Monday, March 5, 2012

Money Sense



















(Photo originally from Tracy O's Flickr, find it here)

So I need to be honest. I fell off the "get out of debt" wagon.

Back on April 4, 2011, I proudly posted on Facebook that I had paid off all credit cards in full. No more carrying balances from month-to-month. No stress about which payment to make. It was the best feeling in the world. I had worked so incredibly hard to make good money choices, knowing that I still had car payments and student loan payments ahead.

Then moving happened, and I threw all of my good work out the window...

It started with moving expenses. I couldn't pay those in cash up front, so they went on one card. That was going to be the only balance, and I'd work to pay that off right away. But then when I went a week without working, had a summer tuition bill to pay, and didn't get my first pay check right away, I developed a cash flow problem. And rather than being appropriately stingy, I did not adjust my lifestyle and brought the cards back out. Of course, then I misplaced my debit card for a few weeks too - so that all got put on the good old Cap One. As did my $250 monthly storage, which piled up with no end in sight to when we would be getting into our own place. Throw in an airplane ticket around the holidays, combined with some Christmas shopping, spending money so that Chris and I could still do fun things, and it just kept going downhill. In fact, I completely gave up, pretended there wasn't a problem, and began hemorrhaging money. Because, you know, I am super rich as a PhD student and public employee. Super rich. 

You would think that living at home with mom would have allowed me to save/pay off debt. In six months, I did exactly the opposite. Now it's time to get my ducks in a row, especially as we will have more expenses with our new apartment.

It's debt snowball time. For those that haven't heard the term, with a debt snowball, you put all of your debts in order, and determine the total amount you can put towards your debt. You make your minimum payments on everything else, but everything else goes to the smallest debt first. Once that is paid off, then you take what you were paying towards the smallest debt and contribute it to the next one. This plan worked really well last time around, because I could see progress and stay motivated.

Bye bye unlimited plan. Back when Chris and I were doing the long-distance-thing, I had a few months where I wracked up some pretty large phone bills, between the calls and texts. To avoid the $300 unexpected surprise at the end of the month, I upgraded my phone to the unlimited plan. But it was an unreasonable $120 a month for the iPhone. Now that we live together, I really have no need for all of those minutes and texts. So I have officially downgraded to just $54 a month. Much better.

I'm also bringing back the End of the Month list. To stay motivated while paying down my debt, I make a list of the things that I want. Not need, want. This could be anything from a new pair of jeans to some fun art for our apartment. Also at a reasonable cost. If I can make it to the end of the month, and still have some cash left, I can pick one thing off the list. I have done this in the past, and it helped with still allowing some nice things, without going overboard. I have a bad habit of feeling rich on payday, and will spend the majority of my paycheck during the first week or weekend, and then be stressed out and counting pennies through the end of the month. Using my end of the month list also helps avoid the "I'm bored, let's go to Target" temptation.

Cash envelopes. I have read Dave Ramsey's Total Money Makeover, and he encourages people to utilize a cash only plan for all expenses, with all dollars assigned to something in the budget. I am going to see if I can make this work so that I pay attention to what I spend, versus putting it all on a card.

It's time to pull out all of the cost-saving strategies that I can. As my supervisor would say, "Bird by bird."

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