Thursday, December 23, 2010

Day 70 - A Gift To Myself

December 23, 2010

Christmas Bonus: It was a tough decision to make because I really wanted an iPad, but I decided the best thing to do with my $1,000 bonus (thanks, job!!) was to throw it at our debt stockpile.  Although it is a decision completely void of instant gratification, it is the right decision for me.  In a year filled with personal loss and struggle, I realize that my Christmas gifts - no matter how cool - are not what help me through the tough days.  And believe me, I have had more than my share this year.  Still having them.  I realize what has helped me the most are my personal relationships - kind of an ironic realization for someone who is not so great at making an effort to keep in touch with friends and family.

So this year most of my family is not exchanging gifts.  Instead we are purchasing a beautiful sunset maple to plant next to my Dad's final resting place.  I can't think of a better gift.  Christmas was a holiday my Dad made every effort to make a special day - no matter how little money he had in the checking account.  And every Christmas after all of his work was done, he would just sit back, relax and quietly take it all in - family, happiness, laughter, togetherness, love.

So here is my ask of you this season: enjoy the gift giving and present-opening but also remember to just sit back and take it in, even if just for a minute.  Look around at the people surrounding you and take time to laugh with them and just enjoy the day.  Don't get caught up in getting things over with so you can move on to your next stop.  Spend ten extra minutes talking with your parents or siblings or close friends.  Give an extra hug to those you love - and actually tell them out loud (or write it down) that you love them.  Trust me, you will never regret it.

I love you, Dad.  Merry Christmas.

Sarah Jane

Sunday, December 19, 2010

Day 66 - Family Kidnapped By Ninjas, Need $4 for Kung Fu Lessons

December 19, 2010

I added a Donate button.

My immediate thought was an image of me holding a hand-drawn cardboard sign asking for a handout.  I'm generally not the type of person to showcase my personal life then say oh, by the way, how about you also give me some money?  Also, I tend to be more likely to give a stranger some cash when there is a bit of cleverness involved in their ask.  One of my favorite homeless person signs:

Family Kidnapped by Ninjas
Need $4 for Kung Fu Lessons

What I'm Doing: I now have a donate button on my blog.  It is an easy way for readers to donate to my debt free $60K Project if they feel compelled or ignore it if they want.  I'm completely fine with either decision and won't be hounding my readers for money.  Also, in order to pay it forward, 50% of donations will be given to a deserving nonprofit organization.  I would like to target lesser known organizations and would love to hear your suggestions.  I have decided to start this push by choosing the Denver Dumb Friends League as this month's organization.  The Dumb Friends League provides humane care to lost and abandoned animals.  No animals are turned away.

Why I'm Doing It: Mike and I are trying to get our life in order but the amount of debt Mike we owe is staggering - about $100,000 in total (and that is AFTER paying off $36,000 already!).  ALL of the remaining debt is related to student loans - we both have Master's degrees and decent jobs.  We have been together for seven years and we would like to eventually get married, buy a house and have kids.  But it is difficult for us to justify these expensive life goals - let alone afford them - when we have so much debt remaining to pay off.  So the $60K Project is our attempt at making sense of our debt, figuring out how to get rid of it as quickly as possible and giving readers a way to learn along with us (as well as get some laughs).

What You Can Do: I realize that you can donate directly to any non-profit without going through my site.  My goal is to give lesser known - but worthy - organizations a chance to get some additional exposure through my site.  Hopefully sponsoring these organizations on my website will introduce some readers to the benefit provided.  So what can you do?  Provide suggestions for nonprofits that are important to you.  I will review all suggestions and periodically change the organization I am featuring (monthly? quarterly? i'll see how it goes and make a decision).

Give me some feedback - I would like to hear what you think.

Stay tuned,
Sarah

Wednesday, December 15, 2010

Day 62 - Mid-Month Report

December 15, 2010

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year. 

** Check out the Real Time Debt Tracker!!!  Keep up to the minute tabs on our debt balance and whether we can pay it off in 365 days!

These last two weeks have been pretty tight but we made it!  Cheap and not so fabulous dinners at home, car-sharing to save gas, cheaper weekend activities and creative gift buying techniques all contributed to this success.

LOAN BALANCES AS OF 12/15/10
  3,882  Mike Student Loan #1
17,075  Mike Student Loan #2
21,571  Sarah Student Loan #1
           0  Mortgage
42,528  Remaining Payoff

Scheduled Payoff of First Debt: Initially we scheduled to pay off Mike Student Loan #1 - our smallest loan - by end of January or early February.  Now that we plan to apply my Christmas bonus it looks like we could have it paid off right around the 15th of January.
Challenges: Ten months left to pay off $42,528. This equates to approximately $4,252 a month in debt payments.  We know that we currently can't pay that much a month towards debt.  But the bright side is that when we calculated this last month it was closer to $4,300.  By continuing to put extra money towards debt this should continue to go down and (hopefully) result in our goal of paying off $60K in one year.
Upcoming Significant Expenses: Bridesmaids dress, new gym membership, physical therapy appointments
Additional Cutbacks: Cutbacks across the board the first half of the month so we could squeak by on our meager budget. Hopefully this next month will allow a little more flexibility and less unplanned expenses.

