my total money makeover

You may have noticed the nifty littler debt thermometer I have over in the sidebar.  I’ve thought about posting about this stuff for a long, long time, and finally decided to go ahead and bite the bullet.

Maybe it will keep me honest…with myself.

Maybe it will help to keep me on track and plugging away when the end seems so far away.

A little back story first…

I started following Dave Ramsey in 2005, shortly after Ella was born.  The plan was clear, concise, and easy to follow.  It’s a 7-step process, which, when stuck to, will get you out of all debt and teach you how to live on a budget, without debt, and build wealth for the rest of your life.  We call them the “baby steps.”

1. Save $1,000 in an emergency fund. It’s not a lot because it’s supposed to act as motivation to get your butt out of the hole you’ve dug.
2. Pay off all debt (except the mortgage) using the “Debt Snowball”. Basically, you pay your accounts from smallest balance to largest balance. Each time an account is paid off, you add the minimum payment to the “snowball” and send it to the next account on your list.  Also, any extra income can be (should be) added to the snowball on a monthly basis to knock the balances down faster.
3. Build the emergency fund to 3-6 months’ of expenses.
4. Invest 15% of your household income into Roth IRAs and pre-tax retirement funds.  If your place of employment has a 401(k) match, invest at least up to the match in that account.
5. Fund college for your kids
6. Pay off the mortgage early
7. Build wealth and give generously

The steps, however straightforward and simple they sound, are not exactly easy to stick to.  I was on board for probably a year before we moved to Wichita.  Once we moved, I lost my motivation.  I slowly slipped away from following the path that had shown itself to be working.  And I sank myself deeper into debt.

Fast forward to April 2010.  In the process of buying the house, I was forced to clean up a few old accounts that I’d been ignoring for years.  But I didn’t make any major strides to make headway with anything else.  And then, for reasons I still can pinpoint, something stirred inside me a few weeks ago and I re-installed the program YNAB (You Need A Budget) on my laptop.  I went back and started tracking my expenses from the day we moved into the house.  And I just about puked.

How did things get so out of whack?  I wasn’t spending more than I made, but I wasn’t saving anything either.  And the proportions of everything was so out of balance, I got a little ill looking at the numbers.  The majority of that $74,000 total is student loans and the collected interest from years of deferments.  My only other debts are my 2010 Suzuki, 1 Mastercard, and the house.

If you’ll stick with me for the next several years, you can watch me dig myself out of this hole.  Mastercard will be paid off by the end of October.  I’m hoping to have the car paid off less than a year later.  That student loan is going to take some time though.

I’m grateful my “shovel” is as large as it is.