Oh boy, let me tell you all something. I recently joined this Facebook group THE Ramsey Baby Step Community and have been completely o.b.s.e.s.s.e.d. with it! I read it daily, I interact with the other users, I am taking in every single tip that everyone has to offer. This group has thousands of people that are working on getting out of debt or HAVE gotten out of debt. They are where I am at or HAVE been where I am at.
In my few short weeks of following and being a part of that group, paired with my love for budgeting, I've put together a few things I've learned! Check them out!
Zero-Based Budgeting is (my) Key!
Every pay cycle - my husband and I get paid the same two days per month - has its own budget. Every dollar on that budget has a purpose. Rent is due on the 1st of the month, so it is on the budget when we get paid the last day of the month. Childcare is split into two equal payments, one on the pay date on the last day of the month and one on the 15th of the month. And, if you are like me, and get paid twice a month and have found that more bills fall into one pay period than another, call the people you owe! Ask to change the payment date. Work it in YOUR favor! You don't have to be broke one pay period a month.
Sinking Funds Are LIIIIIIIIIIFE!
Aren't sure what a sinking fund is? I wasn't either until I joined the above referenced Dave Ramsey follower Facebook group. I was so curious. So many people kept posting about sinking funds. So I asked...every single person that mentioned it. I was asking them. What is it? How do you budget for it? And, I liked what I heard.
Let's say you own a home (we don't). And you know that your water heater will need to be replaced next year. If it costs $1000, and you get paid 24 times in one year, you could create a sinking fund where you automatically deposit $41.66 into that account each time you get paid. Then after your 24 pay periods in one year, BAM, you have $1000.
Real-life example for me? Cars. Dustin and I do a LOT of driving. To and from Florida. To Oklahoma. All over town. You name it. We have a lot of wear and tear on our vehicles. We replace our tires about once a year or so. Then we get hit with new car registrations, and with that comes car inspections. Every time this has come at us in the past, we have had to not pay something or push something back to get the tires we need.
Queue the sinking fund. Now we have $125/pay period going into a car sinking fund.
Now that I know about a sinking fund, I feel like it is a no-brainer and should've been common sense. But, it wasn't! Now here I am that much smarter for setting money aside in a sinking fund. When our tires need to be replaced or our oil needs to be changed or our car registration comes along or we need to have our cars inspected, we will have money for those items! Trust me when I tell you every.other.time we have had to replace tires, the other car needs tires replaced. And every time we have had to stop paying a bill in order to get the tires replace.
No more, Satan! (i.e. not having a plan and having no money for tires)
Debt is Not Normal.
Let me repeat myself. Debt is not normal.
But apparently Americans tend to think it is. In a CNBC study done a few years ago, it was surveyed that 8 out of 10 Americans are in debt. Thinking that debt is normal is a dangerous mindset to have; but there is so much propoganda (is that the right word?) around that says otherwise.
Just last week when doing some Black Friday shopping (with cash), every rep at Old Navy said if you open this credit card now, you can save an additional 20%. Same thing at Old Navy. And guess what, Pier 1 too. But then we get roped in to having too many credit cards. Then it gets easier and easier to swipe without the thought of paying it back tomorrow. I want Mark to live a life where he does not feel like debt is normal. Where his parents don't live paycheck to paycheck. Where his parents aren't slaves to student loan companies or other creditors.
I want to get out of debt and save and prepare a future for Mark where he understands the value of his dollar and does not feel the need to rely on credit cards to get by. (sorry for the rant!)
Debt Will NOT Be Forever.
Once you realize that you do not want to be a slave to debt, you have to commit yourself to getting out of debt. That's the tricky part. That's the part where you get uncomfortable. That's the part where you have to make a promise to yourself to not get trapped into the debt spiral.
Once you realize you want to get out of debt. I suggest you getting pen and paper (or an Excel spreadsheet) and have a real, honest conversation with yourself (and/or your spouse). Write down all of your debt, smallest to largest. Write down your minimum payment due. Write down your payment due date.
Now write down everything else - rent, utilities, internet, tv, etc. What can you cut out? How can you slim your budget in order to throw more money at your debt? It won't be easy. It won't be fun (at first). But once you pay off that first debt, and realize that it CAN be fun when the snowball gets going.
We have a plan to get out of debt by the end of 2020. That might seem far off, but when you have closer to $200,000 in debt than $100,000, 2020 is pretty darn close!
I love being so open about this. Why? Because I have already met some great people that are on the same journey as me and my family, or have gotten out of debt already and are encouraging to follow. And, the fact that my husband and I have such a great plan in place makes me want to share it with the world!!!