Normalists, or How We Broke the Cycle of Excessive Living to Pay Off Our Debt–Part 2

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The Big Guns

We have talked about identifying what is important and what isn’t, so you can shed some clutter, and about real easy things that pretty much everyone can do to cut down on some monthly expenses, but today we will talk about how to kill debt for the long haul.  This is a very big sacrifice we have chosen to make, and with our momentum, we will be debt free in about 6 years.  Like, completely debt free.  We will be only 38, so that is huge.  Obviously, we may have some setbacks and things may not go according to plan, but any headway we make is better than no headway at all. We have just one child (thanks to infertility, not for lack of desire), and both of us work, so I realize this is a much more aggressive tactic that may not be even feasible for some families with more kids or a stay-at-home-parent, but if you have the ways and means, then jump on the train now, because adding kids or losing a job to the mix will complicate matters later if you don’t have things under control now.

1: We drive used cars. I bought my car new in 2007 and it was my first ever brand-new car…and likely my last ever. I hated and resented that car payment every month. Cars are not generally investments, people.  They depreciate, instantly. They do not appreciate, unless you have a mint-condition fancy car that is in high demand, like a classic Corvette.  Do not be fooled and enchanted by the bells and whistles. Buy a used car and either learn basic repairs yourself or befriend a mechanic;  you will be SO much better off.   I plan on keeping Geoffrey (that is my car) until he falls apart, which is hopefully not for a very long time. He has only needed very minor repairs and maintenance, so we are lucky so far.  My husband bought a used Infiniti in cash a year ago—a car that cost $65,000 11 years ago—for $3500, and it is immaculate and way nicer than Geoffrey and will likely outlive him. I shudder when I think of the money the previous owner wasted on the Infiniti.   You really can find a good deal on Craigslist or whatever, but buyer beware.  Our car has had one owner, no accidents and had all the service records.  Even if the Infiniti lasts only another 3 years (which it will last longer, God forbidding accidents), we will have spent only $875 a year on owning it over the course of 4 years, minus gas and regular maintenance, whereas the previous owner spent $6,500 a year while owning it for 10.   I don’t like new car smell THAT much.

2: We make extra payments and buy things in cash. You are thinking you have heard this before, right? Like, every day on Yahoo…but wait, there’s more.  Learning to manage our income to the maximum benefit of our family is the toughest thing we do. It is where the belt gets really tightened.  We get paid every two weeks.  Instead of paying bills monthly, we pay every two weeks. There really isn’t much difference in that, but it does accumulate over the course of a year and it has helped us get ahead in lots of ways.  I have made a handy, dandy chart that shows exactly what our bills are, where our current debts stand, how much progress we have made, and how much money we have after bills are paid. We pay ALL of the bills due for those two weeks the very day we get paid, then we take out the remaining money as cash and that is it. We pay for mostly  When it is gone, it is gone…but believe me, when you know that little wad of cash is your gas, groceries and whatever else you need for two weeks, you think twice before parting with it for any reason.

We also pay more than what our minimum payments are on most things, but we do have a system.  We decided that paying 30 years for a house and ultimately paying twice what you purchased it for really sucks, and since that is our biggest asset, we decided we needed to squash the bank that was sucking its blood.  We started off with first telling ourselves that our $800 mortgage payment was really $1000, and we did that for a while, and were elated to finally see the balance move down  for the first time in, um, ever.  Then we got really brave: we decided to live off of one income and pay the house with the other.  We would also apply any bonuses or income tax returns to the balance.  In one year, we decreased our mortgage balance by $28,000, which was 27% of our principal.  Once our house is paid off, we plan on turning the cannons at the student loans, of which we now owe more on than our house.

We also attacked our debt from the other side, by paying down all of our little debts on our credit cards .  We do have credit cards: we have two very small limit secured credit cards (which are basically small CDs really) and one large-limit credit card in case ish really hits the fan.  If we put anything on them, we pretty much pay them off immediately.  We use the snowball method: we started paying off the smallest debt by making extra large payments, while maintaining minimum payments or just more than minimum payments on other little debts.  Once that was paid off, we used all the money we were paying on the previous debt, plus the money we have been paying on the next smallest debt and killed off that debt, and then so on. We closed out 2 small private loans, 2 store credit cards and paid off the the credit cards we continue to keep open in this manner.  We keep our credit in good standing by occasionally purchasing gas or groceries on a credit card and then paying them off right away.

3: We pay ourselves.

Finally, we have made our savings account a bill. We always pay ourselves. We have been able to build up our emergency fund in this manner, so that if something were to happen, we would have enough money in savings to pay all of our bills as we do now for 3 months.  Ideally, it is supposed to be six, but we decided 3 would be good because we always pay extra on everything and we could stretch it to six by making minimal payments if we had to.  We maintain a certain number pretty much always.  We do add to it, but we can also spend that money if we want to, like for a little vacation or remodel on the house, but only to the minimum amount we agree to keep in savings.

