Personal Finance

Calling Dave Ramsey for their "We're DEBT FREE!!!" scream!

This is the second part of Katie’s story, you can read Part 1 over here.   Today Katie shares a few tips on just how they managed to accomplish such a feat.  Mr. Frugal and I are also compiling a list of the extreme measures we’ve taken as a family (and are currently taking) to be debt free. We’ll be sharing at least one per week until they run out.  You can read more about the cash only envelope system over here and you can download FREE Debt Snowball and Avalanche Plans Worksheet over here.  

Here is the rest of Katie’s story… 

We paid $99 four days later to enroll in Dave’s online Financial Peace University. Trust me, that $99 HURT. Dave doesn’t accept credit cards, so that $99 was REAL money.

On December 8, 2011, just two days shy of exactly 28 months, we sent off our final payment to pay of my husband’s 13-year old student loan.

How did we do it?

I wish I could tell you it was easy.  It wasn’t. It took hard work. It took even more time away from our family. It took prioritizing. It took patience. It took perseverance. It took tears. It took sweat. It took self-control. It took realizing that stuff was *just* stuff. It took humility. It took asking for help. It took receiving that help. It took letting go of control. It took letting God take control.

Though I can hardly sum up what emotions I felt as we went through the process, I have been able to share what I’ve learned with people struggling to let go, like we were.

1. Write Down Your Budget Every Month.

I’m a list junkie. So, when it came to writing down a list of all of our income and spending, I got a little giddy. Some might see it as a chore, but I’m telling you… writing down where our money was to go before we sent out payments gave us a sense of peace that seemed to seep into other facets of our lives. I knew I had $200 for groceries. I knew our bills were paid. I knew I’d have money to put gas in the car. No more wondering if this was the charge that put us over the edge into the red. When I saw our hard-earned money being sent out on paper first, it took away that high blood-pressure inducing anxiety that Quicken brought on. Plus, by writing it all down, we found money! On average, we sent $1800/month to our debt. We were taken care of. Everything would be a-ok.

2. Cash doesn’t bounce, nor does it accrue interest!

Dave Ramsey devotees will know about his Envelope System, that has you writing down every penny spent on paper envelopes, which eventually need replacing, whether you’ve written in the allotted spots, or the envelopes have torn. Just because Dave helps folks out of debt doesn’t mean he’s not a marketing genius!

The best $1 I’ve spent in the past 2 years was at Target on my Envelope System. It’s a plastic coupon organizer! It’s bright, so easy to find. It’s small, so it fits in my purse or diaper bag. It’s durable, so I’m still using the same one I bought 2 years ago. I love it so much, when friends ask me to do financial counseling for them, I give them one (I keep a small supply on hand, just in case there is a need for an envelope system. No, really! I do!).

I don’t write down every little thing I spend money on, because I know when the cash in the envelopes run out, there is no more to put in! My sections include Blow Money ($50/month), Food ($200/ 2xs a month), House ($100/month), and Kids Activities ($20/month). If I lose the system, I’ve got our $1000 Emergency Fund to cover, what would definitely be considered an emergency. But really, how often do you lose your wallet? And I’d much rather lose a finite amount of cash than credit cards (of which we have none) with thousands of dollars available.

3. Stop trying to keep up with The Jones’ and start sharing with them!

This is a biggie. So many people are concerned with how other perceive them, that they spend their lives running after a goal that will never be reached. That constant race is what landed us $77k in debt! So, instead of shelling out money for things like clothes for my kids (even at the Goodwill, that adds up!), I ALWAYS ask friends first. We’ve been so blessed that the first time I spent money on clothes for my kids in as long as I can remember was for Christmas shoes!

We cloth diaper, so instead of buying a whole pack of disposable diapers for a plane ride to Colorado when I would only need 3-4 diapers, I asked on Facebook and had 4 disposable diapers in my hand by the end of the night.

I’ve asked for and received baby bottles, winter gear, closet organizers, bouncy chairs, an Exersaucer, free babysitting and so much more, just by asking! The trick to this is to be just as generous. I used to hoard things, thinking I might need them at some point for some reason. But knowing I can keep my garage a little cleaner and help a friend out? I’m all over it!

