Friday, June 12, 2015

Debt Free by May 2018

Last night was our date night and instead of going out to the movies or lazing about the house we went out to dinner to our favorite restaurant and reviewed the budget. I know hot stuff! I suggested that we do this since it will probably be the last time we have the money in our budget to do so. We've both come to a point where we want to get out of debt completely and are now willing to make the necessary changes and sacrifices in order to make that happen. It’s really funny because we both have been inspired by the people we follow and listen to online to make a change to be better savers and move to a place where we can be debt free. After almost 4 years of marriage we now recognize how debt can stifle your dreams and choke your budget.

We kicked things off by discussing our goals for the next 1-2 years. We talked about everything from our blogs to the emergency kits we still need to complete. It was great hearing about the things that are important to us both. The common thread was that was that our savings fund needed to be amped up and that our debt needed to decrease. Using the spreadsheet that I wrote about in yesterday’s post, we plugged in the numbers for our current debts and altogether we owe a little over 45k. Not too bad but not too great either. We found out that if we pay an extra $960 each month (snowflake payment) then we could be debt free in 35 months.

Now I know this seems like a lot but when we went through our budget we found key areas where we were wasting money or overspending. Also for the last two years we were already making extra payments on our student loans so we just took those extra payments we were making and added them to our snowflake payment. The numbers we came up with use the debt avalanche method opposed to the popular debt snowball method. Again check out my post from yesterday to see why we chose the avalanche over the snowball. Playing around with the calculator I did determine that if we only paid an extra $45 a month on top of the minimum monthly payments that we wouldn’t be debt free until 2035. Yikes! Clearly the more you extra payments you make a month the quicker you can pay off your debts.

I’m excited and a little nervous for this journey. We cut down our Fun Money accounts by more than 50% as well as are significantly reducing our grocery and household budgets. Basically our needs are covered with a little money left over to splurge once in a while. That’s one thing we both continuously said was key. We wanted a little money to go to a movie every now and again or to eat out. Basically this means more game nights at our house where it’s potluck style. We’ll be taking our lunch to work which we already do now so that’s not a huge change. All and all the purposeful spending and tracking will be the biggest transition for us both as well as finding ways to increase our income to pay off our debt sooner. 

We are committed to doing what it takes and as we pay our debts I will share our struggles, challenges and victories. Leave me a comment and let me know if you have debt you’ve like to tackle or ways you are tackling your debt. I hope my transparency inspires you to make a change. I’m not a millionaire nor is my family wealthy. We’re just two crazy kids in love who want financial freedom. Thanks for stopping by and as always thanks for reading!