3 months ago we had credit card debt of $22,000 which we had not been able to make a dent in – even though my husband made a respectable salary. The problem was that we had always operated without a budget and had no clue where our money went…I am a financial illitrate – money scares me so I picked up your book as I was starting this financial “makeover.
The first thing we did after we tracked down our all our expenses and realized that the “Latte” factor was enormous in our lives. We made a series of budgets on a spreadsheet and color coded them. The first one was an “inflated” one where put in all the luxuries we wanted and were we did not downsize on anything. The saving potential on that budget each month was 2%. Then on each subsequent budget on the spreadsheet we started cutting down on things that we did not really need – our expensive phone plan was dropped for a cheaper one, a lawn service we did not need, cutting down on some of our eating out etc. till we reached a savings potential of 40%. There was also a “Survival” budget if ever my husband lost his job how we could survive with the bare minimum by cutting down the gym, cable, childcare, one car etc. AND a “Dream” budget – to finance going back to school for me or my husband without taking a loan.
Some house cleaning and decluttering of our finaces was also required – we closed our multiple bank accounts at work, online etc – and opened a single account with a local bank with no fees or minimum requirements. We had over $600 in coins that we used to pay down the debt – thanks to the free coin counting service at our new bank. I closed out all our infrequently used credit cards after cashing out my reward points in these credit cards for cash and paying down my debt. I also cashed out around $700 in rewards points from the two credit cards that we did keep. I started using your principle of paying the rent twice a month to paying down my Credit Card debt twice a month. I started paying bills online with my new bank and made sure I paid my credit cards in each pay-cycle – I made sure that I paid in full every 15 days – all charges I had incurred on the credit card in the past 15 days + some portion of the debt. By Supercharging my “Latte Factor” (ie – no expensive maid service – cut down on eating out) I also managed to pay off my credit card debt – my husband thinks I am a hero but I must say thanks to your book for opening my eyes. Seeing our bank balance grow has also become quite addictive 🙂
The next step is to start paying myself first — with a twist – since I am a stay-at-home mom and have no 401K or IRA – my husband has agreed for me to have my own account where I can pay myself at least 10% – this is different from all of our finances that is held jointly. I am now trying to see if there is some fund that will allow me to put in some money twice a month. Since my debt has been paid off and I have a better grip of my finances – I feel really empowered and am also planning to start something soon that I love and am good at and know will be be a source of fulfillment as well as income.