Sunday, October 2, 2016

Our Journey to Debt Freedom Part 2

If you missed part 1 you can read it here.

We were sick and tired of being sick and tired. We were done with college, deep in debt, and not earning nearly as much income as we thought we would be. We felt like we were barely keeping our heads above water and living paycheck to paycheck like most Americans. 

We first heard about Dave Ramsey from a coworker of mine at the law firm I worked at in 2008. She let me borrow a copy of the book, "The Total Money Makeover" and it all started making sense. I had Nate read the book too. We eventually got our own copy of the book so we could make notes, re-read, and photo copy budget sheets to stay on track. This introduction was a good taste of what we needed to do but it took us several months to truly get fired up.

Nate graduated in December 2008. Just as the economy was tanking. He looked for an engineering job in Colorado for 6 months when we finally decided to take a job offer in Maryland in early 2009. Once in Maryland we were earning a professional salary instead of being broke college students and it was time to get to work. I started a full-time nanny job about 5 months after we moved and we were a two income earner family for the first time ever. 

Dave Ramsey said you need to tell your money what to do. We started making a written budget but struggled with sticking with it. Every time we fell off the horse, we just got back on again. It was slow and steady progress. We tried the cash envelopes several times during our time in Maryland 2009-2011 but could never quite get it to work as it should. We started hammering away at our credit card debt, paying big chunks at a time. It felt good to not have that huge burden hanging over our heads. In 2011 Nate received a great job offer back in Colorado with a raise, in a city we thought could be our forever home. By the time we moved back to Colorado in June 2011 we had paid off $28,000 in credit card debt and $20,000 in car loans, $48,000 in loans in less than 3 years since we first heard about Dave Ramsey. All while not earning more than $80,000 combined income for our family of 5. Eliminating all debt except our student loans was an amazing relief and there truly is peace without that burden on your shoulders.

I'd like to say we just kept at it and knocked out those $80,000 student loans right away but that's not our story. I had wanted a 4th child for many years and we had both agreed we would wait until Nate could advance his career and our finances were stable enough I could stay home full time until the baby was in kindergarten or 1st grade. Originally we thought we'd pay off all our student loans first. During a week long Yellowstone camping trip in July 2011 Nate said he didn't want to wait anymore, he was only getting older, and let's go for it. Needless to say, I got pregnant our first month trying and 9 months later we were blessed with our final addition to our family. I did stay home with Orion at first. While Nate received a raise we were without my income. We got lazy about budgeting and saving, busy focused on getting ready for the new baby and didn't make significant progress during late 2011 and early 2012.

I went back to work full time in June 2013 and we started paying extra towards our debt. Essentially my entire income should have been going to student loans but it didn't work like that. We never were good about sticking to a written budget during this period and had a lot of two steps forward, one step back. We had a really good household income and were frustrated that we weren't making headway like we'd like to. We decided to take Dave Ramsey's Financial Peace University at our church fall of 2014. That was one of the best decisions we've ever made. The structure, discipline, and accountability of the class were keys to our success. We learned new things from the book and video but mostly from the facilitators and other classmates. We were determined to finish paying off the rest of our student loans ASAP. Some months we made thousand of dollars in extra payments, some months it was only $1200 or $1500 but we kept chugging along. We made goal boards for our bedroom and kept those goals within sight each day so we knew what we were working towards.

Another thing that we took away from Financial Peace University was truly using the cash envelope system as designed. Cash hurts to pay with. You are handing away some of your hard earned money instead of mindlessly swiping your credit card. The thing with cash is when it is gone, it's gone. This was a huge wake up call to me. Especially in our spending money category. Nate and I started out with $40 per week each for coffee, treats, lunch out, or we could save it for something for ourselves. We soon realized our budget didn't have that much extra so we cut back to $20. Thinking through our purchases and stopping when money was out was an important thing to learn. We also used cash for groceries, restaurants, and entertainment. It was fun to stretch the budget and have money left over.

June 2016 was another milestone for our family. Another big cross country move and another promotion for Nate. Our house in Colorado had gone up significantly in value and we were able to buy a new house with $85,000 or 25% down and keep our payment the same as well as take the rest of our equity and pay off the remaining balance on our student loans. It was an amazing feeling! We truly feel like it has been a marathon and a hard one at that but we have changed our family tree!

