthday money toward a new table saw, but I know that with four kids and homeschooling, I won't have that much free time to make use of it. Besides, if I do have free time, I should put it toward earning extra income until our student loans are gone!
  • Can I find another way to get this without paying a lot or anything at all? As a homeschooler, one of the biggest temptations I have is to buy more curriculum or books for my kids. But we also have access to one of the nation's best libraries, and I could teach science by checking out some high quality lab books and working through them with my kids. Similarly,  I would like to have more home decor around the house to make it feel cozy, and I have a lot of scrap wood which I could turn into trays, wall organizers, and more. 
  • What will I gain by waiting? Sometimes simply putting off a decision for awhile will either make the want go away or give you better options. I faced this recently when we almost converted to smartphones because the price per month is only slightly higher than what we are paying for basic phones and my husband's keypad is beginning to wear down (he's a heavy texter :)). There was a great deal for decent phones at only $10 each, but we decided to wait because the higher bill would amount to an extra $96 per year. My guess is that by waiting, if and when we do convert, we will have choices in phones that are even better than they are today. 
  • Which matters more? By prioritizing your financial goals, you can achieve one at a time faster than if you tried to tackle them all at once. For us, paying off these loans is really really important, and it's much more motivating to get them done more quickly than to drag it out for 10 years. 
It took me awhile to realize this, but now I now that I really really want these loans to be gone as soon as possible. The more I crunch the numbers, the more excited I get about how much more we could pay off in the next eighteen months.

Asking questions like this can help you put a pause on the dollars that are flying out of your wallet. Decide what matters to you, and then do everything you can to pursue it. 

Tuesday, July 18, 2017

A summer update

Wow - I know I don't have that many regular readers, but for those of you who do check back in, I apologize for being out of commission for so long. I have reverted to only posting monthly debt updates for awhile because that was all I could manage, and then when May rolled around, our Discover card pending payments hadn't quite cleared when I wanted to post our update (I always try to pay it off first before tallying everything up). Then suddenly it was the end of June, and now it's almost the end of July!

The good news is that we have kept on track with our planned debt payments. Next week I will be posting a July update to catch everyone up. We are closing in on dropping below $60,000 by August. Some would gulp and go, "60? You mean you still owe $60,000!?!" And I will calmly reply with smile, "Yep, $60K. But we've come a decent way from $90K, and before you know it we will be down to $30K. . . ." That's how I keep going. It's not easy. We have friends who are taking the public service loan forgiveness route (which we also qualify for) and it's very tempting to just say, "Oh, whatever. Let's just make the minimum payments and wait for 7 more years."

There are so many other things we could do with $665 a month (this is what we put toward student loans). We could raise our grocery bill, buy smartphones, make all of the home improvements we would like. But one of the reasons we are not making just minimum payments is that we know that extra money flies out the window. When you have extra money coming in, you start to think about everything that is now more affordable, and suddenly your spending goes up and you are back to square one. As hard as it is, I know that with a couple more raises and consistent budgeting, we can be out of this debt in less than three years - in fact, more like 2 1/2!

Wednesday, April 26, 2017

April 2017 Update: $62,565.22

Hey everyone! Not much new here to report - this month our debt dropped to $62,565.22. April was a busy month for us involving two back-to-back weekends where we were out-of-town and then a visit from our in-laws. As regular events wind down for our kids we will be gearing up for baseball.

On the financial side, we had signed up our son for a more competitive baseball team, thinking that the higher registration fee would cover a uniform as well. How wrong we were! We began to hear from others that the fees would eventually be almost double the registration once the uniform, parking, and admission fees were accounted for. It still seems crazy to me that you have to pay to watch your own child play baseball when you paid a great amount just for him to play in the first place! But at some point we were informed that the team would be disbanding due to a coach accepting a job in another state, so we were able to get a full refund and decided to enroll him in a less expensive league. I was grateful for the reprieve we got from that experience and will be much wiser next year.

In May baseball will be starting for two of our sons. It will be interesting to see how practices and games work out given that we are still a one-car family. Thankfully our city is not that large and you can get anywhere in about 15 minutes.

