Update Thursday: Early Edition

This is liable to be my last update for a while, and I’m even early on it…  We met with a personal finance advisor on Saturday, and we have some tweaking to do that really makes sense, but it will delay the time that we are out of debt by a bit.  On the flip side, it will also mean that our emergency fund will be established when we are out of debt, so that puts these updates to “I stockpiled some more cash this week”…  not a particularly interesting topic.

It has been encouraging to see my balances drop drastically on the credit cards, however, and I’m very excited to report that, as of Christmas Day, we will have less than $40,000 total debt and less than $2,500 left on the credit cards, meaning we beat our goal by about $500.  That puts us at nearly 92% paid off in 2 years!  Not too shabby!

The financial planner we met with suggested a few changes, and I’m still mulling over those changes before going ahead with the bulk of them.

First of all, he suggested that my wife and I get a will in place – this is a no-brainer, for sure, so we are sitting down right after Christmas to do just that.

Second, he suggested getting the foundation of income and asset protection in place prior to debt snowballing.  This means getting 3-6 months worth of expenses into an emergency fund, and getting term life insurance in place.  The term life will run us about $100/month – not a pleasant thing to think about, but, at the same time, were something to happen to me, my wife would be taken care of for a while.

Third, he suggested paying off our debts differently.  Rather than paying of the lowest balance first, he suggested paying off debt that frees up monthly cash flow the fastest, which, in our case, happens to be the truck, then car, credit card, and finally the student loan.

I don’t know that I agree with a couple of things about the approach, but I’m also not discounting his process as a whole, either.  Mainly, I’m ready to be done with the credit cards – I’m ready to just pay them off as quickly as I can.

The emergency fund confuses me a bit, since it must be higher now than it would need to be after we pay off debts.  The reason is simple…  Right now, we have a total debt repayment of nearly $700/month, which wouldn’t be required were we to be out of debt.  So a 3-month emergency fund must be at least $2100 higher now than it would need to be after we get everything paid off.  The other way to look at it is that I’m getting a good head start on a 6-month emergency fund at the beginning of the process, rather than waiting until the end.

He encouraged us to just start piling up cash for our next meeting (sometime in February or March), and hopefully accumulate enough to start working on the debt by having our emergency fund in place, but I’m tempted to cheat just long enough to be done with the last credit card, then start working the plan his way.  The last three debts aren’t going away in the next 6 months anyway, but I’m just ALMOST there with the credit card, and I want the emotional boost of being DONE with the credit cards.  (In fact, I just almost cheated and put all the money we have towards the pregnancy against the last credit card to just be done with it by the end of the year.)

I’m getting a full week and a half off starting Wednesday, and my wife and I have decided to set that time aside as an opportunity to set some goals for 2009, get our wills in place and figured out, and basically get set for the coming year.  Of course, no vacation would be complete without a little R&R in there, so we are planning on doing some local things that we haven’t done to this point – go to the aquarium, check out a museum or two – things like that.

I wish you all a very merry Christmas, and a happy new year!  Thank you for all the support you have given me over the past few months, and I’ll return from time to time to give updates as I have them!

Update Thursday: 3rd Week of December

This week went better than expected, mostly due to a bonus that we weren’t expecting from my wife’s primary job.  That will help when she doesn’t work from Christmas until after the new year, but we went ahead and used it to help pay down the debt a little extra.

This week, we came to within $300 of our goal by reducing our debt to the tune of over $575 this week.  We still have a paycheck coming next week from my secondary job, and then my normal paycheck and my wife’s primary paycheck, so we should be sitting pretty good next week and easily beat the $1500 goal we had set.

We are also meeting with a financial advisor on Saturday to see if there are some places we might be able to trim.  I’m interested to see just how much he’s going to be able to accomplish, since I consider myself fairly balanced when it comes to saving for the future vs. paying down existing debt.  We’ll see, though.  At least he doesn’t charge for this portion of his services…

Update Thursday: 2nd Week of December

This week went a little better, but still not as good as it should have…  We ended up paying off a straight $500 this week, bringing our total credit card balance to less than $4,000, and our total debt picture to under $42,000.

We had our first sonogram yesterday, so we spent a little money getting that done, but all in all, we are keeping expenses down this holiday season.  We still have about $900 left this month on our goal of $1,500 (nothing like last month, for sure), and I think we might just make it.  I did find out that I’m getting a *very* healthy bonus this year, but my current plan is to bank it for the baby, just in case it is needed.

Within the first week of next year, we won’t have a single debt over $15,000, and when we started this two years ago, we had a debt that was over $23,000, and another that started at $15,000.  It is somewhat depressing to see that we’ve only paid $1,000 off the student loans in 2 years, but that plan will probably accelerate midway through the year next year.  I’m not planning on putting a whole lot of our extra money on debt during the pregnancy, but I still want to do more than the minimums, even if it is only a little bit.

Once the credit card is paid off, my blogging will probably drop to nearly nothing, since we won’t be as active in our reducing debt, and be working more to piling up cash.  All in all, I’m not unhappy with the progress we have made, and there is always room for improvement, but the blog has more than served its purpose.  This blog has been an incredible motivator for me – really pushing to squeeze every dollar I could so that I could report back positively.  We’ve really upped the ante, and paid far more off per month since the blog’s inception than previously, and I’m very happy about that.

All that to say that I appreciate your encouragements, and know that they have played no small part in my progress.  Thank you!

Update Thursday: 1st Week of December

Well, this week stands in stark contrast of the previous weeks.  Typically the first of the month is where we make huge gains on our credit card debt.  This week, we made just over $100 against the last credit card.  This was mostly due to the “loan” against this week’s income to pay off the AmEx last month.

We got the monthly bill from AmEx yesterday, and it was for just under $8!  I can’t tell you how long it has been since that card had nothing on it, and this month is the last time that I will pay interest charges on that card!

All in all, I’m not disappointed that we only made $100 worth of progress against our credit card, but after several weeks of $500+, it does feel a little anti-climactic.  Next week will be better, with us getting three paychecks next week, and now that we’ve paid back the extra we used to kill off the AmEx.

I guess I’m coming to realize that the debt snowball will sometimes act as an avalanche, but sometimes there’s enough in the way of it coming down the mountain that it just stops.  Even as powerful as it is, it isn’t more powerful than the mountain.  But we’ll pick up steam once again, and continue our journey…

December Goals

This month, we start saving more than we pay off debt, since the birth will cost a decent amount, so our goals will be simpler.  In addition, I am seriously considering dropping my second job this month, and my wife has already quit her second job.  As well, her primary job may be somewhat thin this month due to the holidays, so her primary income may see a decrease.

With Christmas coming up later this month, and all the parties, gift-giving, and added expenses that will inevitably hit, I’m going to set what I feel to be conservative goals, and don’t really plan to spend any more than that.

The goals for this month are simple:  Get the last credit card down to a balance of $3,000.

To do that, we will have to pay off approximately $1,500, less than half of what we paid off in November.

I am still flip-flopping between paying the student loan off next or attacking the next smallest debt, which would be the truck.  Of course, my updates may get fairly sparse, since most of our extra income will go to saving up for the baby, rather than debt reduction, especially after the last credit card is gone, and possibly starting as early as next month.