Instead of living paycheck to paycheck, giving into instant gratification, we now can plan, save, and spend money on the things we want to enjoy. We are putting money away in retirement and want to start investing. We have a fully funded emergency fund and 20 year mortgage with a very low rate. Someday soon our mortgage will be paid off too and we will not owe anyone any money. Our way of thinking about money has changed. We won't finance anything again. If we need a new car and we don't have cash for what we want then we'll lower our standards. If we want to take a nice vacation, we'll save for it. It takes planning, effort, and discipline but most importantly I hope we are teaching our kids these lessons now so they can start their adult lives without the heartache and stress of digging out of significant debt. Just because everyone in America is doing it, it isn't right. You can save up for your purchases, you can get ahead, you can win with money, and you then can bless others with your money too.

Visiting Ramsey Headquarters August 2016 on the way back from visiting family. We get to do our debt free scream live on air during the radio show 11/8 3-4pm CST!


Monday, August 1, 2016

Our Journey to Debt Freedom: Part 1

Debt Free!

Our path to debt freedom was a long and windy one but we finally made it June 28, 2016! We are completely debt free except our mortgage! How'd we get here?

Part 1: Stupid Mistakes

Nate and I both grew up with similar backgrounds. We weren't poor, we always had food on the table, and a roof over our heads but we weren't wealthy growing up either. Our parents didn't travel a lot. I got a few new clothes when school started and at birthdays and Christmas but our parents couldn't afford expensive or fancy things. Both Nate and I got married young and had kids young. Both of us knew if we wanted to go to college we'd be paying for it ourselves. I don't remember being specifically taught about money as a kid. 

As a young adult and as a single mother I bought into American way of instant gratification. I can put it on the credit card and pay for it later. I can finance the new car because I need something reliable. I can rack up thousands of dollars in student loans because I am going to go to law school and make good money and it will be easy to pay off the loans. How else I am going to get a better job or get ahead or ever be able not to struggle financially if I don't go to college?

Instant gratification is a terrible American cultural lie. You do not need what you want, when you want it! You can save for it, work hard, work a 2nd job, buy 2nd hand, or wait. It won't kill you, I promise. A lot of the credit card debt I racked up was as a single mom on monthly budget shortfalls from having too high of living expenses for the income I was bringing in. I didn't live a lavish lifestyle but I could have made better choices. Reduce grocery cost, buy a used car, find a cheaper apartment. The thing was at the time I didn't want to. I justified all these as necessary things at the time. I had to live in a safe neighborhood as a single mom. I had to have a reliable car that didn't break down. Both are true but there is a middle ground.

After owning 2 used cars that were horrible and broke down non-stop I decided to lease a new Honda Accord. Piling money into used cars wasn't something I could afford but I also couldn't afford a lease. Leasing a car is a horrible financial decision as you take on all the immediate depreciation of a new car but technically don't own the car in the end. I ended up buying out my lease with a used car loan and drove that car 8 years until I was pregnant with my 4th child and we couldn't all fit in a 5 seat vehicle. It was a great car and I got good trade in value when I traded it for my van but I don't even want to know how much I paid in interest and how much lost value I took on by leasing it.

Student loans, the golden ticket to success in America! No way! Nate and I both bought into the lie that the only way to get ahead was through a college degree. While I enjoyed my time in college and I am proud that I graduated with my Bachelors degree there are ways to do it without going into debt. Even 9 years after graduating from college I don't make that much more than I did at the bank without a college degree. Nate has an engineering degree and has seen huge jumps in his salary because of his degree. He almost doubled his salary out of college and over the past 8 years has almost doubled it again. Having a degree for him has paid off but he could have gotten a degree slower without going into debt. That is what I wish I did, continued to go to college part-time and cash flow my degree. If I get one point across do not take out student loans! I repeat do not take out student loans. They will haunt you forever. There may not seem like there is another way but there are other ways, scholarships, work study, full time work and part-time college. 

