I have to tell you, I'm quite excited. Our family has just reached a difficult but important milestone, one that means that we're breaking the poverty cycle, starting with us!To my chagrin, I must admit that our family does have debt. While not an insane amount, and none of it because of reckless spending, but just a combination of some faulty decisions and bad luck (can anyone say terrible landlord?), whatever the reason, debt must be paid off, and I'd like to do it sooner as opposed to later. To do this, my husband and I have been trying to follow Dave Ramsey's Total Money Makeover Baby Steps.
The steps are:
1) Save up a Baby Emergency Fund of $1,000 dollars (or if your income is smaller than $25,000, only $500 in the BEF). (Read all about why emergency funds are important.)
2) Pay off debt using the Snowball method (I'll talk more about that later).
3) Finish off your emergency fund with 3-6 months of living expenses.
4) Save for your retirement.
5) Save for your kid's college
6) Pay off your house
7) Build wealth and give to other.
When I first heard about this Total Money Makeover plan, I was completely disheartened. For all that we were tightening our belts, we weren't able to get our spending to be less than our way too small income. Staying afloat was hard enough; saving anything was out of the picture. We seemed to just be going more and more into debt each month because our income wasn't enough. Saving $1000? I didn't think that would ever be possible.
But we didn't give up. We pinched pennies till they screamed (borrowing the phrase from another blogger), truly believed that little sums of money add up, and did more and more extremely frugal things.
I'm proud to tell you that not only did we get our spendings below our teeny tiny income, we also managed to free up enough cash to put a little bit of money into savings every month.
Finally, finally---
I'm happy to announce that we saved up a baby emergency fund! We now have $750 in savings (a compromise between the recommended $500 and $1000 because of our variable income) and now are ready to move on to baby step number 2- tackle that debt!
But, to be honest, the thing I am most excited to share is that we just completed our 2 month income valley (we always have the most expenses and least income during the months of September and October) and did not go into the dreaded overdraft! Not only that, but we also didn't even touch that baby emergency fund! Even better, we still have all our bills paid and a decent amount of cash and a nice amount of gift cards waiting to be used. My husband gets paid in another 10 days and this paycheck will be a good one, thanks to his working many hours overtime this past month. We have enough cash to last us until his paycheck arrives. Yay!
The way we managed to stay afloat during a super valley month was by filling in the valley a little bit, even if it means being very tired. I took on 4 cleaning jobs a week, and while originally I was going to cancel some of them, I decided that the money was worth it and tried to find a way to juggle it so I could keep the job, the money, and my sanity. Fortunately now, instead of cleaning jobs 4/7 days each week, I put them back to back and work outside my home only 2 days a week, giving me the rest of the week to relax and spend time with my family and take care of the house.
So there you have it- that little bit of good news that I was just itching to share with you.
We did it!!!! Party time!!! (Frugally, of course!)
Now to tackle that debt. Let the snowball begin!
If you follow Dave Ramsey's baby steps (or anything similar), where are you holding? Which step has taken you the longest? What issues have you had along the way, and what proud accomplishments can you share?
If you don't follow Dave Ramsey but are trying to pay off debt, what is your method of trying to become debt free?