the awful B word

 Gosh, I was on such a roll posting and then all of a sudden life got in the way. Since my last post we've spent our weekends on two separate wine tours. Virginia has an amazing wine country and I intend to check out each and every vineyard. Out of the six vineyards we visited in the past two weekends, five of them were new to me. We've had an the normal warm October, it's been in the 60's and 70's everyday so far, it might have even hit 80 today.

Since September I've been so excited thinking about a blog post about the amazing budget I created and how we were going to stick to it and beat not only our credit card debt, but also pay down our condo enough to sell it and save enough to put a downpayment on a house. As all budgets go, we had some emergencies come up, but I felt better prepared this time.

In the past my mindset was always "Pay bills first and then put every single extra dollar toward paying off debt." While this is a very sound way to tackle finances, it didn't work for us. Something would always come up or I would forget about a major expense for the month. My new mindset in creating this last budget was more along the lines of slow and steady wins the race. I tried to think of everything that throws us off course. It was usually car repairs, vet or our own health bills, or impulse purchases. These unexpected expenses would end up on a credit card since all of our extra cash had already been spent, towards paying credit cards off. The cycle was never ending and VERY frustrating. When I built this budget I put a percentage towards car repairs, medical, and clothes. I put a more modest amount towards credit cards and even upped our monthly savings.

I chose October to start our budgeting because Hubs got three paychecks this month. While I get paid bi monthly, he gets paid every other week, so about twice a year, three paychecks in one month. We had a couple planned expenses that we knew were coming that we would put that extra paycheck towards: car taxes and a couple various expenses we had put on the credit cards in September that we wanted to pay off.

So I put together a spreadsheet of expenses and percentages of our total budget. I did this in early September and would check it out and tweak it almost daily. I was honestly giddy on October 1st, ready to track every penny and see how much we would end up saving!!!!

Unfortunately I didn't plan for one of the dogs to get a strange bump on her stomach that would require a biopsy and rack up over $300 in vet bills. (She's ok, it was just an infection that ended disappearing in about two weeks, I was fine just letting it run it's course until it started bleeding, then I broke down and got it checked out). I also didn't plan for my car to start sounding like we were newlywed's again and dragging tin cans behind it. I checked for diet coke cans to be stuck under it before I took it in. $1,100 I finally got that 90k mile tune up as parts of that were the culprit of the noises.

BUT guess what? Neither of these went on the credit cards. Somehow we had enough cash to cover these unexpected expenses. I had budgeted 2% to go toward medical, so that helped us start the dent on the vet bill. The amount for car maintenance I budgeted fell FAR short of the car repairs, but it helped and that extra check covered the rest. 

So here is what I started with:
Housing would be 30% - This included our mortgage, storage unit, home insurance, and a small sum for home decor items.
Food is the next 20% - This is divided by groceries, dinners out, and happy hours
Transportation came in at 15% - We fit in gas, a car payment, car insurance, our parking costs, tolls, and maintenance.
Utilities are 10% of the budget - Cell phones, electricity, cable, gas, and water. I also included our condo fees in this category.
Medical came in at 2%
Clothing is 3%
Debt - 10% - Includes credit cards and putting a little extra towards the mortgage to get the condo selling price down
Entertainment - 5%
Savings - 5%

I figured we may not need the 2% in medical or the specified car maintenance every month. The alloted money would be put in an ingDirect sub account specified for it's own purpose. That way when a larger bill showed up, we would have the cash to cover it. I guess that will start next month since we were wiped clean in October.

Going into November we'll start fresh. We have one birthday to shop for and we'll have to start thinking about Christmas gifts for our families. We'll have one quick weekend trip, but we can drive and will keep costs down. I'm looking forward to reporting how well we did in November. I do feel so much more at ease knowing that the unexpected doesn't need to set us back on our debt goals and that we can take care of that without dipping into downpayment money or credit cards.

Have you had any success with budgeting?

Total Money Makeover

I heard about Total Money Makeover by Dave Ramsey from Not Quite Betty Crocker. She mentioned reading it and then paid off all of her debt in 12 weeks. Alright, that got my attention.

So I checked the book out from the library (bonus points for not increasing debt by paying for the book, right?) and sat down to read a few chapters last night. I ended up reading almost the entire thing, I stopped when I got to the part about being so wealthy you don't have to worry anymore, lets tackle that topic when we get there.

So Dave breaks down his plan into baby steps to conquer your debt and to become entirely debt free. He has a lot of comparisons in his book to dieting and losing weight. All the weight won't come off right away, you won't be able to run a marathon without training, you have to start somewhere. I did some mental math as I was trying to fall asleep and figured it would be about 6 years and our condo would be paid off. That would be a huge accomplishment. No mortgage, no car or credit card payments, just wealth accumulation. The only caveat would be that we are still in a one bedroom condo. I can't be there in 6 years, I just can't.

Dave's first baby step is to immediately get a $1,000 emergency fund. The next step is to start your Debt Snowball, which tackles ALL of your debt but your house. He calls for you to empty your bank account if you already have more than $1,000 to but anything above and beyond towards starting the snowball. This would mean that our Downpayment fund would be gone. GONE. We would have a great start on the debt, (over a third there!) but would set us back from moving.

I love his approach and think it makes a logistical argument on how to get started, but maybe not for us right now. If getting out of debt is like starting a diet, starting this right now would be like starting a crash diet the night before Thanksgiving. I think Dave would say "Stick it out in the condo to become debt free before upgrading the house", he advocates suffering now to live it up later. I can't Dave, I just can't. So I think we're going to go all out to save for this house, while not accruing any MORE debt, and start this whole deal once we have some room to breathe. In the process we'll have a couple loans that will expire and will free up money anyways!

Are we just setting ourselves up for disaster?