We contribute to both traditional 401(k)s and Roth IRAs. We have had mixed reviews from several financial advisors about which account we should contribute more to, so we are still figuring this one out. Currently, we contribute enough to meet the requirements for our company to match our yearly contribution to our traditional 401(k), and then some. It is on an increase of 3% each year, which will be accelerated once our debt is paid down. We also contribute 12% currently to the Roth IRA, which we will also accelerate once our debt is paid. The goal is to max these accounts our for how much we are allowed to contribute, per the IRS, once we have cleared our debt.

There you have it! The De Lara method of managing the financial chaos we wrought upon ourselves in our 20s. I gotta tell ya, just 2 years into my 30s, we have mended a lot of financial fences with this.  God willing, we will keep pressing on. Most of the time, I still feel like a little girl that wants my mom, so I feel all adult-y when I look at my monthly budget and the headways we have made from month to month.

Do any of you have any special tactics you would like to share?

Normalism, or How We Broke The Cycle of Excessive Living to Pay Off Our Debt–Part 1

It has dawned on me lately how very excessive our culture is. It is ingrained in us and almost beyond the point of help, sometimes. I recently binged watched House Hunters and House Hunters International on Netflix and I became increasingly annoyed with the “must haves” of some people (granite countertops, stainless steel appliances, five bedrooms, a study, a separate play room, a large yard with a fence, etc.), particularly people moving overseas and expecting American-style housing. Not that I am not guilty of having demands of my own (A/C is non-negotiable unless I am living in Scandinavia or something), but I can easily see how we, as Americans, annoy others with our grandiose sense of living.

Up until a few years ago, I was very guilty of blowing my money on pretty items–clothes, housewares, etc.–and also of racking up debt. Luckily, I met a person that was raised dirt-floor poor and opened my eyes to how silly I was being. Chalk it up to being young and dumb, with no real concept of the future other than what I needed/wanted the very next moment rather than 10 years from now. Despite being 32, I have only learned how to “adult” since I was about 28.

There has been this great movement of people shedding stuff and becoming Minimalists and giving up large houses for teeny tiny adorable portable homes.  I have read the famous blog of the same name and have read many other accounts of people following suit.  They are pretty inspiring and make me kind of wistful.

I am not a Minimalist, however; I am a Normalist and a Realist.  I need some stuff.  Maybe not NEED, like I need air, but I do need some stuff.  I need it because it does actually make me happy.  I LIKE to see my walls adorned with photos of places we have been, family members and my lovely paintings that I have collected.  I LIKE to read Better Homes and Gardens and recreate my outdated spaces into beautiful rooms.  I LIKE to have to go a whole week without washing clothes…sure the mountain is huge at the end of the week, but there are usually clean socks to wear even if I wait until Saturday to do the wash.  Anyway, if my little home things make me happy, then there is no sense of getting rid of them.  Happiness is pretty essential.

However, my family has made a very conscious effort to live more simply, so as to be Normalists, not Excessivists, with the grand goal of paying off all of our debt and retiring early so that we can ENJOY life.  How do we do this and is it hard? Quite easily and not at all hard. Well…it does take some sacrifice, but once you are used to it, it really isn’t hard at all.  You will still have things, and hopefully a lot less clutter in your house and in your life.  After you have decided on which things are important to you, look for ways to enhance those things and just cut out the rest.  Figure out the items you own that you actually use for your things that are important to you, and which things hide in a cupboard 364 days a year.

Really, you just have to decide what is really important and what isn’t and what you can do for yourself and what you cannot. Some things don’t require a lot of skill or talent and you are able to find a YouTube tutorial to learn to tackle them yourself: basic auto repairs and maintenance or non-structural home remodels. You can even make it a family affair. Seriously.  Our family is very busy–both adults work, and kid has school and Tae Kwon Do.  There are probably lots of ways we could cut back on things that would give us more time, but our biggest problem is actually debt.  Our primary goal is to reduce and eventually eliminate our debt as fast as possible, so that we can re-focus our energy into having lots of fun while we are still young.  We make an extra special effort to use our free time productively together: we all help cook, clean, and do yard work, so that we all get time to do fun things together, like play games or sports.  My able-bodied neighbor with a large family of helpers just spent $3,000 on having her house painted…my husband, son, and I painted ours ourselves for about $700, and both projects started and ended at the same time.  Granted, neighbor and kids were probably chilling in their house playing video games or some such and having a grand ‘ol time,  but our little family was jamming to the radio and took breaks to cool off in the sprinklers. Our time together did not suffer for work and we added value to our home while saving money.  Savings: heaps and loads, plus you get quality time together, which is priceless.

The easiest thing to cut is cable.  Back in 2009, when I still had cable, the package for internet and cable was over $100…I think it was $130, to be exact, and that was for a lower-level package, no premium channels or anything.  I was never home long enough to watch $130 worth of TV, in my opinion.   When I was home, I really liked to garden or ride my bike.  We cut cable when my husband moved in and we have used Netflix, Hulu, Amazon Prime and YouTube ever since.  Commercials are fewer, I don’t have to worry about setting the DVR, and I can binge watch when I do have time to kill or cannot sleep.  Better than all that, with all three streaming services and YouTube (which is free, obviously), we spend a grand total of about $25 a month.  My husband and I will often go what a game or a boxing match either at a friend’s or at a sports bar if there is one he is dying to see and it isn’t streaming online anywhere. Savings: $105 a month/ $1260 per year.

