Baby Step #2

I don't adhere to the Dave Ramsey plan, as I've mentioned before. I'm too much of a numbers girl, and the thought of paying off smaller debts without taking into consideration interest rates just bothers me too much. For many of the credit card debts, the lowest balances were the highest interest rates (due to several sizable balance transfers with low fixed rate offers). I understand his rationale, that it's more a psychological thing, and that if you're paying off debt quickly the difference in interest is nominal... but if you have a lot of debt, even a nominal difference in interest can make a big difference. 

So far I've really only focused on paying off credit card debt. In July 2008, we hit our highest outstanding balance - a total of $48,749.15.   Today, a little over a year later, we're down to owing $22,926.12.

But Dave Ramsey's Baby Steps program calls for paying off more than just credit cards. He recommends in Baby Step #2, which comes after building a small $1000 emergency fund, listing and paying off debts smallest to largest (except for the mortgage). While I'm not following this plan, I'd ultimately like to get to the same end point and be debt-free. Here's what we would have to pay to get there: 

1. Student Loan #1: $   1,101
2. Student Loan #2: $  1,328
3. Car Loan #1:  $  6,054
   
4. Credit Card #1: $  6,500
5. Car Loan #2:  $10,852
   
6. Credit Card #2:   $16,288
7. Student Loan #4: $24,548
8. Student Loan #3: $24,587
   
9. 2nd Mortgage:  $26,428  (DR says to include it if it's less than 1/2 your annual income)

TOTAL, not counting 1st Mortgage:  $117,686

That's a big number, and makes the amount we've paid off so far seem so measly. I guess, to be fair, we've also paid off quite a bit on each of those other items that isn't included in the total (on the two vehicles we're paying off about $8500/yr in principal, and we're paying about $3000/year in principal on the student loans). 

Home Repairs & Improvements

It seems like quite a few PF bloggers put a halt on all home renovation & maintenance projects while they try to pay off debt. But not me. 

Maybe it's because I like to have several things going all at once, or because I know it'll be several years before we're debt-free and it's not worth it to me to wait that long, but I want to tackle home repairs just as aggressively as I tackle debt. Which, at times, means sort of a bumpy road, with months of absolutely no progress whatsoever.  ;)

I've got several projects in various stages of completion right now, and many that I'm hoping to finish before winter hits. And although I've purchased a significant portion of the necessary supplies, there will still be some expenses.

• Deck:  $200 in materials (estimated)
• Misc. Tool Rentals/Purchases:  $150 (estimated)
• New Gutters: $800 (estimated total cost)
• Landfill Disposal Fee (hazardous waste & construction debris): $150 
• Replace exterior door: $150 in materials (estimated)
• Re-caulk exterior: $100 in materials (estimated)

Right now I've got $1000 set aside in the home-repair fund, and $1550 in estimated upcoming expenses. If we are successful in completing everything before winter hits, it might delay being able to pay off "my" credit card by the end of the year. It would only push it back by a month or so, which is a tradeoff I'll happily make. 

2009 Debt Tracking

Here's an updated chart showing our progress on credit card debt for 2009, from January 1st through September 1st: 

Starting debts, as of 1/1/09: 

His (blue) - $22,227

Hers (pink) - $12,917

Business debt (not shown) - $4,202

TOTAL (green) - $39,346

Current debts, estimated as of 9/1/09: 

His (blue) - $16,426

Hers (pink) - $6,500

TOTAL (green) - $22,926

Extra Expenses

Husband had surgery earlier this week, so we've incurred quite a few extra expenses this week. It was an outpatient procedure, and had been planned for some time now. 

We had some out of town visitors come for the surgery, to offer support, so we bought dinner on the night of surgery. I ate at the hospital for lunch, and had planned to just grab a snack for dinner at home, but our guests were hungry and in a hurry. 

We had a few copays for prescription drugs, and Husband requested some personal care items and over-the-counter drugs to help him after surgery. He also asked for several "comfort" foods from the grocery store. 

I normally wouldn't have bought most of these items, or at the very least would have only bought them on sale and/or with coupons, but it was unusual circumstances and I wanted to do whatever possible to help him be more comfortable. I ended up spending nearly $100, between the groceries, prescriptions, and meals. 

Later in the week we went to the grocery store for more food, and spend another $50. We also ordered pizza ($25), and saw a movie ($20). 

We both took most of the week off, him for surgery and me to help him. This means that I haven't been able to work any overtime, so my pay will be less on the next paycheck. 

Shopping for Good Deals

For once I actually got up early and hit the stores to find some good deals. Our local Kmart was participating in the Super Double coupon promotion, where coupons for up to $2 will double. I picked up some lotion, cat treats, candles, oral hygiene products, and band-aids/gauze (about $30 worth in total) for $1.50

I hit up CVS for this week's freebies, more school supplies, some headphones, and mini first-aid kits. I also stopped off at the local grocery store to get some almost free air freshener (the sort that spray every so many minutes, for only $.29/ea - normally $12.99). I also picked up a few essentials, namely kitty litter and some stuff for the dog. 

Including the scoop of ice-cream that I stopped off for on the way, today's total was around $25. Not bad, and that leaves me with $25 left for other groceries for the rest of the week (and the pantry & fridge are pretty well-stocked right now). 

Of course, that says nothing about the $65 spent eating out this weekend. Or the $100+ at the home improvement superstore... 