My vegetable garden is also starting to pick up and I will be transplanting many of the seeds I started a couple of months ago. I hope to get some pictures of that up here soon!

Sunday, April 2, 2017

Our frugal garage entryway makeover

It's been awhile since I posted on home projects, and one reason for that is that between homeschooling and keeping the house going, it's not easy to find extra time to work on my long list of ideas. We've finally finished one of our entryways, though, and today I'd love to share it with you!

This entryway comes off of our attached garage, leading into the kitchen/family room. Before we re-did it, it was a nondescript blank space and dumping ground for whatever people didn't put away. Sometimes we would have an old small shoe shelf there, but for the most part, it was a very sad space.

Here is what it looked like before:

And here is what it looks like after:

Much better, right? I had envisioned a mudroom-style entryway with a small bench, and since shiplap is in right now, we did a faux shiplap treatment using strips of 1/4 inch plywood underlayment. I designed and built the upper shelf myself for about $8 in wood, and the bench came from this plan at You can't tell from looking, but the shoe bench also has a hidden compartment for storing things like hats and gloves (a big need here in the Midwest!).

I added the chalkboard by spray-painting an old mirror that was left in our home by the previous owners. It was a cheap mirror that warped your body, so it wasn't really worth saving. I sanded down the darker stain to give it a more distressed look and my husband nailed it in. The magnetic chalkboard/organizer on the left wall is from I purchased it a long time ago, but they still carry it for about $15. It has been such a useful piece, and now that it's in this new location it's perfect for hanging our keys and sorting mail that comes in.

We initially did the shiplap, hooks, shelves, and bench as well as painting the doors, but once all of that was done, the linoleum floor looked really bad (not that it looked that great before). To give you a backstory on why there is linoleum upon linoleum here, when we first moved here this room was carpeted. We took out the carpet a few years ago because of cigarette smells coming out of it, and I was concerned about taking the top linoleum up because the bottom linoleum is original to the house and could have asbestos.

I had seen several tutorials on Pinterest about painting your linoleum, and figured that the cost of porch paint and a stencil was cheaper than buying a new rug and easier to clean. I have been very happy with how it's held up so far. We did have one part come up when we pulled off the painters' tape, but the rest has shown no chipping or flaking.

The cost to makeover this entryway was around $66 give or take. I didn't keep all the receipts but am pretty sure this is a close figure. I also used a birthday gift card I received to offset some of the expenses.

Before, this area was not only an eyesore, but also lacked function for a family of six that needs somewhere to put their coats and shoes. Now, not only do I love looking at it, we actually use this space. For less than $70, it is a change that was definitely worth the expense!

Monday, March 27, 2017

March 2017 Update: $63,392.90

Hey everyone! It's time for the monthly check-in on how we are doing. This month we saw a big step forward thanks to getting our tax return. Our total debt balance dropped to $63,392.90. Even though my husband got a raise last year, our tax return was similar to the previous year's because along with the raise came an increase in our health insurance premiums, and because those are deducted, our taxable dollars were about the same. It's a little frustrating to think about how our raises are being offset by health insurance premium increases, but I won't complain around tax return time :).

This spring season has been filled with many expenses, and while we are tracking what we spend and making sure we planned for it as much as possible, I've also realized that for the next few months our extra savings will be going toward things that need to be dealt with now vs. later, like garden purchases or baseball/swimming lesson fees. I made a budget for our extra income that we are not putting toward debt and am tracking how much we are spending in each category, such as homeschooling, home improvement, clothing, and more. 

One of the most encouraging things that happened this month was seeing how our most beastly loan, which started at over $30,000, is starting to be whittled away to a more manageable figure. Some people advocate a snowball approach, but it makes more sense to me to pay the highest interest rate first, even if the loan will take a few years to pay off. 

Tuesday, February 28, 2017

February 2017 Debt Update: $68,505.35

It's already that time again! This post will be short and sweet - our total debt, including credit card, student loans, and a car loan, is down to $68,505.35.