4. Trust in something besides yourself.

This is a tough one., but the most important, in my opinion. It’s that whole “letting go” thing that really hangs folks up. I can’t tell you how many times I had to verbally remind myself to “trust the program” when it came to sending out that big ol’ debt payment, or pillaging the very meager amount we had saved for our daughter’s college ($1100 saved in 3 years) to fund our Baby Emergency Fund.

I knew in my heart that we were on this journey until the end, and that learning to trust something, or someone, besides myself was going to be a BIG part of that journey. There would be no fundamental change in our lives until we were able to do just that.

And what did I find out? That trust, in my spouse, in my abilities, and in God brought a peace more powerful and overwhelming than my stubbornness.

After all, it’s my stubbornness that got me $77,232.88 in debt in 5 years.

And it’s my trust that got me out.

About Katie

Katie moves the hands behind the blog My Daily Bread Crumbs, where she blogs about faith, finances, and food. She’s been blessed with a similarly driven and very supportive husband of 7 years, three inspiring children, and two wacky dogs. She spends her days managing her household, refereeing kid squabbles, and working on her imperfectness. You can also find her on Facebook and Twitter (@MyDailyCrumbs).

{ 15 comments }

Calling Dave Ramsey for their "We're DEBT FREE!!!" scream!

This is the story of a family of 4 swimming in debt and living on a single income.  Can you believe that they managed to pay off over $77,000 of debt in just over 2 years?  This is Katie’s story…

I’ve always known debt. I got my first credit card when I was 17 (a gas card with a $200 limit that I quickly exceeded buying chips and soda and it was closed when I didn’t make payments). When my husband and I bought our house in November 2004, we rolled all of our debt, save for his student loan, into our mortgage. We were “debt free”.

Yeah right.

We’ve been a single income family since May 2006 when I quit my job as a nanny while expecting our first child, and like the majority of Americans, we lived paycheck to paycheck. Scratch that. We were living paycheck PAST paycheck. My motto used to be “go big or go home”.

We were financing a TV? Why not get the $1500 one instead of the $300 one?

We were financing a new car? Why not get a luxury car instead of a sensible one?

You think travel trailers are cool? Finance it!

We thought in terms of “how much overtime…?” As a police officer, my husband is able to pick up shifts to bring in extra scratch. But in the days BC (Before Children), we had no idea how that would affect our family. The equation is simple:

Overtime = Time away from the house = Time away from our kid(s).

In July of 2009, my husband and I found ourselves about to grow our family (I was 34 weeks pregnant with our second child) and scared to death of what the future held. Heck, I could feel my blood pressure rise just with the opening tone of our Quicken software! Could we pay for college for our kids? Could I still afford to stay home? Would we ever feel like we weren’t drowning in debt?

Three credit cards, a car loan, a travel trailer loan, and two student loans. $77,232.88 in debt accumulated in less than 5 years! The thought is still takes my breath away. We were working like dogs to pay for things. Stuff. Junk. At one point, we were paying $1100 a month in car payments!!

That $1500 TV? It’s already broken and donated for parts.

That luxury car? I stopped driving it 6 months after I got it because my pregnant belly was uncomfortable in it. (But the $556.45/month payment was steadfast)

That trailer for built-in family vacations? My husband was working so much overtime that we rarely got to go anywhere!

We were able to make all of our payments (our mortgage in Northern California included!) but remember that fear of not being able to pay for college? Of not being able to stay home? It was always there.

One day, while perusing miscellaneous blogs, I spotted the name Dave Ramsey. I’d never heard of him, but his principles were sound. In fact, they were very similar to thoughts I had had and suggested to my husband not long before. I told him a little bit about what I had read, and he ran out to Barnes and Noble to buy his book, Total Money Makeover for $21.84 on July 12, 2009.

Thus began our transformation.

to be continued tomorrow…

About Katie

Katie moves the hands behind the blog My Daily Bread Crumbs, where she blogs about faith, finances, and food. She’s been blessed with a similarly driven and very supportive husband of 7 years, three inspiring children, and two wacky dogs. She spends her days managing her household, refereeing kid squabbles, and working on her imperfectness. You can also find her on Facebook and Twitter (@MyDailyCrumbs).