Stay tuned,
Sarah

Friday, December 10, 2010

Day 57 - Snooki and "The Situation" Better Than You at Personal Finance

November 10, 2010

The Wall Street Journal posted an article recently about an online survey conducted to analyze the personal-financial capability of people who live in the United States.  An interactive map instantly tells you how your state sizes up with the rest of the nation.  Believe me, it's not pretty.  A few snippets from the article:
  • Over half of all Americans are living paycheck to paycheck
  • 60% of Americans do not have a "rainy day" fund
New York and New Jersey (land of Snooki and The Situation) consistently came out on top of the survey while Oklahoma (land of me) was close to or at the bottom of the ranks.  Well, this explains a lot!  What is even more disheartening is that New Jersey - one of the top ranked states in the survey - still has 47% without rainy day funds.

Personal finance education needs to become more of a priority.  Young people especially need to be armed with knowledge so that they know what it means to take out a student loan or how much house they can afford on their paycheck.  How to balance a checkbook and understand compound interest should be required material for everyone.  Budgeting should be no big deal.  If nothing is done to educate the US on basic personal finance skills, I think it could have repercussions beyond your own finances by affecting the economy and Gross Domestic Product in the long term.

During the next year I hope to educate myself a little more in these areas and figure out the best way to pass on this knowledge to people who need it.  In the meantime, take charge of your money!  Don't let it call the shots for you.  Don't be another statistic.

Stay tuned,
Sarah

Monday, December 6, 2010

Day 53 - It's All About the Benjamins

December 6, 2010

Been Around the World / All About BenjaminsAs many of you know, I base most of my debt payment principals on Dave Ramsey's Baby Steps. Ramseyheads are notorious for intense enthusiasm and I will confess I'm no different.  When you hear how much money has been paid off by people all across the country it's difficult not to get excited at the thought.  I will attempt to keep my enthusiasm in check while blogging but I can't make any promises.

Right now we are working on Baby Step 2 - pay off your debts (except for the house) beginning with the smallest balance first and working your way progressively through the next largest balances.  Our smallest debt balance is one of Mike's student loans with $7,255 remaining at the end of November.  We would really like to pay off this off by New Year's Day (give or take a few days) and we are racking our brain to find a way.  I need your help - can you make money grow on my Christmas tree?  Or at least give me some money-making ideas.  Right now, we have three payments of $1,625 scheduled to put towards this debt in December and early January.  AND.....drum roll please.....Sarah has made an extra $1,000 (after-tax) appear this month by getting a bonus at her job. Voila! Let's see if Mike can create magic and come up with the remaining balance.  When you count the two minimum payments we make in December and January of $134, it leaves $1,110 not including some additional interest accrued.

In the immortal words of Puff Daddy (aka Sean John Combs, aka P. Diddy, aka Diddy, aka.....)

It's All About the Benjamins

So where do we find some??

Stay tuned,
Sarah

Sunday, December 5, 2010

Day 52 - The Dreaded Weekly Budget Meeting

December 5, 2010

Mike and I just ended our weekly budget meeting.  We had to cut it off after an hour and a half.  Exhaustion and frustration were beginning to set in.  We attempted to budget through January and found we barely squeak by in December and end up in the red in January.  We estimate having $3 in our checking account on the 15th (my next pay date) and not enough money to cover bills during the first part of January.  Back to the chopping block. 

Let me tell you, money saving ideas come out of nowhere when you really sit down and think about it.  Or maybe it's just me not being responsible enough to remember this stuff in the first place.  For example, we budgeted $200 for Christmas gifts.  I realized I had received $235 from my Wellness Rewards program through work (basically get paid to exercise) and was able to apply it towards an Amazon gift card - gifts are now taken care of without using any cash!

Another expense that is going to need to be cut is Christmas travel for me.  I really wanted to drive home or drive to Colorado to spend time with some of my family, but the cost of that could easily reach upwards of $500 or more.  I think I will be able to find a manageable alternative, plus it will give me some relaxing time at home without having to show up at work for a few weeks.  Not my first choice but I will have plenty of other opportunities to visit with my family in the near future.

So for now we budget to barely squeak by as long as Murphy doesn't visit any time soon.