While we were excited to see our debt go down again, we were disappointed to spend more than the extra amount we had coming in from my husband's recent raise. I did keep track of these expenses, which was an improvement, and almost all of them were necessary, but I am tired of spending money. I was motivated to return to our law school days where we tried to spend as little as possible on extras. We do make room to spend for things like kids swimming lessons (but on a scholarship), baseball, and annual memberships to the zoo and discovery center for quality of life, but beyond that, if there's a way we can do without it, we will try not to buy when possible.

So far I am excited about what our summer is shaping up to look like. As I mentioned above, our kids will be in swimming lessons and baseball, but another local opportunity came up for our family to learn more about farming (raising chicks, milking cows, pasture management, etc.) for free. A local family is training other families in these skills in exchange for watching their farm while they are gone. I'm super-thrilled to be part of the program, not just for the skills learned, but also for getting a chance to work with this wonderful family. We are also hoping to travel down to Texas for a week to visit my sister and her family and signed our kids up for one week of free Vacation Bible School as well. 

That's it for now! Spring will be busy, but I hope to be able to post pictures of my gardening efforts here soon!

Wednesday, February 15, 2017

How our low-one-income family pays off $10,000 a year in debt

There are many days where I feel like we are not making progress fast enough toward our hefty student loans and car loan, but I realized recently that when you crunch the numbers, we are putting 28% of our take-home income toward debt each month. Even with the hefty interest we have to pay (it used to total over $3,000 a year - ouch!) we have still managed to lower our overall debt by $10,000 in one year. It may not be as exciting as the stories where people pay off triple this amount in the same time, but we will take what we can get.

You can read more about our current budget here, but as of this post, we only have about $3,500 a month in take-home pay to work with. Out of this, we tithe $422, so our working budget is really about $3,100. With four children, our family is classified as "low-income" according to the Federal guidelines of having an annual income of less than 200% of the Federal poverty level. It's tempting at times to throw up our hands and say it's too hard, but we believe that it is possible to make a significant dent in our debt each year even with a limited budget.

Here are 10 tips which have helped us knock off our debt:

1. Keep your expenses as low as possible (without killing yourself). You can see how we budget our paychecks here.

2. Take advantage of low income tax advantages and use as much of that tax return to put toward your debt.

3. Budget for expenses you know will happen so that you will not be caught off guard. We allocate the two extra paychecks my husband gets a year for other expenses such as home repairs/improvement, children's activities, clothing, and more.

4. Keep a list of wants vs. needs. I like to call it the "Ma Ingalls" approach, but essentially, it seemed that Laura Ingalls Wilder's family often did not buy something until they had the money for it, and then would stock up on as much as they could afford of that item. This was for financial as well as practical purposes - seasonally, certain things were more available at certain times of the year. Instead of the steady stream of consumerism we have today where there are sales every other day, it is important to look at what you or your family need and when the sale and funds line up, to purchase those items.

5. Consider becoming a one-car family. Our decision to do so has helped us to save on car insurance and gas as well as reducing our risk of auto repairs.

6. Track your progress. I created a spreadsheet  which lays out where we will be each month if we pay a certain amount toward debt each month. In the months where it feels like we will never get there, I always look at this chart to remind myself of where we will be if we just keep plugging along.

7. This goes without saying, but eating out, having cable, and paying for smartphones are three things we choose to mostly forgo while we are on this debt-repayment journey. It would cost about $100 for our six-person family to eat out a couple times a month, about that much for cable, and that much for smartphones too - saying no to these three categories saves us $300 a month!

8. Be intentional about how you spend gift money. I try to save up my gift money to purchase tools that will allow me to sew, do renovations and build furniture that would otherwise be out of our reach.

9. When you pay off student loans, if possible pay off the highest interest group first. We qualify for Income-Based Repayment for our federal student loans, and while we make a small monthly minimum payment that is evenly applied across all loan categories, we put the rest toward the loan group with the highest interest.

10. Make a list of things you can do to improve your home that don't cost little to no money. Cleaning, organizing, and making small affordable improvements to your home can help you have a much higher sense of well-being.

How have you found success in taking on debt with limited funds? I'd love to hear in the comments!
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