My husband and I are finally getting our financial house in order. I am PSYCHED. I have had credit card debt since 2005 and I just picture the incredible lightness when I pay it off. We're following the Balanced Money Formula. I actually read the book (I find most people criticize it without actually reading it--it's worth reading, at least!) and my husband and I find it very useful. I am super excited about our momentum and want to post updates on a semi-regular basis.

Here's a snapshot of our finances (there are plenty of mistakes made over the years, I know):

We are 30 and 29.

Debts:
$199,000 - house at 4.75%. Paying PMI on this, foolishly. Probably underwater, we bought last year but we really want to stay put as long as we can.
$600 - ancient student loan at something like 2.5%

Credit cards
$1200 @ 22%
$4600 @ 15%
$1900 @ 15%
Total: $7700 (down from $12,000 in March 2011)

Savings
$1k in emergency fund
$25k in retirement funds

We have a small windfall of $1800 coming our way. We will apply it all to the credit cards.

Our income is variable at the moment. My husband is a contractor and makes $25 an hour after taxes and health insurance but we have vacation coming up (spending time with my parents) and while he'll work part time during the vacation, we'll have a hit of about $1000. He's also had his overtime cut so his paychecks have been reduced by $500. Also, we're paid every other week so we have a paycheck each Friday, so some months we have 5 paychecks and some months we have 4.

So, in general, in a four paycheck month, we bring home a combined $6200. We'll have to cut back on spending and saving in October but I've run the numbers and I think we'll be okay.

I'm really excited because this is the first time a book like this has really clicked with me, and I can visualize this working for us. Thanks for reading!

Welcome to the forums Margerie! Living debt free is fantastic and you're on the right path! I'm pumped for you! This is the most exciting time in your journey to financial freedom as you can really tackle this debt (especially the Credit Cards) quickly.



So here’s what your debt looks like.

CC 1 $1200 @ 22%
CC 2 $1900 @ 15%
CC 3 $4600 @ 15%
HM $199,000 @ 4.75%.
SL $600 @ 2.5%

A) I would not apply the $1800 to all the credit cards. I would recommend paying off the CC1 $1200 first since it has the highest interest with the $1800.

B) Then while I know this may not be popular with everyone on GRS (as it has the lowest interest rate) I’d knock out the SL $600 with the remainder from the $1800 as well. That way you reduce your debts from 5 to 3 accounts. If I reduced my debt accounts by 2/5's in such a short time I'd be even more pumped.

C) Personally I’d feel uncomfortable with $1k in my E-Fund. I’d build my E-fund to say $3-5k. Emergencies can and always will happen - house appliances, new roof, new central AC unit, car repairs, medical expenses, ect. Better to be prepared than risk putting the cost on a card at 15% interest.

D) Then I’d tackle CC2 followed by CC3. After that I’d tackle the HM loan.



With $6200 a month on average you should be able to hack away at this debt rather intentionally and quickly. That’s good. What are your total monthly expenses? Where can you reduce some of your expenses while getting out of debt – especially the CC? Consider this thread when cutting your expenses.

Might also want to start a separate savings account and deposit $50-100 a month into it for next year’s vacation?



This is awesome! Keep up the good work! Keep moving forward!

Hey margerie, welcome to GRS.

Really excited for you and your new plans! I think it will feel great to rub out those debts.

My big piece of advice (which you should feel totally free to disregard!) is this: whatever you do, do NOT put anything else on the credit cards. Make a commitment to living without credit until you have got this situation under control. Even if you spend the first few months of this process just getting used to living within your current salary (especially since it varies) it will be time well spent. Otherwise, you may end up struggling to take two steps forward only to find yourself right back where you started when the cc statement comes in.

If you take the option of "free money" off the table I think you will become more aware of how much cash you have left until your next payday, and more creative about making it last (cooking from the freezer, a cheaper but equally thoughtful gift, borrowing the tool you need to complete that project, buying second hand clothes).

Good luck!

Thanks, guys. I appreciate the input, even though I might not always take advice offered. But I do appreciate it!

I just wanted to update the figures a bit since all the transfers have now cleared since my husband's payday.

Our fixed expenses come to around $3300. I mean, this number always fluctuates depending on how you calculate it, but this is based off of work I did from All Your Worth. Mortgage, car insurance, gas, utilities, basic food: that kind of thing.

We don't have any of the cards anymore, although I'm a little anxious about renting a car for the upcoming vacation. I've switched to cash. One thing I like about All Your Worth is that I've tried to just shut down spending. I've panicked and imposed austerity measures. But that's really hard for me to maintain and I would backslide and feel guilty. Instead, I now feel like I have a generous amount of spending money but it's absolutely finite. I have a couple hundred dollars of spending money right now, in cash. It's all I have, but it feels like so much. I think the point of this is that it is training for what it will feel like to have a normal relationship with money.

CC 1 $900 @ 22%
CC 2 $1900 @ 15%
CC 3 $4500 @ 15%
HM $199,000 @ 4.75%.
SL $600 @ 2.5%

It will be so rewarding for you to knock those CC debts off your balance sheet the upcoming months! The SL is miniscule but almost free if inflation is normal 2-3%, save it for last! I would really struggle to get rid off CC and get a EF of $ 3.300 (a month of expenses). After that I would probably reward myself a bit by switching to a more reasonable pace of saving. Allocate money to pump up the EF to 3-4 months of expenses in 1-2 years time ($275-$825 a month), and start paying of mortgage at a 20-25 year pace ($660-830 a month). That would be a great situation?!

PS. We save about $300 a month august-july for ski vacation in february-march and summer vacation some time june-august. We have an actual "vacatin account". We are going to pump that up to $440 to finance a weekend in a europan big city for me and fiancé once every year (we live in Europe so it´s not that expensive). There is no reason not to save for costly vacation trips? DS.

