Why am I writing The Debt Diaries?
I think about debt and the idea of financial freedom pretty much constantly. For awhile there, I was really into Dave Ramsey and was reading all the financial books I could get my hands on. I had implemented many of Ramsey’s principals and even opened up several different bank accounts for various sinking funds. Each week, I dutifully paid our bills, put money into our regular savings, and then divvied up the rest into our various sinking fund accounts. We had no credit card debt and were doing great!
Well, I am saddened and ashamed to say that lately, we’ve gone off course and have gotten into some debt. I’ve also been largely ignoring those sinking fund accounts. I’ve changed my mindset once again, and now we’re working hard to pay everything off and get back on track. For now, we are only saving a small amount of money and focusing on debt repayment instead. Though I hesitated a lot about sharing numbers and such, I’ve always found it useful when other bloggers shared their actual numbers and plans of attack so I decided to just go for it.
What are our jobs and budget like?
Jerry and I both work full time, but I won’t be going into our income or anything that detailed. I have my masters degree and work as a public librarian. Jerry works in building services at a local college doing custodial work. I’d say we’re middle class and do alright for ourselves. We pay all of our bills on time and have never had any financial catastrophes.
We both get paid every two weeks and it conveniently happens that we’re on the opposite weeks, so we get a paycheck every week. To make our mortgage and student loan payments easier, we divide them into four and put that amount from each paycheck away into a special account. This way, we don’t have to pay either of our two biggest expenses out of one check. I hope that makes sense. Basically, those two bills are split between all of our paychecks. Other than that, we don’t do anything too special. I write a budget each week, filling in which bill is due when, and we pay all of our bills immediately after getting paid. Once those are out of the way, we kind of see what’s left and go from there. I’m the primary budget writer and bill payer and we share our bank accounts.
We pay things primarily with our debit card / personal checking account. We also have a a personal savings account which is just our generic savings for emergencies or things we’re saving towards. I am working on rebuilding that since it’s embarrassingly small right now. Those are our two main accounts.
In addition to our checking and savings accounts, we also have several “sinking fund” accounts opened up at the bank which we try and transfer money to. A sinking fund is basically a specific event or expense that you know you will need to pay for and are saving towards. You can do it however you like, but I opted to open up extra accounts at the bank (some are checking and some are savings). You transfer money to a sinking fund on a regular basis instead of having to take a large chunk out at once to pay for them. Our sinking funds are:
- Mortgage/Student Loan: I mentioned this above. We transfer 1/4th of the monthly total for these from each of our 4 checks in a month.
- Vacation: No specific amount, we just transfer when we can. It’s currently at zero since our cruise last year. Need to restart this.
- Garbage/Water Bill: These bills are not paid monthly so we prefer to spread them out by transferring small amounts each month until they are due. It’s currently at zero and I’ve just been paying these bills as they come which takes a bigger chunk of our check. Need to restart this.
- Vet/Dakota: No specific amount, we just transfer when we can to have money for vet visits. This is currently being used for an upcoming visit and has some money in it. Still working on it.
- Car Expenses: No specific amount, just as we can. This is supposed to be for car repairs, oil changes, registrations, etc. Currently at zero, and needs to be restarted.
What debt do we have that I won’t be detailing?
Because I don’t really consider these things to be “bad” debt or “consumer” credit (though I know the cars could be considered as such), I am not going to get into the specifics of repaying these debts in my Debt Diaries series. I did want to mention them though and perhaps will detail them in the future.
- Our 30 year mortgage: currently set to be paid off in 2044. Eek!
- My auto loan: set to be paid off April 2019.
- Jerry’s auto loan: set to be paid off August 2021.
- My student loans: these are currently quite high because I have a masters degree and grad school is a b*tch. However, the good news is that I pay on the Income Based Repayment plan, and because I work as a public librarian, I am eligible for loan forgiveness in the future. After 10 years of payments, the remainder of my balance should (pray to God) be forgiven. If all goes as planned, I should be eligible for forgiveness around September 2026.
- Jerry’s Amazon Card: For the sake of simplification and privacy, I will also not be including my husband’s personal Amazon card on here because that’s his own thing!
What debt will I be detailing?
For this series, I am focusing on our other debts: credit cards and personal loans. Of course I’d love to have the above mentioned things paid off too, but first we need to focus on these ones.
Without further ado, here are the debt totals we are working on tackling. I’ll be updating each month around the same time with payments, purchases made (hopefully none), interest accrued, and new balances. Here we go!
- Visa Credit Card: $5,588.33
This balance really increased last year because of a few things: I got into a car accident and had to pay a deductible, we got our garage door replaced, and we went on vacation. Also, I shopped too much. My interest rate on this one is around 9% and as low as the bank goes. Please note that we saved money for our vacation (the cruise booking and flights), but did use the credit card for additional onboard expenses.
- PayPal Credit: $4,247.00
This one here is full on me being irresponsible and impulse shopping online. I’m pretty embarrassed. Many of the purchases are 6-month interest free, and after 6 months, the interest is around 20% (ew). I’m going try to focus on this one as much as possible because of the high interest that will start in a few months.
- Personal Loan (Parents): $110
Over the winter, we had some household emergencies arise and had to borrow a small amount from my parents which I HATED having to do. Luckily, we have been paying it off little by little and are almost done. No interest on this one, obvs.
- Personal Loan (Bank – Funeral Expense): $1000
Jerry had to travel to California unexpectedly for a funeral. We took out a small personal loan from the bank and the interest is around 9-10%.
- Total: $10,945.33 (hereby referred to as the “starting balance!”)
Plan of Attack
I won’t be following Ramsey’s plan to a t simply because it’s a bit too stringent and hubby isn’t all the way on board with that. My plan is to each week: pay our bills, put a small amount in savings (for now, it’s low while we pay debt), add money to our sinking funds, keep aside some money for “fun” spending and dining out, and then apply the rest to debt. Yes, this means that our debt won’t get paid as fast as I’d like it to, but we need to balance living with paying debt.
To help speed up the process, I am attempting to really curb my needless spending. This means a lot less clothes and books. Jerry is also working OT when he can, and I am making a bit of money on my new dip business.
So there you have it. Please, no judging or criticizing as this was hard for me to share. I decided to take the leap though because I feel it will help hold us accountable and might inspire and motivate others. I tossed around the idea of also showing you the progress on our various sinking fund accounts I mentioned above but I wasn’t sure.
I am really eager to become debt free and obtain financial freedom, though I know it will be a long road. Once these debts are paid off, we can focus on slaying the aforementioned debts like our house! I want to get back to being “gazelle intense,” as Dave Ramsey calls it. He also says that “if you will live like no one else, later you can live like no one else.” What this means is that while you’re in the process of paying off debt, you should sacrifice and live a meager, frugal lifestyle. People may not agree with you on giving things up so that you can pay your debt, so you have to live like no one else with your intensity to get it done. In the long run though, when you become debt free, you will live like no one else because of the freedom you will have by not owing anyone anything. This is the mindset I am working on getting back into right now. This means no more mindless, needless spending. I am getting back to the basics. My next update will be in one month, on or around September 7th, so please check back then.
I look forward to slaying debt and having you follow us on our journey to becoming debt free!