Workplace Rewards: Many workplaces offer Wellness Rewards or other types of benefits for their employees.  This is basically free money for you - it may take a little effort but in the end it's worth it.

What we're eating this week: PB&J, Veggie stir fry with quinoa, spaghetti and two nights of Christmas parties (wish we could take home the yummy leftovers!)

What we're selling this week: An office chair and some textbooks.

Murphy's Law: Anything that can go wrong, will go wrong.

Chin up. Eyes on the prize.

Stay tuned,
Sarah

Saturday, December 4, 2010

Day 51 - A Slight Problem

November 4, 2010

Ok, so this is officially our first rough period. Due to some unexpected expenses in the last part of November of about $1,000 (vets can be expensive!!), we have way less money to cover our bills than we originally thought. Another issues that adds to the problem is that about 90% of our bills are due during the first half of the month. Since I get paid on the 15th and last day of every month, the first part of the month is always tight. During the last part of the month, we have to make sure to have enough money left over to be able to cover all the bills due after the 1st. But an unexpected expense can easily wreck this plan.

So what do we do? This is really a time to see our creativity shine as we try to come up with some extra money (and also spend less).  Based on our checking account balances and upcoming expenses through the 15th (car insurance, gas, pet supplies, dr. visits), we have about $75 dollars remaining for food and general supplies - yikes!! The easy way out would be to just take some extra money from Mike's paycheck this month and put less towards extra debt payments. But we are determined to stick to our plan.  Here are some of our solutions:
  • Score! I found a $100 AmEx gift card I got a few months ago from work. Look through your important documents for those gift cards you threw in there a while ago.
  • Protein-packed vegetarian stir-fry: Your favorite beans and vegetables all stir-fried together with soy sauce, rice vinegar, sugar and chili garlic sauce. Substitute quinoa (high in protein) for rice and you have a very healthy, inexpensive and filling meal. Make it in bulk and you can survive on it for quite a few days (we just did).
  • Christmas parties! We've got three coming up and they all involve free food and drinks. We are all of the sudden very social people.
  • PB&J: Come on, nobody is too good to survive on this standby in a time of need.
  • Sell stuff: This is Mike's solution - we've got a great desk chair going up on craigslist soon and a shelf we got as a gift that will be returned to Target very soon.
We are very optimistic that we can get through the next week and a half. Netflix was our best friend last night (along with a nice bottle of wine we received as a gift) and tonight is Balboa Park December Nights - a free Christmas celebration in San Diego which includes free access to all museums in Balboa Park. So despite our limited funds we are still able to have a good time.

What can we do better? We really need to spend more time working on our monthly budgets. To date it has been more of a back of the envelope event, but I feel an Excel spreadsheet approaching quickly.
What are we doing well? Communicating and keeping our cool. Mike and I are in this together and haven't let emotions get in the way when it comes to stressful financial situations. I hope we can keep this up!
Takeaways: Although we really enjoy going out on the weekends for a nice dinner and a comedy show/play/movie/dessert, I realize that you can still have fun on a smaller budget than you think. Netflix is a lifesaver (We LOVE Dexter) and free events are all over the place, especially this holiday season.

Keeping my eyes on the prize - this will be all worth it in about 314 days.

Stay tuned,
Sarah

Thursday, December 2, 2010

Day 49 - It's Personal

December 2, 2010

The week of Thankgiving is typically a great time for everyone to reflect on their lives and recognize what they have to be thankful for.  Last Thanksgiving, my Dad came out for a visit and we ended up having Thanksgiving dinner at the Hotel Del Coronado - his absolute favorite hotel.  It was a very special day for the two of us - just me and my Dad relishing in the amazing buffet spread in the Crown Room.  We both crave great life experiences and this was definitely one I know he had always wanted to have.  We wanted so badly to savor each moment that we made a point of taking small portions every time we went to the buffet line just so we could have an excuse to get up and do it all over again.  Three hours later we reluctantly headed home.

Since this was my first Thanksgiving without my Dad, it felt strange not to see him camped out in  a comfy chair quietly enjoying the hustle and bustle of the day and the friends and family surrounding him.  But I was fortunate to be surrounded by such wonderful family to help me get through the week.  I am also incredibly thankful that I took the time to really connect with my Dad, especially in the past few years.  I have no regrets when it comes to my Dad - I'm not sure we could have been any closer than we were at the time he decided to move on.  This is what I'm truly most thankful for this season.  I hope that you were able to take some time and reflect on what is most important to you in your life.  Sometimes it takes a tragedy to force people to stop, think and reassess what is important.  Don't wait until it's too late - try to take some time each day to think about what is important so that you can live with no regrets.

Stay tuned,
Sarah

Wednesday, December 1, 2010

Day 48 - December Report

December 1, 2010

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.

