Good Idea #2: Debt-busting

Compared to a lot of people, The Hubs and I don't have a lot of debt. In fact, for as young as we are, I'd say we're relatively comfortable financially. We own a house, we pay our bills, and we have enough money to have a lot of fun. HOWEVER- we are bad about budgeting. And saving. And paying off debt. I have always admired people who know where every penny of their income is going to go before they even get paid. People like that seem to be in so much more control over their finances and thus have a greater degree of financial freedom than people like me who budget/save/pay off debt sporadically. But how to do it?

I've come up with a plan loosely based on Dave Ramsey's teachings. I've never read any of his books, heard a radio show, or been to one of his seminars, but I have read about his ideas and they seem pretty logical. The whole process seems large and looming, so I've broken this down into steps. (If I'm plagiarizing anyone here, its unintentional. I promise.)

Step 1: Make a Budget.
This seems pretty daunting to me, but I found a basic budgeting form that breaks it down a little bit. (Here is a more detailed form.) I am going to start using cash for a lot more things, pretty much everything but bills. The Hubs is unwilling to give up his debit card but has agreed to use cash for lunches, entertainment, etc. I haven't filled out the form yet, but once I do, I'll let you know how it goes.

Step 2: Mini-Emergency Fund
Stash away $1000.00 for small emergencies- car repairs, unexpected large-ish expenses, etc. When we have paid off our credit card in the past, invariably some small emergency arises that we don't have the cash for, and boom- We're back in debt. So before we REALLY start throwing money at our debt, we are going to accumulate $1000.00 in savings. Once we reach that, we will start putting more towards our debt, but keep building this fund until, probably YEARS from now, we have an entire year's income in savings.

Step 3: The Snowball
This is pretty basic- I listed all of my debts in an Excel document in order of the amount owed. Then beneath each one I put the minimum monthly payment. Then below that I listed what my payments would be once the smallest debt was paid off and I could add what I had been paying towards Debt X to the minimum monthly payment for Debt Y:

Debt X was $40 a month, Debt Y is $50 a month. Once Debt X is paid off, I can put $90 a month towards Debt Y)

And so on.

There are more steps in Dave Ramsey's plan, but these are the ones I'm going to work on for now. We just paid off one debt so technically we could start The Snowball rolling, but I'm going to take what we were paying on it and put it into our Mini Emergency Fund first.

So my next challenge: Fill out the budget sheet and find ways to cut back. Coincidentally, I think the Freezer Cooking will be a big help to our food budget! (sidenote: I dreamed last night that I went to do my freezer shopping and forgot my list...)