Can we talk getting out of debt?

[Aubrey]

We've never been great at budgeting, etc., & this last yr while dh was...underemployed?...we ended up w/ quite a bit of cc debt. Anyway, I think it will all be paid off when we file our taxes. Our cars are paid off, & we rent. So the only thing left is student loans.

 

And my are those big. About 2yrs worth of pay, when he was working a real job w/ benefits. Maybe 4-5 yrs worth now. The interest rates, of course, are really low. Part of me thinks we should just figure these in & consider them long-term suck-it-up debt.

 

But we're paying interest-only on mine, dh's are deferred since he's in school. When the interest-only pd is up, we won't be able to afford them. Not that we can afford them now. I would like for them to go away. Of course, lol.

 

Anyway, I like to make up plans for getting out of debt, even though we're not. quite. making it now. I think this drives dh crazy.

 

For ex, I suggest selling stuff. He says we don't have enough stuff to sell. Not valuable stuff. I say every little bit helps. He says we'll end up having to replace most of it at a higher price. But we have a set of Tiffany wine glasses that his old co. gave us that must be worth something & a lot of books & an old non-digital camcorder.

 

I also think that we need to be more careful w/ budgeting. I think that $1 for something at the gas station, for ex, is a really bad idea. Does $1 really make a difference? Maybe not, but I tend to think that the mindset does.

 

I figure it's like dieting. W/out teeny goals, it always feels too impossible to get any where. After we pay the cc off, I'd like to make some goals w/ regard to his private student loan, since it has the highest int. rates of them all. Or maybe mine, since they can't be deferred.

 

I'm pretty sure he thinks we've got enough trouble now w/out looking for more. We can tread water w/ my loans & focus on the fact that we're not taking any more out for him. He's probably right. We should probably pay off the cc & work on savings so that we can *keep* the cc paid off.

 

What do y'all think?

[cathmom]

Honestly, I have no idea. You have described our dilemma perfectly - paying off debt would help the budgeting, but the income is so low that there's never enough to help pay it off, and what extra money we do get goes to needs that can't be covered with regular income. We establish an emergency fund and then the money gets used with no way to replace it, and then we are back where we started. I feel like every financial decision I make is the wrong one, from whether or not to spend $4 at the grocery to buying a house. It's VERY frustrating.

[Julie in Austin]

We've really liked this budget program:

 

http://www.snowmintcs.com/products/budgetwin/index.php

 

Maybe it would help?

[Tammyla]

Dave Ramsey.

[always cookin']

I think you are right on about the attitude. Most people who have a lot of money got there because they don't spend it. I think you really need to track carefully where ALL of it goes. A dollar at the gas station (or wherever) can add up to a lot.

[partyof5]

Dave Ramsey has been our "rescue" from a similar lifestyle.

 

We took his Financial Peace University course at church but his books have similar teaching if the course is unavailable (though I HIGHLY recommend FPU if you can attend!).

 

It is a mindset, a lifestyle change, a total new way of thinking. Without this, you are right in likening it to dieting. It's the nibbles of extra food that create unwanted weight, not one single meal. Likewise, small it's-just-a-buck-or-two thinking will lead to massive debt.

 

We too struggled with not enough income to make the budget work and to look at getting to the point of purposeful money-saving/investing. The solution? First, stop spending by creating an air-tight budget with no frills. Sell stuff and buy nothing. If you still can't pay for things your family NEEDS, then you must make more money. Extra part-time jobs, short-term, were pretty much the only solution (for us) in that case.

 

Now we are living in an entirely different mindset. Budgeting every dollar. For us, attending FPU TOGETHER, (or perhaps reading the books together would work for you), were what helped us get to EXACTLY the same page, not sort of kind of trying to make it work, but working diligently, purposefully, together as a couple.

 

I'm sure there are other helpful programs out there, but I think Dave Ramsey does a wonderful job integrating financial information with the need for teamwork within marriage, and most importantly, relying on God...pray your way through this together.

 

Dave's "Baby Steps" are helpful in prioritizing what to tackle first, which also sounds like something that would be helpful for you.