Survived our Thanksgiving week vacation without spending too much money.  Most of it went to food, beer and gas - all necessities when spending a week with family in Denver.  But we are still on the right track!!




Challenges: Since the majority of our bills fall during the first half of the month we have to make sure to have enough money left over at the end of the month to cover all of our expenses.  This month we had an unexpected vet bill for $500 at the end of the month so there really isn't much money at all. Beans and rice, rice and beans for the next few weeks.
Upcoming Significant Expenses: Physical therapy, Christmas travel

Stay tuned,
Sarah

Sunday, November 21, 2010

Day 38 - Navigating the Holidays

November 21, 2010

As Thanksgiving and Christmas approach, I am excited by the thought of the holiday season ahead.  As mentioned in an earlier post, I had initially budget to spend $1,000 on Christmas expenses this year - a number which seems rather absurd to me now given my financial situation.  And since I have already spent what I had saved for Christmas so far on extra debt payments, I need a new game plan.  There are really two issues at play this holiday season: 1) Gift-Buying and 2) Travel Expenses.

As far as Thanksgiving, Mike and I bought our tickets long ago and for a good price.  Plus the only gifts we expect to buy are for the people we stay with as a thank you. Other than that, our remaining expenses should be food.  We are fairly confident that we will be able to stay within our November budget barring any unforeseen emergencies.

Christmas is a bit more complicated.  As far as presents, I am considering a gift truce with everyone over the age of 18.  My family has a lot going on this year and I think that presents for the adults are not a necessity.  As far as travel, Mike decided to fly home to see his family after we were able to scrounge up flight credits and credit card points to pay for his flight.  As for me, I am contemplating a drive home.  Given that my current job allows me the flexibility to work from pretty much anywhere, it would be easy for me to go home for a couple of weeks.  In addition, I plan on bringing my dog so that eliminates the cost of a dog sitter.  The problem? I estimate the total cost of driving home to be about $600 round trip including hotels and gas.  Given that this is going to be my first Christmas without my dad and the thought of spending it at home by myself doesn't appeal to me too much, is the cost of my trip justified?  When do you allow yourself to think outside of the financial box when making spending decisions?

I think people too often have a tendency to justify their spending with some kind of emotional reasoning - myself included.  But where do you draw the line when deciding between the logical and emotional sides of a spending argument?  If I were to think with solely a financial mind, I would probably decide not to go home since that $600 could be used to pay off debt faster.  If I think about it from an emotional standpoint, I would most likely decide to go home.  Holidays and family have always been important to me.

Although I try, I am not capable of deciding solely based on my budget and bank statements.  But maybe that is why I am still in debt.  I do think that there has got be a happy medium when these types of decisions come along.  But I haven't figured out what it is yet.

Stay tuned,
Sarah

Wednesday, November 17, 2010

Day 34 - The Salary Myth Part I: Income vs. Debt

November 17, 2010

I have generally been taught all my life that a larger income allows for greater security and more options. While I do believe there is some truth to this, I also feel that this type of thinking can be easily misconstrued by a person - myself included. I think I have realized the key word is "debt" rather than income. I believe a family with $50k of income and very little debt can lead a similar or better lifestyle than a person who makes $80k and relies on debt for most major purchases. Let's test this theory by putting some numbers together for a very simplified example.

Family A makes $50,000 annually while Family B makes $80,000 (gross). Family A has very little debt - just a small student loan. Family B has two car payments and lots of student loans to pay back. All other monthly expenses are the same.


Family A Family B
 $50,000 Gross Income  $80,000
65% Less Taxes, SS 65%
 32,500 Annual Take Home  52,000
/12 /12
 2,708.33 Monthly Take Home  4,333.33
 (1,250) Rent/Home Mtg.  (1,250)
 -   Car Pmts  (800)
 (750) Food  (750)
 (200) Insurance  (200)
 (200) Utilities  (200)
 (100) Student Loan  (1,000)
 (2,500) Total Expenses  (4,200)
 208.33 Net Income  133.33

This is obviously an oversimplified example but hopefully it makes the point. Assuming all expenses are the same - with the exception of anything debt related - you can see that these fictitious families can live similar lifestyles despite the $30,000 difference in income.

The general takeaway here is that more income does not necessarily equate to more money, things, vacations. It also does not ease that "stuck" feeling in your head when disposable income is eaten up by car payments and student loans. Just Google the many "Real Housewives" who have lost everything in the past few years.

Takeaways
1) Spend less than you make: A very simple phrase but for some reason difficult to live by. Americans at every turn are encouraged to be consumers often times even to their detriment.
2) Think twice before taking a loan out for anything, including school: You may end up with a mortgage-sized load of debt to pay off - with no house attached to it.
3) More income is not always the answer: Explore your spending habits. You may be surprised to find ways to cut back even more than you first imagined.

