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Getting Serious About Getting Out of Debt

This is the time of year people start setting goals for the coming year and making resolutions. For us we have one goal…get out of debt. While I think we’ll need a windfall to pay it off in 12 months, with focus and a lot of discipline we can definitely do it in 18 months. But I’ve always liked to set aggressive goals and challenge myself to achieve them, so perhaps (and I don’t know how yet) we can get out of debt by the end of 2014. And to hold myself accountable I’m going to document everything here.

Goal: Pay off ALL non-mortgage debt

Here’s where we stand at the end of 2013:

Credit cards: $924.25 + $419.92 = $1,344.17

Loan #1 (7.25%): $16,436.05

Loan #2 (2.49%): $10,937.66

Total non-mortgage debt = $28,717.88

Ugh! I look at that number and I think what the heck have we been doing these past 4 years? It feels like we worked so hard but we hardly made any progress at all! The truth is we have made progress, a lot of progress. When we started this journey 4 years ago we had over $46k in debt. By last year we had paid off $30k of that debt while still aggressively saving for retirement, college and a house down payment.

And then two things happened around the same time last year. I got pregnant with our second child and our faithful little 1998 Honda Accord started to poop out. It was time for a new car. So we found a well-maintained, low-mileage SUV that met the needs of our growing family. And instantly doubled our debt! Gah! And while the new (to us) car has been well worth the investment, I am tired of this debt and ready to tackle it head on.

How: Stick to the plan…and the plan is the budget.

Since 2009 we have been working toward the goal of living debt-free with an ultimate goal of financial freedom. And we’ve done a good job. However this year we took our eye off the prize and got a little lax with our spending. We didn’t get too crazy, but in two areas I consistently overshot our budget…baby items and groceries. Ok, not a shocker, with a new baby in the house it’s easy to sacrifice financial prudence for convenience. And that’s exactly what I did. Hence the credit card balance. I used to pay it off every month but this year we were constantly in catch up mode and even had to use a couple windfalls that came our way to pay down the balance. This spending behavior ends now.

I’ve spent a lot of time this past month looking at our income and expenses and have come up with a new method of budgeting that I’m excited about and that I believe will help us stay on track this year while we pay off our debt as well as help us reach our goals in years to come. I’ll elaborate more on my new method in a separate post.

But at the end of the day, it’s all about discipline. You can have the most foolproof budget in the world, but if you don’t have the discipline to stick to it it’s worthless. This year I took a holiday from discipline. But I’m back now and I’m excited implement our new budget and finally get out of debt! Here’s to a new year and a fresh start!

 

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