[Alana in Canada]

Dave Ramsey, hands down. Check out the book "Total Money Makeover" from the library! You both neeed to be on board. Woud your husband read it? or listen to a broadcast of Ramsey's show?

 

There's also a free web-site with fabulous folks called "Living Like No One Else" (or LLNOE) who can give support and help (and fun stuff like grocery challenges and so on.)

[Once]

I second the Dave Ramsey FPU suggestion. My dh and I are mid way through it now. It has been fun, tough and informative. Just to let you know....even Dave would recommend a small allowance for adults to blow money on things that they feel is worthy of it. So use this as a selling point to your dh, it may lighten the burden of a buget just enough to get him on board. To put it in perspective, we each have $15 a month to spend however we please. My hubbie played a game at the arcade last night with some of his and he goes out to lunch with a friend on a monthly basis. I am keeping mine for drive through on nights when I am without the kids. Budgets are freeing if done properly and Dave Ramsey is a good source for motivation and tools to get the job done.

 

Best wishes! It is worth it!

[Mommyof4ks]

I think you are right on about the attitude. Most people who have a lot of money got there because they don't spend it. I think you really need to track carefully where ALL of it goes. A dollar at the gas station (or wherever) can add up to a lot.

 

:iagree: I was AMAZED at how much money we had left at the end of the month when we tracked every.single.penny.we.spent. Even $50-$75 toward debt can make a big difference. It is hard to dig out once you get in, but keep plugging away, and you too will get out of this. Dave Ramsey was too harsh for us, but he is a great starting point and perhaps what is needed with limited funds at the moment.

[bettyandbob]

I think tracking every single penny could result in huge saving for most people. And putting that toward debt reduction would significantly reduce debt.

 

But selling stuff. Doesn't this presume you have stuff people want. And if you have stuff that is usually desirable--is this a good time to unload it. Given the economy, it seems like everyone is looking for a way to get what they need cheaper and not looking for "extras". I would put Aubrey's Tiffany wine glasses in the category of "extra" for the vast majority of the population. I have a large collection of blue depression glass I'd like to unload. My suspicion is that if I can hold off the amount people will pay will be quite a bit more when the economy improves (which I hope is soon). How do evaluate whether you should hold on to something?

 

I sell practical stuff like coats, snow boots and curriculum, but that money buys larger coats, larger snow boots and more advanced curriculum. So, selling this stuff is just part of my standard operating budget, not a way to raise funds.

[Catherine]

We too struggled with not enough income to make the budget work and had to look at getting to the point of purposeful money-saving/investing. The solution? First, stop spending by creating an air-tight budget with no frills. Sell stuff and buy nothing. If you still can't pay for things your family NEEDS, then you must make more money. Extra part-time jobs, short-term, were pretty much the only solution (for us) in that case.

 

This is it, in a nutshell. In an earlier time of my life, I had to make some difficult decisions wrt: working with a small child and paying off massive educational debt. It's not fun or easy but the short term joy of being there for every single moment of my baby's infancy had to be balanced out by the reality of our situation and the decision of whether or not to take responsibility for our lives and our debts. Dh moonlighted. AFter loans were paid off, we saved a reasonable down payment for a house, and were able to purchase one. We are not totally debt free, but only owe for mortgage.

 

First, stop spending, just as the DR follower quoted above suggests. Until I was forced to see and acknowledge my own spending habits, nothing changed. Then prioritize debts and set up a plan, and figure out if more income is needed. It actually is incredibly empowering to have a plan and work on carrying it out. It did not realize how much anxiety I had over money until I gained control of it and started making it work for me.

 

ETA: That first paragraph is a quote-I did it wrong and it doesn't indicate that it's a quote. Sorry!

Edited March 1, 2009 by Catherine

[seanda]

There are so many ways to cut a budget... and plenty of people out there with info on how to do so.

 

We began making our own laundry detergent and cleaners. I make things from scratch. I search ads and shop loss leaders. I stock up with the loss leaders. In fact, I almost only buy super sale items at this point because I have a good stock of sale items in my pantry and freezer.

