Minimize expenses and Generate more income!!

Realizing how bad off we are, my wife and I have to make some decisions. We've already cancelled the cable. We figured we had to have the internet so that is still here. The extra $26 a month we pay for the phone we will keep for now too. My wife has a part time job from home that requires a landline. It is very flexible and provides a few extra dollars a month.

What else could we do?

We decided to take out the last little bit of saving we had in a 401K and pay off some debt. We have two 401K accounts. One with $14K and the other with $500.00-I also own about $200 in stock-everything is on the table.

We made a decision to take the $14k and pay off two credit cards. I know many people will disagree with this decision, but I've been spinning my wheels long enough and I felt like I had to create some breathing room since without doing so would give me a negative monthly cash flow. I realize though that I have to stay committed because there is no more 'buffer' in place if I don't follow through this time.

We paid off First National for $6K and one Discover for $4k. We took $1k and placed it in ING Direct as an emergency fund. We had a car repair to take care of and that left us about $800 to pay toward Chase.

That took a huge chunk off the table of $11K and helped lower our monthly credit card payments from $1003 to $787.....A little bit of breathing room. Now I wanted to figure out how long it would take us to get rid of the rest of the credit card debt. Seven cards left with a balance of about $34K. I went to www.powerpay.org and input all of our payments. We committed to pay $10 extra monthly to our first card scheduled to pay off. That is Chase. All of the other cards we will pay the minimum without change. In other words, when they lower the minimum each month by a buck or so, we will pay the original minimum that we are at today. Across the board.

According to Power pay's calculations, we can have this total debt paid off in 4 years. This does include me using my tax return each year. So I've estimated adding $1800 February, 2011. And $1k each year after that for the next three. I'm trying to be conservative in my estimates.

Creating the Budget

Step one was to sit down and actually create a budget......I am backtracking a little here so you can get caught up. I sat down and created this budget about six weeks ago.

Bills:

Mortgage $1150.00
Credit card $1003-payments on 9 credit cards
Cell phones $121
Electric $87
Gas $162
Car insur $88
Trash $18
Water $30
Phone/inter $69
Auto fuel $150.00 two vehicles for the month
Grocery $300.00 Monthly-frugal shopping
Medical $125-5 doctors $50 to one and $25 monthly to the other three
Music $85-music lessons and instrument rental for 3 kids

Total outlay: $3388
Total guaranteed income: $3542

Ouch!! That leaves $154 monthly. Clothing, emergencies, field trips, car problems etc.

We are homeschoolers. We attend a homeschooling group that charges a total of $1800 a year. That is not figured into my budget above.

So that pretty much takes my income down to zero with absolutely no wiggle room.

Making the Commitment

After approximately ten years of carrying debt and multiple attempts to pay it off-or at least multiple attempts to commit to paying it off, I have finally made the ultimate decision. Why now? Well for one, my fourth child was just born. The other reason is I am about to turn 43. If I don't get this ball rolling, I could have a huge problem on my hands in 10-15 years. And lastly, I am sick and tired of living paycheck to paycheck and not being able to do the things I want to do.

Here is where things stand right now:

I sat down and made a budget. Figured out how much we make and what our true expenses are. My wife and I have made a comittment to live as lean as possible and to not accumulate any additional credit card debt. We have cancelled the cable as well. If we don't need it, we don't have it.

I found a great site called www.powerpay.org You can list all your credit card balances and payments and it will show you how long it will take you to eliminate all your debt and the best way to do it. Low balance, high interest first etc. You can also put in extra payments and see how that affects the outcome. One of the keys is to keep your payment the same amount even if the payment changes. So if your Discover card payment is $110 in January and then goes down to $108 in February, continue to pay the $110. Pay as much as possible on the card you are focused on. Once that card is payed off, move onto card number two with the payment you were paying on card number one. So now you really start to roll.

So now it is budget time!! How much do I have to work with and how is this all going to work?

Let's start at the beginning!!

Here is where I stand as of March 1st, 2010:

(Don't ask me how I got here, I really don't know. I have nothing really to show for all this debt, but I have been paying on it for years.)

Total Credit card debt:

Chase 1508
Discover 5657
Discover 3926
First Natl 6158
Orchard 1508
FIA 8059
Silverton 8102
Cap One 4831
Ameriquest 4317

Total Credit Card Debt is $44,066