Getting out of debt. I'm in the process. I'm almost done, I'll tell you how I did it. Added link for credit score post
I considered going anon for this, because people are such assholes and I"m sure people will post about times when we had no money, or I overspent on something. I'm not claiming I'm perfect with money, in fact I'm not good with it at all. I am however better at it than my husband who lucky for us blew $500.00 or so on a "get out of debt" plan that he let sit in the basement and gather dust until I opened it and learned something. I am not going to say this is right for you, I'm not telling anyone that this is how you should live or pay bills. I am simply sharing what I did and what I continue to do. Keep in mind the program is like 15 cd's and a ton of workbooks. I'll just be summing up. I also want to say, that IMO (and this whole thing is my opinion so keep that in mind) it is very hard to be successful without positive thinking and visualization. I think it's important to mention that I had just discovered "The Secret" before I started this program, and the whole first CD in the get out of debt program was explaining "the secret". It is important to focus on what you want, and not what you do not want. Here's how it works and I'll give you a run down on what our debt looked like.
when we started. my household income was about 2800 per month net.
utilities back owed 700.00 plus 250.00 monthly
15k in credit card debt 5 cards
737.00 in car payments
400.00 per month groceries
Car insurance 150.00 per month
Income tax owed 3800.00
State taxes owed 4000.00
198.00 per month for cable and internet
130.00 per month phone bill
and $7000 in medical bills
Now if you add up the utilities, rent, phone, groceries, cable, car, and insurance, you will see we didn't even make enough money to pay our bills. What my husband was doing was paying the bills with credit cards, then whenever he would get a big bonus at work, he would pay what what we could.
The first thing I did was have a garage sale. We sold absolutely everything we did not need or were not deeply in love with. We sold it cheap but we got rid of a ton of things, and I don't remember any of it. I also sold a vintage guitar of mine. The guitar and garage sale gave us almost 1400 bucks.
The next thing I did was look for a cheap apartment because we couldn't afford the house we were renting. I didn't want to downsize, but it was only temporary and let's face it.....we didn't actually own anything! We were paying for electric on credit!
I found a place for 750.00 and told the landlord we would not be renewing our lease. Well, he dropped the rent to 750 for us ad we didn't have to move.
We were on a payment plan with the government. $65.00 per month to both the state and the feds. Here's how the rest broke down and I'll explain the accelerator fund.
credit cards listed in order of lowest balance first (minimum payments)
Credit card 1 25.00
Credit card 2 25.00
Credit card 3 35.00
Credit card 4 50.00
Crdit card 5 50.00
These are the minimum balances.
We canceled our cable and internet, and we now had about 300.00every month that I could use to get us out of debt. Now when I say out of debt, I mean completely out. I also had any bonus money that came in.
This 300.00 is called my accelorator fund. Here is how it works.
Everything that was accruing interest gets put at the top of the list to be paid (we are only talking debts, not monthly bills) and they get put in order of lowest balance to highest balance. Here is what my list looked like.
utility back payments
So I take my accelerator fund of $300.00 and I add it to the first bill, every month, until the debt is paid. This is on top of the minimum payment. So what happens is, I pay off the CC1 and then instead of having an accelerator fund of $300.00 I know have 325.00 because that card is paid. Then I work on the second card and so on. When all the CC's are paid, My accelerator fund jumps from 300.00 per month to $485.00 also in the meantime, the utilities were paid off slowly and we got a huge bonus and I paid off the taxes because they were really making me nervous. So after about a year I now had taken care of the taxes and back utilities and 3 credit cards. Now my accelerator fund was $515.00. Add that to the minimum payment of $50.00 and I was sending that CC $565.00 every month. I had it paid off in 3 or 4 months. Now along the way, we fell off the wagon a few times. We got a few new bills here and there and once the CC were all paid off we bought a house.
(I can tell you how I fixed our credit in another thread)Click here to read that thread
Once we bought the house our accelerator fund went down to about 200.00 per month, but we kept at it. It's been about 3 years since I started on this plan and I just paid off my husband's car. So now our accelorator fund is 667.00 per month. So now I send an extra $667.00 to my car payment. Guess who'd car will be paid off by the end of this summer? That will put our accelerator fund at $934.00. Then I will be sending an extra $934.00 to my mortgage every month. Guess who's brand new house will be paid for in 5 years? At that point we will have $1619.00 every month and no where to put it. At that point we will be investing and saving. Also my husband gets raises every year. The important thing to do is to not allow your standard of living to change when you get more money.
I hope this made sense. Again, if it's not for you...it's not for you. This has worked for my family. It was really hard sometimes and I'm not going to say that we didn't struggle, a lot. But we are doing much much better now than we were even 6 months ago, and miles away from where we were 3 years ago.
Remember when you are paying for something with credit you are paying more for it. You are promising money to someone before you actually get it. That goes for credit cards, school loans, car loans, and mortgages. The key is to free up all that money and actually OWN what you have. You can't do much about utilities, we all have to pay them. The biggest way to positively affect your wealth is to eliminate loans and interest. You might not get the newest and latest stuff when everyone else does, but if you save a little, buy it in cash....you will pay less for it than they did.