Our family also doesn’t try to have the newest, and best things.  I bought my son a Wii way back in 2008 or 2009, which he still plays with and we use to stream shows and movies.  He also loves my old Nintendo 64 from back in the day.  My husband bought a PS3 before I met him, which he also still plays with occasionally, but it functions mostly as a streaming device for music and shows/movies.  My husband is still rockin’ a slider phone from 2006 and I just bought a used iPhone 4 off of eBay.  Phones are just phones to us—we both work in a call center, so talking on one is the furthest thing from our minds and when we are together. Our cell phone plan is probably our favorite money-saving secret (note: this is not a sponsored post, I am just sharing our experience).  We use Ting and we pay only for what we use.  It isn’t pre-paid and there is no set amount that you can use or anything, the service is good, the customer service is great, and you can migrate your old Sprint or Verizon phone (including your fancy iPhone 6) and your old number from any carrier you are with.  You just pay for whatever minutes you use, whatever texts you send, and however many data bite thingies you use, and it tiers them all separately, so if you use more of one and not the other, you aren’t wasting money on the unused service.  Both of our phones together, with internet, costs us about $60 a month. That is $30 less than my old phone bill for just me through At&t. Savings: hundreds yearly on devices, $120 per month/$1,440 on cell phone plan per year.

Clothes were the biggest thing for me to learn to let go of.  I just love pretty things and it has always been one of my goals to dress like a French woman, but my priorities now are to pay debts, so life is easier in the long run.  Debts can haunt you a lot longer than not buying that cute sundress on sale.  I have learned to shop friends’ and sisters’ closets for their cast-offs and the Goodwill store for great deals.  And, I tell ya, if you hit one up near a richer part of town (I like the one in Brandon, FL which is near the Westshore Mall), you get some really nice stuff  and sometimes the tag is still attached! I do go shopping in regular stores a few times a year, or for a special occasion, but mostly, I have learned to re-use and re-purpose what I have by choosing classic pieces and accessories. Savings: Heaven only knows–a whole lot, probably at least $2,000 per year.

Next, we cook… a lot.  We pack lunch daily to work and cook almost every night.  We will go out to eat usually twice a month as a date night, but never anything fancy unless it is a very special occasion.  Our favorite restaurant is a taco truck—no  sense in paying hefty prices for tacos that taste only half as good as taco truck tacos.  Grocery shopping is limited to twice a month, and ain’t nobody got time for coupons in my house, so we are a bit creative.  We cook with what we have on hand for two weeks before the next shopping spree, with the exception being we do stop to get milk and bananas weekly.  We do our shopping at the roadside fruit and veggie stand and we go to a meat market for meat.  We make a lot of stews and soups because 1: they last longer, usually at least 3-4 meals. 2: they make a lot out of a little 3: they are generally healthier than heavier meals.  We always make a meal plan and buy only the ingredients we need for our meals. This keeps us from over-spending and from over-eating because we do not keep extra snacks in the house. Savings: probably about $400 per month/ $4,800 per year.

Finally, we conserve energy.  We live in Central Florida, where it is HOT and HUMID. Insufferably hot and humid, really, from about May through September, finally reaching an agreeable temperature around mid-October.  I have heard tale of people that lived before a/c  in tin roof houses (my mother),  but they are legends of old.  I think the long life-expectancy in this country directly correlates with the mass availability of central heat and air conditioning systems.  But just because you have it, doesn’t mean you have to use it ALL of the time…like Mid-October through the end of April, for instance. If we do get a random cold day in winter, we usually just pile on some blankets or wear socks, because our cold really doesn’t touch the cold that our Yankee friends get.  On normal days, we open the windows in our house and let the breeze in and we also cook outside every chance we get because it keeps the house cooler and the food tastes better.  For the dog days of summer, we have learned to acclimate ourselves to a higher temperature.  When we are not home, the air is OFF and so are ceiling fans, but when we are home, we turn on the ceiling fans and leave the air at about 75. We started bumping up the air by one degree every week until we got used to that temperature. If guests come over, we will adjust for them, but otherwise, we have learned to live with it.  We also hang our clothes up to dry most laundry days—unless it is raining, which is rare; then we go to the Laundromat about 2 miles away because it costs 25 cents and dries the clothes in about 20 minutes—long enough to eat tacos at our favorite taco truck across the street! We have cut our monthly electric bill from about $230 a month to about $75 a month in this way. Savings: $155 per month/ $1,860 per year.

Just by cutting back on some things and using the hands and brains God gave us, we save at least $11,360 per year, not including the savings on our DIY projects and electronic devices. All of this seems pretty common sense, but you would be surprised how the false sense of financial security will allow you to slip into bad habits that create a hellhole of debt. I will bring out the big guns next time, so you can see our aggressive debt PAYING tactics and see if they may help you.