Stay tuned,
Sarah

Monday, November 15, 2010

Day 32 - The Mid-Month Report

November 15, 2010

The first and fifteenth of each month I will update you on the status towards our goal of paying off $60K in one year.

So far we have been able to completely live on my salary and put Mike's entire salary towards extra debt payments. A good start to sticking to our budget and cutting back on expenses.










Scheduled Payoff of First Debt: We are currently throwing all of our extra money at our smallest debt - Mike Student Loan #1. We expect to completely pay this off late January or early February if we can stick to our budget
Challenges: Eleven months left to pay off $47,500. This equates to approximately $4,300 a month in debt payments. Right now we do not have that much money available from our current paychecks to put towards debt each month. Mike and I will need to earn some extra money on the side. But how??
Upcoming Significant Expenses: Vet, holidays
Additional Cutbacks: Wine club ($50/ month), online fitness tracker ($17.50/month), office garage parking canceled as of December  ($135/month)

Stay tuned,
Sarah

Monday, November 8, 2010

Day 25 - The Budget


I hope to share with you some of my favorite blog posts from the last ten months. This post about budgeting was my way of saying I had a real wake-up call happen. Sometimes you can trick yourself into thinking you are "going without" when you really aren't. Enjoy!

 The Total Money Makeover: A Proven Plan for Financial FitnessHow exactly do you figure out what you should and shouldn't budget for? Prior to starting the $60K Project, I was a cult-like follower of Dave Ramsey's Total Money Makeover. I created envelopes for my expenses and stuffed them with cash, canceled my credit cards and listened to Dave's three hour radio show almost every day. I religiously saved up for Christmas gifts, auto expenses and vet bills a little bit at a time each month and had my $1,000 emergency fund in place. But even though I consider myself to have made tremendous progress ($22,000 paid off in 18 months!), I still feel like I may have missed the mark somewhere in the process.

Also included in my budget each month was $120 for spending money, $200 for eating out/entertainment and $25 for gifts. Oh yeah, and did I mention that I thought saving up $1,000 for Christmas presents seemed reasonable? And might I mention that Mike and I were not doing the Ramsey Plan together - it was just me. So I was trying to balance paying off debt while maintaining a life with someone who didn't necessarily overspend (by any means) but also didn't feel any need to be especially frugal either.

In a way, I was fooling myself a little bit. I smugly thought that I "got" the Ramsey Plan and "lived like no one else so I could live like no one else." I realize now that I would pick and choose the elements of the plan that were convenient for me at the time. I was also over-saving and over-budgeting for certain items, resulting in considerably less money to put towards my debt snowball - and living a relatively comfortable way of life. Considering my income and comparing my payoff timeline to callers on Dave's show, my performance was below average.

So what have I learned so far? 

If I budget for it, I will spend it. Whether I saved $500 or $1,000 for Christmas, the total amount will be spent. Same with my "spending money", entertainment, gifts, etc. That Starbucks grande cinnamon dolce latte is a lot easier to buy when in my head it appears to be within the budget. Going forward I do not have a spending money, gift or Christmas envelope that I diligently throw money into. I carry very little cash in my wallet and I only budget for essentials. There is no play money anymore. Instead of stockpiling wads of money for "emergencies" or having a little too much spending money for frivolous purchases, I throw it all towards debt. 

Eating out is not essential. Dave Ramsey always talks about how the only way you should see the inside of a restaurant on his plan is if you're working there. I didn't really take that to heart until this past month. Trust me - it is not easy. I get a lot of enjoyment out of my nights out at great restaurants and this past weekend I was going through withdrawal while watching a 30 Rock marathon (thankful for Internet) and eating a homemade - yet fairly tasty - cheeseburger. But by cutting out the eating out part of our lifestyle we easily save $500 - most likely more when you account for lunch, coffee, dessert. That alone is $6,000 a year or 10% of our total debt payoff goal.

Your family needs to be on the same page. Being accountable to someone other than myself is a real motivator. It makes me think twice about grabbing a slice of pizza for lunch or a coffee and bagel in the morning because now I have someone to answer to other than myself who scrutinizes every transaction. On my own, I wouldn't have thought twice about it. I hate to say it but it's nice to know that Mike will give me a hard time and vice versa. It is a nice checks and balances system.

So I continue to thank Dave in all his infinite wisdom (and superior marketing ability) and have vowed to re-learn what his baby steps are REALLY all about. And some day in the near future I hope to yell "I'mmmmm debttttt freeeeeee" at the top of my lungs.