When we started attacking our debt we had $128,000 in debt! Staggering amount for two young adults with minimal income and 3 kids. Our debt broke down into $28,000 (half Nate's, half Michelle's) in credit cards, $20,000 ($10,000 left on two car loans both bought new), $80,000 student loans ($35,000 Michelle, $40,000 Nate). It was utterly overwhelming! 

In Part 2: I'll fill you in on what we decided to do about it.


Friday, June 17, 2016

No Spend Month - Week 3 and 4 Update

If you missed early posts in this series: Getting Ready, Week 1, and Week 2

During week 2 we learned Nate received the promotion he applied for with his company to Moorhead, MN, meaning we were going to be relocating to Fargo, ND on a short timeline. This obviously made for some no spend exceptions that I will outline below. The great news is our house went under contract, within days, with multiple offers, over asking price.

Week 3 and 4: Craziness
Have you ever moved across the country? Relocated on short notice? We have before and it is always a stressful process but this is our first time as homeowners and getting our home ready to sell on short notice was both stressful and expensive. I also was out of state for a work conference the last week of April. Needless to say when we planned our no spend month we never thought things would get so crazy but we pushed through.

Eating Out
This is the area where we did the best! It was a huge eye opener how much we truly were spending both at restaurants and fast food. Going out to dinner as a family is something we enjoy but with 6 people it is never less than $35 and often is $80-$90 with a tip. Our money is better spent on other things. We will reserve eating out for special occasions and really strive to plan our meals and be prepared. A lot of our eating out is due to our crazy schedule with 4 kids and 2 working parents and not planning things in advance. With our move I won't immediately start working so I am going to work to become better organized in this area and limit this spending going forward.

Our cheats were at the very end of the month. Nate spent $6.44 at his work cafeteria 4/27 so I bought myself a drink at dinner at Bahama Breeze $10.45 with tip. 4/30 I had a moment of weakness and exhaustion and got Nate a soda (and myself one too) instead of going into King Soopers $6.86.

$23.75 for the whole month with no spending all month until 4/27.

Entertainment wasn't hard to find during the last two weeks of April. We had a busy calendar with bible study, JOY team party for the kids at church, Great Cloth Diaper Change, and I had a work conference in Atlanta. On top of all that we were under a time crunch to get our house on the market so every free moment was spent doing repair projects. It wasn't glamorous or exciting but we kept busy.

Grocery Shopping
We managed to stay right at budget those last two weeks. It was a good reminder that if I set a budget and calculate out costs while I shop or use grocery delivery I can stay on budget even with cleaning supplies, toiletry items, and household goods.

Clothing and Shoes
No temptations in this area. The no spend month just affirmed that this area is one I don't overspend in.

Household Items
We didn't have specific items we purchased to use in the home but we had a number of expenses to get the home ready to sell. I will detail them below under a new category "moving expenses".

No Cosmetics or Luxury Toiletries
No temptations in this area. The no spend month reaffirmed that my overall spending in this category is on track.

Car Maintenance
No maintenance needed this month. My next oil change wasn't due until early June. Nate ended up selling his car and purchasing a new car in early May with cash. He did buy $49.99 Carfax subscription to assist with his search.

Medical Expenses
This category of our budget always takes up a much larger part than it should. I was able to defer these expenses until May with no problem. Overall we need to increase our budget in this area as it seems most months we have at least $200-$300 in medical expenses with some months as much as $500 or more. I think a good exercise would be to total up medical expenses the past 3 years, get an average, divide it by 12 months and add that into our budget. Going forward $3000-$5000 per year in medical expenses will likely be our norm so we just need to embrace it.

Moving Expenses
This was our biggest deviation from our no spend month. We had a number of large expenses to get the house ready to sell. 
$141 Home Depot
$29.77 Home Depot
$74.83 Walmart
$15.36 Ace Hardware
$73.41 Home Depot
$138 Walmart
$13.37 Home Depot
$3.75 Lowe's
$19.95 Lowe's
$49.69 Target
$19.99 Ace Hardware
$58.82 Walmart
Total $637.94 in the month of April. Including May these expenses totaled closer to $3000 with a brand new water heater the day before the house listed an $300 washing machine repair right when it went under contract.