{ 48 comments }

I thought it was time to come back to this post again, the Envelope Budget has been an overwhelming source help when it comes to our finances and I’d encourage you to give it a try.

This is the 2nd part of a 4 part series titled – Getting Your Finances In Order.  You can read Part 1 over here.  After reading this post, I’d highly encourage you to relax and enjoy this funny video to lighten the mood a bit.

Seems like a contradiction right?  I’m suggesting that by spending CASH (note – not debit, credit cards, or checks) but hard cold CASH, you’ll actually SAVE money!  We are a cash only family – simply put if you can pay cash for it, you should.  I know at first it might sound crazy, you might think if I have cash I will just blow it!  However, I think quickly you will see just the opposite happen. You will begin to ask yourself, do we really need this? You will find yourself using coupons more often and shopping at the discount store you always avoided. When you are on a fixed budget you will see that you actually DO have the time to hit a couple of different stores in search of a deal or sale. Amazing how this happens!

“When you pay cash, you can “feel” the money leaving you. This is not true with credit cards. Flipping a credit card up on a counter registers nothing emotionally. A study of credit card use at McDonald’s found that people spent 47% more when using credit instead of cash. This is money you could have saved!” – Dave Ramsey

We do not pay cash for any bill that can be paid through our online bill pay, and I highly suggest online billpay – it’s free and you’ll never incur a late payment again.  We get our cash out each week and divide it up between our envelopes, some of the acrue while other are spent each week.

As an example our Car Registration envelope accumulates while our Grocery Envelope is spent in full each week.  The difference is that you do not want or need for your Grocery Envelope to have excess, it is not a “savings account”  if you have extra money in there every week I’d bet that there is another category that could use a little bump up or if you’re working on paying down debt it should absolutely go there first.

Here is a post I wrote a while back about the “How To’s of Using Cash”

Step 1 – Define your categories, what can you possibly pay for cash with? One key here is to only include categories for things that you can’t pay online or through an invoice or bill. Anything that doesn’t come as a bill in the mail is probably a good candidate for cash.

Here is a list of our envelopes.  You may notice that we do not have an envelope for gas, it’s not that we don’t have it budgeted, but it’s because I don’t want to leave the kids in the car while I go into the gas station to pay the attendant. We use our debit card for this expense. You’ll need to figure out what best fits your families needs.

ENVELOPES

1. Groceries

2. Toiletries

3. Clothes

4. Gifts (Birthdays, Christmas, etc)

5. Date Night

6. Eating Out

7. Spending Money

8. Car Maintenance

9. Kid’s Date

10. Kid’s Allowance

11. Trip Money

12. Car Maintenance

13. Car Registration

14. Hair Cuts

15. School Supplies/Events

Step 2 – Determine how much you spend in several categories per month, ie. groceries, toiletries, clothing, etc. Not while on a budget, but what you have spent on a regular basis. This make take some time, and you may have no idea because you haven’t kept any track at all so you may have to start this process now for the next 30 days. Now hold on to your seat, you’re going to be shocked.  I’d highly suggest using Mint.com, you can read Mr. Frugal’s review of their free system here.

Step 3 – Figure out how much you THINK you will NEED in each category, but the key here is to be flexible, it will change. It will change more than once, twice, and possibly even three times. Life is always changing and so will your budget. Another baby? Up goes the toiletry budget! Or maybe you just potty trained your 2 year old, well that saves $30 a month!

Step 4 – Get the cash! We go every week  to withdraw our cash, it is easiest if you can keep it to an even $20 amount so you can go to the ATM machine at your bank, saves you a trip inside the bank. This has got to be the best part, it’s like playing a game of monopoly. Divide your cash, you may need to go into the bank every once in a while to get $5’s, $10’s, etc depending on your envelope amounts.

Step 5 - Start saving money! When the envelope is empty, that’s it, your money is gone and you CANNOT purchase anything in that category until the next envelope payday. But remember, the first couple of months you need to be flexible. Also, please remember to make your budget realistic, if you undercut yourself too much, you will give up. So that is why my family has an eating out budget, because the reality is, while we shouldn’t eat out, we do. We put $15 a week into our eating out budget, if we save it up we can go out to a sit down dinner, otherwise it gets us a pizza night once a week.

