Holy cow has it been crazy at my house lately. I'm trying to get my pieces ready for my gallery showing in June, July, and August , just picked up "Patrons By The Sea", been holding my private watercolor sessions, and we have been looking at inexpensive houses! Yep, we are selling our home!
Here is some background for you in case you are new to my blog or missed some of my ramblings in the past about debt. - My husband and I have been fascinated with paying off all our bills via the Dave Ramsey plan for a few years now. We've always been a little frugal, but once we read his book and started the "Baby Steps" we became VERY FRUGAL!
Our first step was to do a BUDGET! Figure out where all your money is going! It's surprising when you look at how many little things added up, like the coffee you pick up on your way to work each day, or the take out for lunch.
Once the budget is in place - and that means budgeting 100% of your income, you can move on to the "baby steps". Now there is a little more to all of this of course than I'm explaining here so I - highly recommend you read the book The Total Money Makeover: A Proven Plan for Financial Fitness
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What are Baby Steps? It's all about paying off the smallest bill first then snowballing the payment from that into your next bill. So it would look like this. Say you had a Target card with $100 on it, Sears bill with $500, Lowe's card with $1000 and a $300 car payment with $5k left on it (just random #'s here to give you and idea).
How it works - Pay basic monthly payments for each bill and use all and any extra income and put it on the lowest bill ($100 Target card) first. We had to get tough....no dinners out, no take out, no extra spending at all during this time frame. Fingers crossed and we manage to knock that lowest bill out in the first month just from not ordering Pizza every Friday night for the family but instead make home-made pizza! That's what we did.
Next....Okay so your no longer have a (Target payment) due since it's all paid off. Next, use all the money you would have paid on the (Target bill) and throw anything extra you saved from not spending on pizza , or take out, or coffee...what ever it is.... and put that on your next bill (Sears bill).
Snow Ball: Once the (Sears bill) is paid off, you move to the (Lowe's) and so on. It's a snowball effect. By the time your reach your largest bill you have all that money that would have been spent for, from the bills you are no longer paying (Target, Sears, and Lowes cards). This makes it easier to bang out that vehicle loan quicker.
Extra Money: We did all these steps and now have a great amount of extra money monthly to drop onto our house mortgage! Ah, but here is the rub once you see how much money you have when you have no bills to pay...... it may drive you crazy seeing that $500+ a month going to JUST the INTEREST on the house!
Have you ever looked at how much you will pay back on a loan after you've paid the interest for 15 or 30 years! It's crazy....ours was over 120,000 dollars!
Mortgage Interest $120k.....after looking at this ridiculous number for interest only, it gave us the drive to look for a smaller home , one that we could pay cash for. Hence the house hunting week we are currently on. Our plan is to use the equity we have in our current home to buy the smaller home with cash.
I think we'll need to cheers with a shot of Patron tequila to celebrate when we close on our paid for home! We'll stick our feet in the grass and it should feel different...because we'll truly own it.
As Dave Ramsey would say....live like nobody else today so that you can live like no-one else tomorrow. In other words......we can sacrifice the I wants for a short time so that our family can be debt free and have financial freedom tomorrow.
Looking forward to my mortgage free home...which will hopefully allow me to purchase an art gallery space with cash soon!
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The Total Money Makeover: A Proven Plan for Financial Fitness
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