 

What really helped me is to keep a modified version of the envelope system. I have envelopes for food, gas, and of course extras. When that extra money is gone it is GONE. I keep it low but it does allow for the occasional item at the gas station if I did not plan properly or coffee out with friends or if I save, a movie matinee for the family. It has changed my life. I can't believe how the dollar here, dollar there added up. If you are doing these on a regular basis it is hundreds if not thousands of dollars.

 

I can generally feed my family of 4 (which includes an 11 yo boy who can eat enough for 2 and a 13 year old girl) for 50-60 per week, including paper products, and cleaners. (Since I make my own, the cleaner section is tiny.)

 

The mentality that every little bit helps is sooo important when the budget is tight.

[Closeacademy]

First--Dave Ramsey. Check out his book and read through baby step one then do baby step two.

 

Second--Set up your budget the Dave Ramsey way and tell your money where to go. If you think you need it (we did) buy the DVDs or take the class at a local church.

 

Third--use CASH as it is harder to part with.

 

Fourth--yes, $1 a day is $30 a month is $365 a year. Most people's car payments are that much or more. So stopping by the Quickmart for a coke is 1 car payment a year.

 

1 nice meal out for a family of four = $50. Over a year that is $600, that is the equivelent of 1 house payment.

 

If you use that $80 a month to pay extra on debt it goes toward the principal and it will get paid off faster.

 

As far as selling stuff, I sold enough of our used books to pay for most of our curriculum for next year.

 

If you have a garage sale you can make from $100 to $1000 depending on how much good stuff you have. Furniture and appliances make the most money but kids clothes, books, and useable stuff like glasses, plates, pots and pans also sell well in most areas. One of Dave Ramsey's sayings is "Sell so much stuff that the kids think they are next."

 

Good luck. Btw, we've been doing Dave Ramsey since December and have paid off over $5000 worth of debt just through budgeting and putting the excess on debt rather than blowing it on whatever. And during this period we did buy his DVDs and he only takes cash (check or debit).

 

:001_smile:

[CactusPair]

Dave Ramsey isn't for us, but I do like his envelope system. Limiting and budgeting your money this way might help you keep from overspending at the grocery store, etc.

 

I think it's really important to track every cent when $ is tight. It's surprising how much is lost on frivolous spending. Every bit makes a difference.

 

I know about student loans, ugh! We've been paying a long time on mine. We just keep plugging away. It would be really tough if we couldn't afford to make those "smallish" payments, though. Is there any way to supplement your household income to help pay the student loans when crunch time comes? Like dh taking a 2nd part-time summer job or something? This is just one suggestion. You have to do what's right for your family situation.

 

I don't have any really good ideas for you. If I did, I'd use them myself! Just a :grouphug: to say dh and I have been there. I know it's tough and frustrating. We got married as students and we were poor and struggling for most of our years together.

[Tree House Academy]

We made our mistakes early in our marriage. I was working full time and dh was working full time. Then, I stopped working after my ds5 was born...however, we didn't stop LIVING as if I was STILL WORKING. :( That amounted to about a year's worth of my salary on the credit card. Then we lumped that, along with student loans, a car, and some other stuff into a second mortgage. Now, while I pay down my mortgage for the next 15 years at $2200 a month, I realize what a terrible mistake we made. :( Hindsight is 20/20. The difference between your situation and my own is that we own a lot of land (which is why we were able to get a loan of the magnitude that we did with a payment as low as it is) and dh makes great money now (double what he made when we got into the debt). That helps a lot. The other part of our debt paydown has been sacrifice. We just can't buy what we want anymore. We think about it a lot before we buy. We just received his yearly bonus, plus our tax return, and ALL of it went to pay off debt. I was sick about it too...do you know what else I could have done with 10K? :( But, this is what we have to do for right now.

 

I think you are 100% right in your mindset about not paying higher prices for things at places like the gas station, etc. It is definitely a MINDSET issue and that is a great start to saving. I would be sure to get at least 1K in savings before you start to pay down debt and defer your student loans as much as you can. We did for 3 years EACH before we rolled it into what we now lovingly refer to as the "we are stupid loan."