“Hey I just wanted to share with you that after starting the envelope system 3 months ago we have finally met budget AND we were able to UP-IT! Also my husband told me the other day that for the first time he doesn’t feel like we are living paycheck to paycheck. We are buying things dirt cheap before the real need for them hits. It has been a hard but wonderful journey. One I really didn’t think we could do! Thanks so much.” – Cassandra

That is just one of hundred’s of  reader’s experiences, I’d LOVE to hear about yours in thecomment section below.  Do you use cash or an envelope budget system?  What does it look like for your family?

{ 41 comments }

.

The Great Recovery is a grassroots movement spread by people who are tired of looking to Washington for answers. The truth is that the government can’t fix this economy. It’ll be restored one family at a time, as each of us takes a stand to return to God and grandma’s way of handling money.

Together, we’ll bring this country back on track—one family, one church, one community at a time.

{ 5 comments }

Getting ready in my hotel room this morning I turned on the news, a guilty pleasure of mine.  When we used to have cable the news was something I used to enjoy watching here and there.  So this morning on I turned on MSNBC as I did my makeup. They were talking about the government’s huge budget mess- surprise, surprise.  I kept thinking – they need a bunch of us couponers to set them straight!

Then they had an “expert” come on to talk about this new fad called the “Cash Only Diet”.  She went on to list the pros and cons.   The expert listed many of the pros including not spending more than you have, when it’s gone it’s gone, avoiding identity theft, etc.  However she then went on to say that people on a “Cash Only Diet” could never buy a house, rent a car, book a flight, or go to college. Gasp! Yes…that is what she said and that is what is wrong with America, many people believe debt is the only way to get ahead in life. Sadly it’s exactly what sets most people back and keeps them from living their dreams.  She didn’t seem to realize that a debit card works the very same way.  In fact I both booked a flight and rented a car this week with my debit card – while on a “Cash Only Diet”.

Now we are a credit-card free family ourselves but this isn’t so much about whether you use a credit card or not – the big concern is that you pay off your balance at the end of the month with your cash.  We have friends and readers that take full advantage of what their credit cards have to offer them, it’s not something I feel I can suggest you do because we know personally the black hole debt can create. However it can work for some families and it can work well.

I’d love to hear your thoughts on the Cash Only Diet - is it something your family has adopted?  What do you see as the pros and cons of using cash only?  If you’d like to learn more about how our family lives on cash and what an envelope budget system looks like, you can read this post – Save Cash by Using Cash.

{ 48 comments }

Kristi posted the following comment on the TFF Facebook Page, and I thought it would be a great discussion question here on the blog as well.  I’m certain she is not alone and I’m also certain that it CAN be done.

OK, is it just me or is it frustrating getting started couponing? I feel like I spend my time sorting and clipping and have not seen any real savings, I buy 4 newspapers per week for my family and have not gotten to really save much yet. I dont have much by way of a stash yet but I am getting dejected by it taking up so much time. I work full time outside of the home and dont have time to clip, print and shop. How do you recommend a full time worker find savings

What advice or tips do you have for her?  Can you offer her a word of encouragement today?

{ 41 comments }

Kaiser offers a plan in CA only, called the Child Health Plan. It’s ideal for self-employed families. Our family has been blessed to a part of it for the past 2 years, I found it at exactly the same time  my husband left his job, we were approved within weeks.  We found out recently that we were approved again for the next 2 years!  Our family pays $24 for all 4 children plus only $5 per doctor visit.  When my son broke his arm, the entire trip to the emergency room set us back only $35.  The prescriptions are only $5 too!  It’s an amazing resource, but you do have to qualify.

The majority of the details I listed below are taken directly from the Kaiser Child Health Plan Website.

For just $8 or $15 per child, per month, for up to three children, depending on your family size and income. Additional children are covered at no extra premium.