Even with the best of planning you can come across unexpected expenses. Brennan got asked to prom and since we were moving we decided to let him go and cover his tux rental of $110. Brennan's birthday ended up getting moved one weekend early into April due to our house being listed for sale. The expense for his party was $195 including food for 7 and cards for the game they played during the party. Once again more than I typically spend but since he wouldn't be seeing these friends for awhile I let him invite more people. $305 spent in the miscellaneous category on two events: birthday party that was moved from April to May and prom that Brennan wasn't invited to until April.

Bottom Line:
No spend month was a huge exercise in self control and discipline. Lack of self control and discipline is a big reason we've failed at budgeting and failed financially. American culture says get what you want when you want it, you deserve it, and pay for it later. Dave Ramsey and Financial Peace University along with YNAB budgeting software really have turned my attitude about money around. We'll never finance a car again. If we want to make a big purchase like a vacation, we save cash first, then go on the trip. Totally life changing. Bringing these other spending habits into line will only help us in the long run. 

Our biggest wins were eating out and entertainment. These are huge drains on our monthly budget. In the month of June, admist our big move I have gotten lazy but in July I am going to work to keep this category as close to zero as possible again. Eating at home is healthier and saves money. It just takes a little time and planning. Entertainment is something that can't always be at zero but it pays to be thoughtful about how much we spend in this category, balancing free things with affordable, fun things.

Other things that were easy to not spend money on were toiletries and luxury cosemtics, clothing, household items, and car maintenance. These are all things that I need to spend money on annually but not every month. Going forward I plan to budget these items out for the year so I get a good picture of what we spend each year in these category even if I only purchase these items once every 4-6 months.

Our biggest challenge was finding out we were relocating on short notice. Throughout the months of April and May we spent $3000 getting our house ready to sell. Another challenge was unexpected kid expenses. The biggest one was prom, 2nd biggest one was moving Brennan's party to an earlier date, 3rd was an unplanned field trip. The first two were influenced by our move as well. In a month without a major life change I think we could stay much closer to zero. We plan to try this again soon. Probably in September once our summer travel is done and the kids start school.

Could you do it?
Yes! Anyone can do it. I found our no spend month a great exercise in self control and an eye opening experience to what we truly spend money on. Give it a try. Let me know how you do. Some other great resources I've found on budgeting and finance are Dave Ramsey's book Total Money Makeover and his class Financial Peace University (totally life changing for us). I also really like the budgeting software YNAB and like following their posts and updates on Facebook as they have a similar philosophy of living within your means, saving, and planning for purchases. We're excited to be debt free except our house (good riddance student loans) and to have a fully funded emergency fund after our move. I plan to write more about our journey in the coming months so stay tuned!


Tuesday, May 3, 2016

Go Toddler Go!

I was given the opportunity to review the Bobux i-walk shoes. i-walk shoes are the perfect shoes for toddlers. The i-Walk line is made for toddlers who are confidently walking and are perfect for running and jumping. Bobux makes tennis shoes, sandals, and boots, making it the perfect shoe for every season. Bobux i-walk shoes are available in toddlers sizes 4.5-11.5 (U.S. equivalent). 

Orion is 3 years old and I have always chosen to purchase him 1-2 pair of quality shoes at a time rather than 10 different pair of shoes to match everything. He's a boy so 1 pair of tennis shoes, 1 pair of snow boots, and 1 pair of sandals. Between those 3 pairs we can get by all year.

Bobux is based out of Castle Rock, Colorado and I love the opportunity to work with another local, Colorado company.

i-walk Attica Flame

Fun, orange and gray shoes

These shoes didn't disappoint! Orion was so excited to put them on and run, run, run. Orion has been wearing them daily for the last couple weeks to preschool both for outdoor playground time and indoor P.E. time and they are working great and holding up well. 

Buying shoes online without trying them on first can be tricky. I used the Bobux i-walk sizing guide provided on their website. Orion measured 6 1/4 inches but I decided to go with the size 27 because he had outgrown his last pair of tennis shoes in 9.5. The 27 is a bit big and the size 26, which was recommended by the sizing chart would have fit him perfectly. My advice is go with the measurement size even if it doesn't correspond to the U.S. shoe size you typically buy your toddler. Even being a little big Orion has been able to wear the shoes just fine and they'll end up lasting him longer.