Stay tuned,
Sarah

Thursday, November 4, 2010

Day 20 - It's Personal

November 3, 2010

I've never been too good at sharing anything about my personal life - but I'm working on it in hopes that I can learn and benefit from it. I recently lost someone very special to me and he is the inspiration behind the creation of this year-long challenge.  So here goes....

Hi Dad,

It's been a little over two months since you died and I'm still really struggling with the fact that you aren't here. As more days pass, I realize how much I relied on you for support - in good times and in bad - and how much it affects me that I can't just pick up the phone and call you. I realize that my phone calls to you greatly helped me deal with stress in my life - you would always listen to me and what I had to say that day;  you always picked up the phone regardless of how you felt. Unfortunately, talking to mom is just not the same.

I knew you were a great man but as time passes without you, I realize even more the commitment you made to your family - and that you kept it both in good times and in bad. I hope you know how much I love you and how great an influence you have been in my life. I am very proud of the fact that I was raised on classical music, Shakespeare, and changing my own oil. I am so grateful for every day I had with you - even the bad ones. I think you and I have a very special relationship that I will always cherish. I'm so thankful to have had someone like you in my life - I feel like I have learned from both your triumphs and miseries and I am grateful for it.

So where do I go from here? I feel lonely sometimes without you - you really "get" me and always have. I feel like I am somewhat of an enigma to the family sometimes. It's hard to move forward in life without your biggest fan and moral compass. But I am making every effort to get to a better place knowing that you will always be in my heart. I know our long talks on the phone where we would keep saying goodbye but never hang up are now just a happy memory. But I know that you were - and still are - my biggest advocate, my shoulder to lean on, my person to share grand ideas and dreams with. I hope that you are still watching and listening because I plan to keep talking even though I keep trying to say goodbye. I'll never hang up.

Love you with all my heart,
Sarah

Day 19 - The Start

Nov. 2, 2010


There comes a time where you just have to draw a line in the sand. I'm
not sure what it was that put us there, but Oct. 14 was that time.

Debt is an interesting thing. In some cases, it can be useful.
Investors use debt and leverage to boost their returns, especially
real estate investors. Families use it to help buy homes. In these
cases, you pay down your debt and are left with an asset - a home, an
investment, etc. Debt also allowed us to attend some top-notch schools
and get some top-notch degrees. However, as we pay our debt back, we are left
with what? A piece of paper and an education - the same piece of paper
and education we had before we started paying off the debt. When
paying off a mortgage, you have the end goal of owning your home free
and clear; with a student loan, there's no such carrot, other than not
having to send a chunk of your paycheck into a black hole every month.

I don't think this is the time or venue to discuss the merits or
drawbacks of using debt to pay for school. For people our age, taking
loans to pay for school (often multiple degrees) was taught as the
thing to do. We never really thought twice about it. Similarly, many
people jumped on the bandwagon of buying a home (regardless of their
situation and income) - and we see how well that worked out for a lot
of people.

Looking back, would I do it again? Would I take out loans to get my
degrees? Probably. I think the payback has probably been worth it for
both of us (although I do occasionally have second thoughts). However,
if I did it over, I probably would have worked more during school, saved up more money before hand, or really chased scholarships a lot harder - basically, do
anything to minimize the loan amounts I needed.

Anyway, as a result of our educational endeavors, we’ve been writing checks off
to various lenders each month, eating away at a significant portion of
our take home pay. We try to justify this - saying if we didn't have
these degrees, our paychecks would be smaller. We’d like to hope that the
paycheck increases our education brings us is more than our monthly
student loan payments - although that is not something I can easily
prove, or disprove.

I mentioned we drew the line. Something clicked. Sure, I was tired of
seeing people, who I knew made less than us, buy homes, nice cars, go
on nice vacations, and wonder how they afford it and we couldn't
(although I knew the answer). But that wasn't the tipping point. I got
tired of not being able to move into a nicer house or to go on a nice
vacation. I also got tired of calculating what we could buy each
month, or how much we could save, if we didn't have to make monthly
loan payments. Those weren't the tipping points either. I got sick of
second guessing every purchase we made, wondering if that money would
be better spent paying down debt. I got sick of constantly having that
number in the back of my head - we still owe this much money -
constantly, thinking about all of that money going into a black hole.
It's tough to enjoy a nice meal out or the new bike I
want if I second-guess the purchase - and then feel guilty about it,
knowing I should be paying down debt. It's tough to enjoy a
vacation, if you're worried about every penny you spend and how that
relates to your debt. It just gets old.

Of course, the alternative was to continue to make minimum payments,
budget that into our cash outflows every month, and ride the loan out
into the sunset (20+ more years). But for some reason, that annoyed me
too. I don't think I could stand having to have the annoyance of debt
for that long.