Your children may be eligible for Kaiser Permanente Child Health Plan if they:

• are under 19 years of age (birth through age 18) and not currently insured
• are not eligible for public health care coverage such as Medi-Cal or Healthy Families
• are not eligible for health care coverage that is paid for, in any part, by an employer
• are in a family with an annualized income‡ between the ranges shown below

As you can see the below the income qualifications are VERY generous, our family of 6 can make up to $89,970 before we no longer qualify.

If your child qualifies, coverage includes the following plus Dental Coverage! Dental coverage for Kaiser Permanente Child Health Plan is offered to all our Child Health Plan members at no additional premium. The DeltaCare program is administered by PMI, the HMO affiliate of Delta Dental.

For more information or download an enrollment kit, head on over to the Kaiser Child Health Plan website.  I pray that this will help at least one family that reads this.  I have no idea if they are currently taking applications or if there is an open period, etc.  I would suggest calling to find out.

If you would like to apply for the Kaiser Permanente Child Health Plan and if your child resides in one of the service areas, you can request an application online.

Or you can call Member Services to request an application at the numbers listed below:

• 800-464-4000 (toll free)
• 800-777-1370 (toll-free TTY for the hearing/speech impaired)

{ 50 comments }

Buying a used (or new) car from a dealership can be a very overwhelming experience. The salespeople are trained very well – they know exactly what to do to get an inexperienced person signing on the dotted line (and paying far too much) before they know what’s hit them. But never fear! We’ve had our own debacle, and we’ve learned a great deal in the process – NOW we’d like to share it with you and hopefully save you some heartache (and your wallet some green). Once you step on the lot, you need to keep a few rules in mind:

Rule #1: YOU are in control

Don’t EVER let them forget this – and don’t forget it yourself. If you don’t absolutely have to leave with a car that day, then keep that in mind – and let THEM know. You’ll be amazed at how things turn in your favor when you start heading for the door. But they may just let you go – in that case, GO.

Rule #2: You are dealing with PEOPLE

Be kind and courteous; like them or not, even used-car salesmen are people. Oh, and people are pretty flexible. Once they KNOW for sure that you aren’t going to bite, you’ll probably get a better deal (price, APR, or what have you). See Rule #1.

Rule #3: Don’t lose after you’ve won!

Whew! The negotiating is over, the dust has cleared, and you’ve got 0% APR for 70 bazillion months! DO NOT get sucked in to their after-the-sale schemes. When we purchased our last car and got to this point, the salesman told us there’s a 90% chance one of the processors would go out within 2 years, so we needed an extended warranty (for the record, it’s been over 2 years and that hasn’t happened). They’ll tell you anything they have to – they WANT to make money. Things not to buy:

• Rust proofing
• Fabric Protector
• Paint Sealant
• Oil changes for life!
• Extended warranty

All of the above are SEVERELY overpriced – just watch how hard they try and sell you on them. They’re trying to make money – they do NOT have your best interest in mind (no matter how much they insist they do).

Something to do BEFORE you go car shopping

Hopefully you’re paying cash – we will be for our next vehicle! Whether you are or not, know how much you’re willing to pay for the car. In our case, we had picked out about 6 of the same car online, so we knew the general price range. We ran some APR calculations, and knew what a 48 or 60-month loan would cost us per month. Armed with price and monthly payment info, we were far more prepared than our first (incredibly inexperienced) foray into a car lot; and this would prove hugely in our favor later in negotiations.

After taking a test drive, we decided this would be the car (make/model) for us. So we went in and sat down in their office. After negotiating for far too long, they sat us down, punched our info in the computer, and told us we would be paying somewhere around 26% APR. I laughed, told him we didn’t NEED a car that day (we didn’t), got up and walked out. We were planning on driving around and checking out several other cars we had found online. But we didn’t even make it out the door – the manager stopped us and said “What do I have to do to get you in a car today?” My reply? “It needs to be the right price”. So we go back in, and “OH LOOK, this car qualifies for the Certified Used program, and there’s a 2.9% APR for 66 month special right now.” Now, we didn’t qualify for this, and I knew it. But after they realized we weren’t buying any other way – WE GOT THAT DEAL. We didn’t expect it, and we didn’t pressure them. We simply used the power of NOT HAVING TO BUY and they did all the work for us.

{ 13 comments }