Happy boy modeling his new shoes

Watch Orion run in his fast, new Bobux shoes!

Check out Bobux's website for their full selection of shoes for babies and toddlers. You can also follow Bobux on Facebook where they partner with other companies each Friday for Friday Freeday giveaways.

I was provided this pair of shoes at no charge in order to facilitate this review. All opinions are my own.


Tuesday, April 19, 2016

No Spend Month - April 2016: Week 2

If you missed the first post outlining the rules for our no spend challenge, read it here.

Week 2 Finding Our Groove
Week 2, April 11-April 17 went pretty well. We got used to saying no to Starbucks, and fast food, and dinners out. We are saving money and I hope a month of no discretionary spending becomes a habit for how we spend our money.

Our only cheat this week was a field trip fee for our daughter of $20. We were not notified of the trip in advance and it was due 4/20.

Eating Out
This has gotten easier. I don't even want to take the easy way out and pick something up. I know I need to plan ahead or head home for food. My friend did buy me a $2.00 Americano this week. No other food outside of grocery store food.

This was easier this week too. We took another trip to the library for new books. It was a busy week with MOPS, Bunko, pre-race party, half marathon, and VBS meeting at work. I invited my running friends to our house for a pre-race party rather than going out. I met with a close friend to catch up this week but since she knew we were doing a no spend month she invited me to her house. We invited my son's best buddy over to play instead of going out to lunch together.

Grocery Shopping 
After going over budget last week we managed to stay $10.10 under budget for groceries this week including hosting a pre-race party at our house where we provided hot dogs, buns, and juice for 40 people. 

Clothing and Shoes
No temptations in this area. I even removed myself from most of the online LuLaRoe clothing groups on Facebook so I wouldn't have the temptation while I can't buy anything.

No Household Items 
This week we did good in this area. We did receive word that hubby received the promotion he applied for and we are going to be relocating to Fargo, ND. We met with a Realtor and now have a 3 page list of things to get the house ready which will involve some expense but hopefully not too much.

No Cosmetics or Luxury Toiletries 
No cheats in this area.

No car maintenance 
So far we have not come across any needed car maintenance. My windshield cracked last week but the repair can wait.

Medical Expenses 
We did find out that our insurance did not pay the final balance of Brennan's braces so we now owe $150. I am going to try to wait and pay the balance due May 1st.

Week 2 continues to be a lesson in self control and delayed gratification. As the month goes on it gets easier and easier.

Spent from no spend categories: $20.00 for field trip for daughter.


Monday, April 11, 2016

No Spend Month-April 2016: Week 1

If you missed the first post outlining the rules for our no spend challenge, read it here.

Week 1, Adjusting to the Change. 
Week 1 has been a bit of an adjustment. There were many times this week where I had to tell other people no I couldn't do something and even harder I had to tell the kids no several times to things they were used to doing or really wanted to do. Week 1 actually lasted 10 days, April 1st-April 10th.

The biggest adjustment has been no fast food, no Starbucks, no quick treats. No spending on entertainment or date nights or rewards for the kids.

Nate has stuck to the plan perfectly. In fact the only purchase he has made all month was one tank of gasoline for his Jeep. 

I have made 2 cheats already this month. I owed a co-worker $15 for a birthday gift in March that I forgot to give her. I forgot to purchase the two bible study books I needed for this month. I was able to get one book from the public library but the other I had to purchase on Amazon for $9.99

Eating Out
We haven't strayed but we have used a couple gift cards we had received: The Egg and I, McDonald's, Timberline Cafe. These have been nice treats mixed it with no dent to our budget. We did have to say no to a treat for Brennan after his band concert. We usually stop for an ice cream or something similar after kids have a special performance or school event. This was hard as the kids expect this treat.

We've taken multiple trips to the public library, checking out many books and movies. We've also taken multiple trips to different parks across town. We've walked to the lake in our neighborhood several times and played at the park in the neighborhood. We've also done things at the house we don't always do like put together a puzzle or watch a new show on Netflix. We've also had fun school events like the egg drop, IB showcase, and a band concert. I also hosted book club and had my first bible study class. Work has also kept me busy the past week with a Parent's Night Out event we hosted Friday night. Yesterday we had my nephew's birthday party. I also am finishing up my training for my 3rd half marathon. Not much time to be bored! I did have to say no to purchasing Rockies tickets as a fundraiser, which was a bummer!