So, if it was going to bother me, if it was going to interfere with my
life and prevent me from doing things, buying things, enjoying things
- why not just bunch the misery into a shorter time period. Why not
just cut everything we possibly could out of our budget for a short
period of time, suck it up, pay off our debt (or a good chunk of it),
and then go on living life as we want to.

Of course, this isn't just about paying off a large part of debt. With
that comes budgeting, understanding where every penny is going, where
we spend our money, where we waste money, and learning how to cut our
costs. When you start looking at these things closely, it's amazing
how money can (and used to) just disappear each month.

I don' t know why we never thought of this before. I guess we kept
tricking ourselves and coming up with excuses. I think we finally
realized we had to make a stand - and that's why we started this
project.

M.

Monday, November 1, 2010

Day 18: November Budget

November 1, 2010

All right, down to business. Mike and I are trying to live on one paycheck while the other paycheck goes completely towards paying off debt. After taxes, health insurance, 401(k) and God knows what else, my monthly "take home" pay becomes approximately $4,350. Sound like plenty? That's what we thought, too! But then we looked at our expenses for November: 

Where did all the money go?  Your first thought: Get rid of the housekeeper and the massage!  Very good points.  The massage is definitely under consideration - Mike gets a massage once a month because of an injury.  He is trying to evaluate whether this is really a "necessary" expense at this point.  The housekeeper is also under consideration although I may have a little more trouble letting it go.  I know, I know.  You think I'm being a little ridiculous - and maybe I am.  But I gladly gave up cable - a "necessary" expense in most households - in exchange for keeping the housekeeper.  Or maybe I'm just trying to grasp at some sort of justification.  Interested to hear what you all think…..

As far as cutting any remaining expenses, I think groceries and supplies might be estimated a bit high.  But I swear every time we go to Target we don't walk out of there without spending at least fifty bucks.  Weird how that works.  Plus we have really cut back on eating out - I think we ate out once in the last two weeks.  Before we cut out restaurants, we would spend about $80 a week at the grocery store for breakfast, lunch, snacks and five dinners.  Now we are estimating $120 a week with no dinners out (plus the $50 Target fee).

There are a few one-time expenses during November: Duke's sitter is only because we will be going out of town for a few days (business idea: dogswap service) and haircuts don't happen every month.  As we go through this process together, hopefully we can figure out a way to bring in more income (insert business idea) or get rid of some expenses we currently have.

Expenses Already Cut: Cable, Spending Money, Eating Out

Additional Expenses to (Maybe) Cut: Housekeeper, Massage, ???

Future Roadblocks: Duke needs a visit to the vet ($); Bridesmaid dress ($$)

Frustrations: We could buy a Tesla with the money we spend on student loans every month.

Sarah

Sunday, October 31, 2010

Day 17 - Making Time to Write

October 31, 2010

I have even more respect now for writers (bloggers, especially) who can consistently write something to share with the world.  It's been two weeks since my last post!  I find myself wanting to sit down and write about our progress but I can't seem to make the time.  I hate this saying but - life always seems to get in the way.  And coming from a family of writers (excellent ones, I might add) I would expect more from myself - even though somehow I ended up as an accountant.

My mom has decided to do a writing marathon during the month of November and write an entire first draft of a novel.  I think a blogging marathon is in the works for me.

On a financial note, Mike and I made it through our first two weeks of living on my paycheck.  We even went out on the town one night (Groupon in hand, of course).  Mike's entire paycheck went towards our smallest debt.  This might actually work!

More later, I just wanted to check in and get back on track!

Sarah

Sunday, October 17, 2010

Day 1: The Mortgage

October 15, 2010

Day 1 of the $60k project was a big one. Mike and I decided that in order to successfully pay off this very large amount of debt in 365 days, we would need a flea flicker to get an early lead in the game. We scrounged up every last penny we could possibly find - withdrew from checking and savings, emptied the change jars, searched under the couch cushions (seriously) - in order to pay off the smallest debt we owe. The flea flicker worked:
10:30am - Arrive at Bank
10:33AM - Skip Out of Bank
I can't even begin to explain to you how good that felt. I tried to express to the bank teller my feeling of exuberance but she shoo'd me away before I could tell her for the eighth time that I was paying off my mortgage. Some people.

Wait a minute, Sarah - you have a mortgage? Does that mean you just paid off a house? you have all of this debt and a paid for house? I don't get it.