Little things -

I had plans to go out to dinner with a friend tonight, and had made plans to have lunch out with a coworker tomorrow. I figured that it would be $15 for dinner, with tip, and another $7 for lunch tomorrow. 

My friend ended up picking up tonight's dinner tab, and my coworker asked if we could just bring lunch from home and eat together at the office instead. So that's $22 saved! 

I probably should have saved the $22, but instead I swung by the store to pick up a few items. Bottled water (we refill jugs at the store, so it's pretty cheap!), air freshener for my car (still trying to mask the spoiled milk odor!), and some containers for organizing shelves. 

I also found some jersey sheets on clearance for only $7, and picked up a set. I normally pay around $20-25, and had actually just bought some on sale a few weeks ago, but I couldn't resist such a great deal. My total ended up being $31, which I thought wasn't too bad... 

Pay off a student loan?

Both Husband and I each have multiple student loans, and we each have to pay two separate student loan payments. The biggest loans are federal Direct student loans, through the government. They're on 20-year repayment plans, so the monthly payments are fairly manageable. 

I only owe $1329 on my other loan (I think it was originally $2500). If I kept paying according to the schedule, I'd have almost three years left. My plan was to pay off my credit card first (currently $7400), and then pay off the smaller student loan - both by January 1st. 

I was thinking about taking either this or next month's credit card payment and instead just using it to pay off that loan instead. I'd still pay the minimum credit card payment, of course, but I could use the extra and pretty much get rid of that loan altogether. I don't think it'll make much difference overall (the credit card has a slightly higher interest rate, but in terms of actual interest paid it would be only $3 or so "extra" to pay off the loan vs. pay down the credit card). It might affect my credit score, but I would guess that would be ever so slight if at all. 

Are there any other considerations I'm missing? 

Electric Bill

August is shaping up to be a very hot month! So far we've had a few days in the 90s (with high humidity!), and the weather forecast is calling for temperatures in the 80s for at least the next week. 

We try to keep the A/C set around 75 during the summer, but with the humidity even 75 feels too hot... so we dialed it back to 73, which means the condenser is running practically nonstop for most of the day (and a good part of the night, to "catch up"). Makes me wonder how much our August electric bill will be. Our electric bill in June was only $47, and $115 in July. 

I had only budgeted $110 for August, so hopefully the weather will cool down some... 

College Costs

I've decided to quit grad school, for a variety of personal reasons. I feel a bit disappointed, but I think it's the best decision overall. Financially, not having to worry about two of us in college at the same time will be a huge relief. 

I had set aside $2000 for fall tuition, which would have been due mid-August. I've already paid $1100 of that straight to one of the credit cards, and plan to add the remaining $900 to this month's payment. 

For some reason, I hadn't thought about budgeting for tuition hikes (the fiscal year for most public universities changes on July 1st, with tuition increases being finalized at some point during the summer). The actual percent increase was just announced, and would have amounted to $120 extra for the upcoming term. Mid-year tuition increases are also possible, so the December tuition bill may have been even more. 

I knew I'd have to buy books, but I didn't budget that in either. Afterall, it's a nominal amount (at least, compared to the cost of tuition!)... and I figured I could pick up a used book online. Turns out that textbooks and course materials would have been about $150. 

I'd also have to increase the amount that I budget for gas, to cover the additional expense for commuting to class. At current gas prices (about $2.50/gal), that would be an increase of $60/mo. Plus the "cost" of wear & tear on my vehicle, of additional maintenance (oil changes, tires, etc). And our food budget would have to increase, because I won't have time to shop for all the best deals, and we'll undoubtedly end up buying more convenience foods or eating out. 

August - blown already!

Although it hasn't even been twelve hours since I posted our projected budget, we're already way over on miscellaneous spending. 

We spent most of the day working around the house, and so we ended up eating out for lunch ($20, Coney Island) and dinner ($10, Taco Bell). We went to Home Depot to pick up some replacement work gloves ($11), and also decided to browse around Lowe's. We did swing by the grocery store for a few other items ($21), but I'm considering that part of our regular grocery budget. 

I had a 10% off coupon for Lowe's, and we found a ton of stuff for around the house. Some lighting fixtures, bathroom exhaust fan, flowers/shrubbery, landscaping supplies. They had a great deal on some of the perennial flowers that I couldn't pass up, and we also decided to pick up some lights that we've been needing to replace for quite awhile. After the coupon, we spent $133. 

So in all, we spent almost $200 today... with only $21 having been budgeted. Oops! 

August Budget

Projected Income: 

Salary: $5971

Projected Expenses:

Mortgage: $1450

Electric: $150

Gas: $40

Cable/Web: $155

Cell Phones: $200

Groceries: $250

Car Payments: $792

Gas (for cars): $300

Student Loans: $281

Credit Cards: $2350

TOTAL: $5968

This will leave us only $3 of "wiggle" room for the month, so it's essentially a zero-based budget. I think we should be able to come in pretty close to the budget for August. I've included some assumed overtime pay in the income, but I think we might be able to scrounge up some extra (by selling items online). The minimum credit card payments are much less (around $1000/mo), so if we need extra money we can always reduce the amount we pay. 

Potential budget busters this month: we will probably go out to eat a few times, which isn't really accounted for, and I will need to pick up some miscellaneous items (clothing, school supplies, etc.). Home improvements/repairs are a constant item, though nothing (I hope!) is critical for this month.