Grocery Shopping 
This was a bit harder this week knowing there was no other food we could consume. I went over budget by $42. I made multiple trips to the grocery store last week. I plan to remedy this next week by making one planned trip.

Clothing and Shoes
This part hasn't been hard for me yet. I tend to do a couple larger shopping trips for clothes in the year rather than buy things each month. I did take Wynter shopping at Nordstrom Rack where I found a pair of shoes I may be returning for next month.

No Household Items 
This has been a bit trickier. Our master bathroom toilet started running and really needed a repair. We lucked out though and Nate came across a partly used toilet repair kit in the garage that had the pieces he needed. 

No Cosmetics or Luxury Toiletries 
This has not been hard. I pre-planned in this area. Twice per year I order Mary Kay. I was almost totally out in the month of March so I placed a big order 3/31. I should be set in this area.

No car maintenance 
So far we have not come across any needed car maintenance.

Medical Expenses 
So far this month we have had doctor visit co-pays and prescription drug co-pays but we still have money in our 2016 flexible spending account so I have not had to take any money from our budget. Medical bills for 2015 that must be paid out of pocket I am waiting to pay until May.

Most importantly week 1 has been a lesson in self control and delayed gratification, both things I know I need to work on financially. I think as the month goes on it will get easier not harder as I will get into the routine of saying no to spending money.

Spent from no spend categories: $24.99

Spent over budget in allowed category (groceries): $42


Thursday, March 31, 2016

No Spend Month-April 2016: Getting Ready!

What is a no spend month? How do you get ready? A no spend month or no challenge is a personal challenge where you or you and your spouse agree to no discretionary spending for an entire month. Yikes, that sounds hard doesn't it. You or you and your spouse agree on the rules and the most important point is sticking to it. 

Nate and I have been on a financial journey for many years. I've talked about our financial journey on the blog a few times: paying cash for a new car,  new years goal posts, and funding our vacation by selling things around the house. We were first introduced to Dave Ramsey's the Total Money Makeover in 2008 and took Financial Peace University  in person at our church fall of 2014. Paying off debt and living a life of true financial freedom is our ultimate goal. The no spend month will be a good challenge for Nate and I to stop discretionary spending, gain more self control, and truly look at how much money each month we are spending on things we truly don't need.

Brown Family No Spend Month Rules:

No Discretionary Spending
1) No eating out, no fast food, no restaurants, no coffee, treats, or snacks not prepared at home.
2) No entertainment that costs money: no bowling, no museum trips, no trips to the movie theater, no Redbox rentals, etc.
3) No clothing or shoe purchases
4) No household purchases, no decor, no repair items, no equipment
5) No cosmetics or other luxury type toiletry items

We Will Continue:
1) All regular bills: mortgage, HOA, insurance, utilities, gasoline, childcare, student loan payments, tithes, and charitable giving.
2) Groceries, cleaning supplies, and regular toiletries like soap and toothpaste will be replenished out of our regular grocery budget which we have set at $150 per week.
3) Gasoline for the cars will be replenished as needed.

How We Prepared:
1) Complete all car maintenance either prior to start of no spend month in March or wait until May.
2) Pay medical bills prior to start in March or wait until May for any newly received medical bills that cannot be paid out of our flexible spending account.
3) Review calendar to anticipate potential events that would derail our no spend month. We did not see any kids field trips, church events, or birthday parties during the month of April that we anticipate spending money on.
4) Reschedule things that cost money to the month of May. For example I have a haircut scheduled in April. I will reschedule that for the 1st week of May.
5) Complete purchases for things we know we need by 3/31. For example I am completely out of my skin care regimen so I am ordering that today. Hubby wants to purchase hunting licenses which are due by mid April so he will purchase them by 3/31.

That's it! We're committed and excited for this challenge. I will be posting updates on our journey every Monday beginning 4/11/16. Follow along to see how we do!