We’ve decided that we needed a complete Money Makeover a’ la Dave Ramsey. We’re fed up with living from pay to pay, giving the banks masses of interest, living with debt and wondering what happened to our money. Our current debt, not including mortgages, is roughly two thirds of Eddies yearly wage. Add in the mortgage (investment property) and it’s 2.1 times his wage. I’m not even going to calculate the interest bill on that… Our total Net worth is roughly 115% of his yearly wage, although if you consider that we have both worked over twenty years each, on fairly high paying jobs for that time, that really isn’t a lot of Net worth!
What we are doing is:
Emergency Fund. We have set aside $1000 as an emergency fund, so once we get going properly we won’t have to use credit at all. Note the word ‘Emergency’, it it could be foreseen and budgeted for then it’s not an emergency.
Budgeting. Working out at the beginning of the month where our money is going to be spent that month. Instead of wondering where it went at the end of the month, we’re telling it where to go! In theory, if it’s not in the budget then it doesn’t get spent, and if something comes up then it has to be made fit into the budget. We’re working on this, there are some things that we have committed to or need (like some car parts for Eddie to repair his car) that don’t quite fit and are needed.
Paying Cash. Our grocery, car and bill money is being withdrawn from the bank and held as cash in plastic baggies, so we can see exactly how much we have. Paying cash is harder than whipping out a credit card, it’s ‘real’ money. I have ceased carrying my credit cards, although I’m not quite ready to cut them up yet.
Debt Snowball. Any money not required for essentials is put into paying off our debts. The minimum is paid on each debt each month, with any extra funds going onto the lowest debt in addition to the minimum. As the lowest debt is paid off, that money is then moved onto the next debt, so it snowballs.
Net Worth. I’m keeping a chart of our net worth and also the debt each month. So we can see improvements and make sure we’re keeping on track.
Dian. She now has to work for any pocket money. We were previously paying her $4 a week, plus extra for jobs she did, except that she very seldom did any work! So now no work = no pay. Of her pay, she is required to tithe 10%, bank 10%, save 10% in an envelope, and the rest is spending.
In addition to this, in line with Compacting as well, I’m working on decluttering the house. We have so much ‘stuff’ here that it’s impossible to keep tidy, if we move to a smaller house (very likely!) we won’t have room for it all. So I’m, very slowly, working on simplifying life here.
I’ve been doing a lot of reading lately on money and frugal living and it’s really changed my attitude to money, credit and purchasing. Affluenza… I am guilty. I don’t have to stay that way though! Will my family follow suit and join me in this? I don’t know, what I do know is that I am responsible for my own behaviour and actions, and for teaching Dian as well. I can only do what ‘I’ can do.