 

Our goal is to get out of debt and NEVER, ever find ourselves there again.

 

I think the other important thing is not to live above your means. If you make 50K a year, learn to live within that range. If you make 500K a year, live within that range. The problem is when you make 50K and spend 500K! KWIM? Doesn't really matter how much money you make if you spend more than you have. I have friends who, together, make less than my dh...but they spend in their means and can afford a lot more than we can because they have little to no debt.

 

I also second the "fun money" idea brought up by a pp. My dh and I did this as a MUST. We also include in that fun money, the gas for our cars for the 2 weeks. Dh gets $275 every two weeks and I get $150 every two weeks. It really helps to have money to spend that doesn't involve any kind of budgeting. I spend my money however I want (once gas is taken care of...it is usually $35-45/2 weeks) and when it is gone, it is gone and I have to wait until the next two weeks to replenish my supply. This last paycheck, I bought some nice pants on sale at Belks, did lunch at McD's with the kids, did lunch with a friend after church (weekly occurance there), bought books at a used book sale, rented a movie, and I still have $40 to spend. Cash is SOOOO important to making our budget work.

Edited March 1, 2009 by Tree House Academy

[Aubrey]

there any way to supplement your household income to help pay the student loans when crunch time comes? Like dh taking a 2nd part-time summer job or something?

 

Dh is already working 2 jobs + going to school.

[hillfarm]

I know this sounds silly, but money saved goes farther than money earned. You don't have to pay any taxes on it (since you already have), and if you do it correctly, it costs you very little or nothing to acquire it (no commute, special clothing, etc.)

 

At one point about 15 years ago, my dh laughed at me for suggesting that we should try to get totally out of debt. But I quietly kept paying things off. There are several authors who write about this: Dave Ramsey, Larry Burkett, Mary Hunt, etc. Now I am working on gathering up 6 months of living expenses before I start the big push to pay off our last debt--our home. It can be done. We are doing it on a farily small salary.

 

If you have stuff that has value that you are not using, sell it. Once you get into the right mindset, you will begin to see opportunities everywhere for ways to make money. Can you clean offices in the evenings? Can you cater sandwiches and cookies for office parties? Can you cater the food for ps "home room mothers" to bring in to class when they don't have time to make it? Can you sell pies for the holidays, fancy challah bread sculptures for Easter? Do you have any type of skill you can teach? Could you offer summer tutoring for children who need remedial work in a particular subject? There are a million ways to make an extra buck and with enough of those, you would be surprised at what you can do.

 

Your dh probably isn't antagonistic to the idea, just unable to see a way that it could be done. Especially if his time is totally taken up. Is there any way he could continue to look for jobs that pay more than the two he has? Perhaps be in somewhat of a continual UPward spiral of replacing the lowest paying? There's no sense in him working longer when he could be working smarter.

[Susan in TN]

Before we started the journey through getting out of debt (13 years ago), it was difficult to convince dh that it was a good thing to do. We grew up in similar households in many ways, but WAY different attitudes about money.

 

I found it helpful to add up what each of those "little" things might add up to in a year. Each little thing sold, each $1 saved here and there. It adds up. And the "snowball effect" that Ramsey talks about is encouraging.

 

I also found that dh was much more receptive to the idea of "cutting back" when we put his own personal "slush fund" into the budget. It might have been $30 per month or something like that. When he wanted to "blow" money at a coffee shop or a fast food restaurant or a DVD, that's what he used, and it made it easier for him.

 

We've been out of debt for 11 years now with a solid emergency fund; we aren't wealthy, but we do "live like no one else". Even in this topsy turvy economy, we don't live in fear.

[Melissa in Australia]

. Does $1 really make a difference?

 

 

 

absolutely. if you count and save your pennies ( or $1) than the dollars follow.

it is only by saving the $1 everywhere that I live in a mortgage free house, and have an investment property. we live an extremely frugal life. and try not to buy anything that we can live without.