When Kyler and I were in college, we were, simply, stupid. We didn't work for the first couple of years except in the summer so we could "focus on school"...which really translated to have the optimum amount of free time. So, we ended up taking out tons of student loans to cover tuition and cost of living. We were still living on a seriously, seriously small amount of money per year...enter credit cards. They are really the epitome of evil. I hate credit cards. I've been making payments on the same credit cards for 4 years and making sadly little progress. It's such an easy thing to get sucked in to. Here is all this "free" money, you can buy whatever you want, and you don't even have to think about it right now! Until you get the statement in the mail and realize you spent more than you could have imagined in such a short period of time.
At our worst point, we had over 10 credit cards combined. I wish I was joking.
While Kyler was at Basic Training, I went to a weekly Dave Ramsey church class with my inlaws. I don't really know why it's taken us this long to put what I learned there into effect, but this month, we are starting to follow Dave's plan.
If you take a class or read one of his books or watch his show you'll hear "live like no one else...so you can live like no one else." In short, following his plan is not fun. You put as much as possible into debt as you can, you never buy anything unless you have the money saved up for it...but you know what is even less fun than that? Looking at your budget for the month and realizing you have very little fun money to work with because you have so many credit card payments.
So, this is what we're doing:
1) Making a monthly budget and strictly following it. We take out cash for the following categories: groceries, restaurant money, laundry, toiletries, necessities for our dog, and a Christmas savings-and put them into envelopes. When that money is gone, you're done! The point of that is when you use a debit card, it's so easy to just spend and spend and not realize where the money's going or how much you're actually spending. The idea is when you have to pay cash and physically hand over the amount and see the amount get smaller, you'll feel what you're spending and be more aware of it. And it's so true.
2) Putting $500 into a savings/"emergency fund" account. We can already check this one off the list-we just did this one today! It's so nice to know that if our car breaks down or we get a flat tire, or some other unexpected thing comes up, we have money right there to fix it without having to worry about where it will come from. If you have a higher income the recommended amount is $1000, and we'd like to get there eventually, but it's staying at $500 for now.
3) Paying off debt and NOT using the credit cards. If we weren't using our income tax return and Kyler's Army bonus on this, this one would be taking us ages and ages to finish. But we are hoping that once that money comes in (it should be any day now, please please!) we are buying the rest of the things we need for Keira, buying Kyler a grill and me a workout program for after Keira's here, and then literally absolutely everything else is going to credit cards. Yes, it's depressing to read and hear about all the really fun things other people are buying with their returns and bonuses...but I am psyched for this. We are hoping to pay off all but ONE credit card and free up over $300 extra dollars per month!!
4) You are supposed to "snowball" your debt...so, if you pay off one credit card, you take the payment amount for that one and instead of counting it as extra money, you put it towards your next credit card. You're also supposed to pay off credit cards smallest to largest balances no matter the interest rate, but since we're hoping to pay them all off at once this won't matter to us. And you're also supposed to put as much extra as you can per month. Right now, we aren't able to put any-but once we free up that $300, we'll be able to pay off the other things even faster.
I'm planning on us being debt free, other than student loans, within a year. We don't have a house and we own our car outright, so how amazing would that be to literally only have student loan payments. I'm so excited.
I'm going to read "the total money makeover" by Dave Ramsey to freshen up on exactly how this works, but there's the jist of it. Look this guy up if you are having money problems-it's not super complicated stuff, but it really works if you follow the plan.