Accountability is key when you’re getting out of debt. So, for the past few months I’ve been tracking our debt snowball goals versus our actual savings. For the months of October 2012 through January 2013, we have saved $18,402.58. That seems like a lot, but our goal had been more. We missed the mark by about $3,200. Ouch! Here’s what happened, judging by our bank statements.
In October, I took my pets to the vet for their annual exams. They all seemed pretty healthy, but one of our cats is old and he gets more tests done than the other pets. In the end, the bill was over $800 for three pets. That sucks, but luckily the tests came out ok and we only need to spend that much once a year (hopefully). I need to start a sinking fund for our pets so these annual exams don’t sneak up on me.
Life insurance premiums also ate into our debt snowball in November. My husband’s is $1,300 for the year, and mine is $635. In total, that’s $1,935. Another sinking fund I need to start.
Holiday expenses also diminished our snowball a little. We planned the expenses, but we didn’t account for that when we set our savings goals, so I still count it against us. There’s really not a cheaper way to travel from the West Coast to the East Coast. We only spent $500 on tickets because of my husband’s airline points, and we stayed with my in-laws, so that really helped. All in all, Christmas really didn’t have that much of an impact. We just need to remember when we’re setting goals next year that we need to account for holiday spending.
So where are we? Well, we have about $20,000 in the bank right now, and $70,000 in student loans left, which means we are $50,000 from our goal. This is impressive, since originally we planned to be paying off debt for over three years, and it’s barely been two. If we finish by the end of the year, that’s almost six months ahead of schedule. (We’d reeeeally like to be done with this by the end of the year.) When we started in April of 2011, we had about $146,000 in debt. What a difference a budget makes. I can’t believe we ever lived any other way. I remember the days when I had no idea how much income or outgo we had each month, and I cringe. What the hell were we thinking?
Some of you might be wondering why we have $20,000 in the bank, when we’re supposed to be sending off extra payments each month. The answer is simple. We might be in for a tax hit this year and I want to be prepared. When we moved out here a couple years ago, my husband accepted some restricted stock units as part of his compensation and those units vested back in November. His employer withheld a chunk for taxes, but just in case it wasn’t enough, we need to be able to pay off the IRS tab since I refuse to be in debt to them, ever!
Some of you might also think we must be rolling in dough in order to save thousands each month. This is most certainly not the case. In the area of the country we live in, the average home price is well over half a million dollars, which I’m not sure we will ever be able to afford if we use the Dave Ramsey rule of only taking out a 15 year mortgage with a payment that’s only 25% of our take-home pay. I don’t know if we’ll ever be able to make those numbers work, so for now the plan is after we get out of debt we are just going to save like crazy and see what happens. For our area of the country, we are definitely not part of the elite.
If you’re wondering how we manage to save so much each month, here are a few of the cutbacks we’ve made for the past couple of years:
1. We live in a one-bedroom, 700sf apartment. Yes, it sucks. But the energy costs are cheap and we do our best to keep it neat and tidy so we never feel too cramped.
2. We only own one car. This can be tricky, but if you can pull it off, you will be amazed at how much money you can save. Insurance is cheap and gas is half of what it would be if we didn’t carpool and use public trans whenever possible. We also get regular maintenance done to prevent any big repairs.
3. We don’t have cable. We pay for a Netflix subscription and wi-fi (my husband needs it for his job). A Netflix streaming package is only $7.99 per month.
4. We don’t eat out. We do budget for entertainment each month, but most of the time it’s still not enough to eat out regularly. Occasionally, the envelope will have enough in it for a pizza or some other form of cheap takeout, but we don’t go out to sit-down dinners. This is hard, since a lot of our friends like to go out for drinks and to eat, but right now it’s just not in the budget. Ninety-nine out of a hundred nights are spent at home cooking. To make it interesting, we’ve started using our crock pot a lot. The food just tastes more flavorful when it’s had time to simmer all day.
5. We work extra jobs. I work with a local attorney, editing her briefs. It’s sporadic, but since I get to set my own rate, I still manage to make a few hundred dollars a month doing this.
6. We don’t go to the gym. We used to have a couples gym membership, to the tune of about $100 per month. Now, we run outside and we bought a set of weights to use at home. When we want to mix it up, we stream exercise videos on Netflix.
7. “We hate Target!” You know that ad slogan, “I love Target?” That used to be my mantra, but now I avoid it at all costs. Did you ever date someone you knew was bad for you, and you tried to be “friends,” but instead, you just ended up having regrettable break-up sex and spending way too much money on fancy drinks with your girlfriends, hashing out the whole situation? That pretty much describes my relationship with Target. At one time, I convinced myself that I could just stop in on occasion and buy a candle or something, but every time I ended up bringing home some sort of shabby-chic-looking basket and a cute top that was “such a good deal!”. This in addition to the candle. It had to stop. Now I don’t really have a lot of cute tops or nice baskets to organize all my trinkets. But we do have money, so that’s a win in my book.
All in all, our rent and expenses are only about 35% of our income, which has been amazing in terms of our debt repayment, but not so amazing in terms of our lifestyle. Some days it feels like it’s going to be forever until we’re out of debt. I heard a saying on Dave Ramsey’s program once, though, that in order to win with money, you have to be willing to be a crock pot, not a microwave. It’s hard to be the crock pot when everyone around you seems to be nuking themselves into upper-middle-class-dom, but I have to believe that it will all be worth it in the end. Even if we’re doing it all wrong, at least we won’t have Sallie Mae pounding on our door every month. That has to be worth a few candles and shabby chic baskets.