You know how you can set your relationship status to "It's Complicated" on Facebook? I think my mortgage relationship status would be closer to "It's Really F'd Up". About four years ago, I convinced myself that I officially had a lot of money to spend because of my "good" income. So I decided it would be a great idea to help my mom purchase a smaller, more manageable (and affordable) home. (Mom, just stop reading here and skip to the next paragraph - nothing to see here). Since my mom's credit is less than stellar due to her inability to pay bills, I came up with the down payment, got approved for a mortgage and became a homeowner. Once the old house sold, my mom paid off both the old and new house mortgages with the proceeds. So technically I do have a house in my name, but in reality it's my mom's house because she paid for it. Although the ownership seems to revert back to me when taxes and insurance are due. Or when the roof needs to be fixed. By the way, I would highly recommend NEVER doing anything remotely like this. Even if you have good intentions, mixing family and finances is about as tasteful as brushing your teeth and gargling with orange juice.

Once the new house was paid off, I decided to take out another mortgage and pay off all of my credit cards (which turned out to be a good move since shortly after I did this the housing market collapsed and credit card interest rates skyrocketed). So ultimately the house isn't really mine and Mike and I just paid off all of my old credit card debt. The main point is that we scrounged up enough money to pay off $7920.89. A HUGE win for us.
Why is this so important? Our payoff strategy (I'll explain this in more detail later) is to attempt to live on one person's paycheck - living expenses, minimum debt payments, fun money, everything. The other paycheck will be used to pay extra on the debt. Paying off the mortgage immediately freed up an extra $335 to live on since we will no longer have a monthly payment. That's the logical answer. Psychologically, completely paying off a debt is a great sense of accomplishment and also a great motivator.
Now reality sets in - there is no extra money out there for emergencies. There is only one paycheck to live on. Serious cutbacks are ahead of me. I'm not sure I know the definition of frugal. A serious post from a slightly freaked out person. Can we really do this? Are we setting ourselves up for failure? Are we just plain crazy? Send me some positive vibes.
What's Coming: Getting to know us and our financial situation a little better. "Mike's Corner". Laughing (you), crying (me), taking care of business.
Stay tuned,
Sarah

Thursday, October 14, 2010

Day 0: 365 Days and $60,000 To Go

October 14, 2010

We have finally thrown down the gauntlet: pay off $60,000 in debt in one year. For you math heads out there, that's $5,000 a month, $165 a day. I'm pretty certain this means my life is officially over - at least temporarily. Goodbye J Winery club membership. So long Kate Spade Friends and Family sale. Farewell eating out when I feel too lazy to cook. Duke, we're downgrading from Natural Balance to Kibbles 'n Bits - and we're going to have a serious discussion about the cost of bones. 

Why the hell am I doing this again? And who the hell am I anyway? I believe I represent the average American lifestyle - I grew up in a household where debt was a way of life. My dad was in debt most of his life - only two months before he died this year did he finally become debt free. He was 73 and it was one of his proudest moments. My mom has no concept of due dates and check registers. Paying bills makes her break out into a full blown panic attack most months. Coming home from school to find a utility cutoff notice was nothing out of the ordinary for me.

Growing up I was constantly reminded how important an education was and that school loans were my ticket to a better life that was carefree and absent of debt collectors. Consequently, I decided to do whatever it took to get through undergraduate and graduate school - including taking out a bunch of student loans. Now every month I make a payment to Sallie Mae that is the equivalent of a mortgage for a very nice home. On top of that, I thought credit cards were made for living expenses in my early twenties. Not until recently did I realize that there is something very wrong with this picture that I just painted.

I'm now in my early 30's and I actually make a "good living" - at least I thought I did. But when your good living goes right out the door every month to pay for living expenses and debt it doesn't feel so good anymore.

The good news: I paid off $22,000 in the last 18 months.

The bad news: Combined, Mike (you'll hear from him soon) and I have $110,000 to go. Just writing that down makes me feel nauseous.

The goal: Pay off $60,000 in the next year.

The fantasy finish: I'll let Mike speak for himself because I'm fairly certain he has his own ideas, but I envision us standing next to Matt Lauer and Meredith Vieira on The Today Show holding a giant check made out to Sallie Mae (evil of all evils). Jimmy Buffett has just finished his Friday concert series performance (do they still have those in October?) and is handing me two front row seats to his next concert.  And for all of our hard work Al Roker informs us that he told the annual Today Show wedding winners to piss off and we are the much more interesting, better looking replacements!!

So why am I writing about paying off debt for the whole world to see? I must admit I'm not usually the sharing type. My biggest reason: accountability. Even if I only have five readers the entire year, I will feel like I disappointed these five random strangers if I don't achieve my goal. Second reason: I want people to know that living a debt free life is possible. Definitely not easy, but possible. I want to show people it can be done.

What's coming: Day 1 is a big day for us - find out why. Meet Mike. Learn more about our plan of attack (or lack of). Feel inspired. Have fun.

Stay tuned,
Sarah
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