In January, I declared war on our credit cards. With over $11,000 dollars in credit card debt, I mapped out a basic plan to accomplish the goal of being free of credit cards by 2012. And in the spirit of complete honesty, I’m going to share the nitty gritty details with all of you. (*Names of creditors have been changed to protect the
All over the internet, I read of people who have drunk the Dave Ramsey Kool-Aid and changed their financial futures. I’m not a huge fan of Kool-Aid, but I wanted in.
So for the month of August, we went cash only on all of our variable expenses.
First, let me say that while some of our expenses are rather predictable (i.e. groceries) many are not (ummm… Target, I’m talking about you). This made setting budget amounts a little challenging. And I’m expecting this to be a work in progress for a little while.
But for our first month, I’m really happy about the results.
It wasn’t unusual for us to spend almost $200 a month on eating/going out. But by setting a limit of $120, we’ve been able to make better decisions about our entertainment expenses. Because if there isn’t any money in the envelope, we need to find something at home.
It’s also been great for planning future expenses. Knowing that an upcoming event is already allocated for, makes going out a lot more enjoyable for me. Because before I was always guilty that I was spending money on frivolous activities. Now I can relax because it’s part of the budget.
My biggest lesson? I had been grossly under-budgeting before.
I would set a limit of $50/month for household items, but in reality we were spending close to $100. And at the end of the month, I’d look at the budget and say, “Oops. We went over. I need to try harder next month.” And. I. did. this. every. month. Never once thinking that *maybe* cat litter and diapers were just expensive.
The downside to this realization is that we will be making lower payments towards our credit card debt. Because somehow, even after overspending each month by nearly $1000, we were managing to stay on schedule with our repayment plan. With the exception of June and July. Which I guess is where the extra money came from. Sigh.
But I did manage to get back on track in August with a good-sized payment to Chinchilla.
Unfortunately, due to the set backs this summer, we don’t appear to be on track to pay everything off by the end of the year. However, we have paid off over $5000 worth of debt so far this year. And that feels pretty good.
So even though our budget doesn’t look as tight on paper anymore, I’m glad that we are being truthful about our spending needs.
Have you drank the Dave Ramsey Kool-Aid?
Next post in the War on Debt series: Celebrating