Here's where we are right now after my paycheck:

CC 1 $800 @ 22%
CC 2 $1700 @ 15%
CC 3 $4500 @ 15%
HM $199,000 @ 4.75%.
SL $500 @ 2.5%

Emergency fund: $1120

We got part of the windfall in hand, it's just a matter of depositing it and applying it to the debt. $1400 towards our debt reduction is going to feel amazing. CC1 has been the card I've had the longest. I racked up debt when I was depressed and unemployed (I can track bouts of depression by looking at my financial history; every month the debt increased correlates strongly with depression). I brought this debt into my marriage. Having it gone is going to be amazing.

CC 1 $800 @ 22%
CC 2 $1100 @ 15%
CC 3 $3700 @ 15%
HM $199,000 @ 4.75%.
SL $500 @ 2.5%

Welp, I goofed. I sent the windfall to the wrong account, so CC1 still stands at $800. But on Friday, we'll put $400 onto CC1, and it will be paid off by the end of October at the latest.

Switching to cash has been really good for me. It's a hassle sometimes (paying gas) but overall it's just so much better for me. I have such a better handle on how much money I have at any one point.

My husband's been able to work more hours for a spell, so that will help offset the lost income from our upcoming vacation. I've been working super hard at work in an area that has good job prospects and could easily boost my income in a few years.

CC 1 $0 @ 22% !!!
CC 2 $800 @ 15%
CC 3 $3700 @ 15%
HM $198,645 @ 4.75%.
SL $400 @ 2.5%

The good (no, great) news? Paying off that first credit card. What an amazing feeling.

The bad? I dipped into my savings while we were travelling, and our income is going to take a serious hit in the next few weeks, and we have some expensive weekends coming up (weddings). I'm not quite sure how to handle them, but we'll just take it a week at a time.

So, I spent a week with my family and I've begun to notice some patterns about love and money. One is that when I'm on my own with my husband, I can usually keep my spending in check. When I'm with my mom, she is extraordinarily generous (and I realize this is going to sound a little "poor little rich girl" but I am not complaining, just observing). She showers me with gifts and money, she's sending me a check for several thousand to put in my savings. The problem is that I start to spend more when I'm around her.

Even though it's my mom doing the shopping, I find it hard to turn off the shopping urge when I'm around her. I also spend more because I want her to see that I'm doing okay, which I am. My husband and I make more than enough for all we need and enough to cover a finite set of wants. So we can't afford everything in the world, so what? However, overspending to show my mom this is just one of the ways I've gotten into trouble.

It makes me a little sad the way familiar behavior crops up when I should know better. But I think recognizing what is going on is at least half the battle.

How is your savings coming along anyway? Previously you had $1000, so not sure if that's changed or not.

Congrats on paying off CC1. You should use the money your mom gives you to pay off your other loans. Once you get that debt off your shoulders, you can use the extra money to boost your other savings, and if you know you're going to see your mom, you can set a limit of spending for yourself. For example, promise to take $500 and only spend that and the rest your mom can buy for you (because she's so generous). I wouldn't tell her NOT to give you money, but use the money for good, and enjoy spending time with her regardless.

As far as the weddings, unless they are out of town, they really don't cost that much aside from the gift that you're giving. What is the hurdle?

I think you're doing great. Keep up the good work.

Savings is at $600. I will get it back to $1000 with the money from my mom, then apply the rest to debt.

Two of the weddings are out of town but one of them we can stay with my parents. They're driving distance, thankfully, but that still means gas and boarding the cats and dry cleaning the suit. They will cost about $200 each. Ordinarily not a problem but in a month with reduced income, it will smart.

Well, we got some bad news.

My husband has been working a "contract to hire" job for the past year. For a variety of reasons out of his control, the "to hire" part never happened, but it also looks like his work is going to be off-shored. We think we have until his contract is up in December.

He is hustling for work, obviously, and we're imposing austerity measures.

I have been reducing our car insurance premiums, which is going to save us $100 a month. We are cutting out almost all wants.

Unfortunately, it was already going to be a lean couple of months with the holidays coming up. But we'll save whatever we can. I'll probably stop paying down our debt so aggressively in order to save more cash. Plus we have some extra cash to contribute: he got $300 for his birthday, my parents say they are going to give us a check of an unspecified amount, and we have another $300 in matured savings bonds that we just have to figure out how to cash.

If it came to it, I think we could get by with unemployment (and we think he would qualify since he's not a 1099 contractor, but works for a recruiter, basically). We've also offered our spare bedroom to a friend who might need short term housing in January.

Oooh, sorry to hear about the upcoming job loss. It sounds like you are taking great steps to prepare for it. I hope it won't take too long to find something new.

Thank you.

I wish I could find a way to cope better. I'm really struggling with sleep. For the past few nights I've been wide awake until 2, 3, 4 o'clock. I break down and take sleeping pills and oversleep in the morning. And I'm just so sad.

I think increases in income only make us so happy after a certain point, but adjusting downward just hurts disproportionately to the happiness felt on the way up. At least, that has been my experience.

So, my mom gave me a check for $1,500.

Of course, it came with some strings attached. She wants me to spend $700 of it on our wedding photographs (from several years ago). I'm sure you can guess how I feel about that, while we're facing unemployment.

I am tempted to just pay off a credit card with the rest but I know I shouldn't. And I won't.

Honestly, I will probably just sock it all away and leave it alone until my husband's job situation changes.

Pay the credit card off with the other 800 dollars!
You have until December to figure out how to find extra cash. The interest on the credit card will be a burden.