Our Debt Free Family

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February 2020 Update: Improved Credit Scores and More Progress

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February 2020 update

February was a great month for us. We are getting situated with my husband’s new job as well as focusing on improving our health – physically, mentally, and financially. We made progress in all of those areas last month, which feels SO great. Here’s our February 2020 recap…

Our Credit Scores Went Up!

One of the best things about the debt freedom journey is watching how paying off debt will help you improve other areas of your life too. Our credit scores have gone up, especially within the past two months. At the beginning of the year, both of us stood in the “poor” area of the credit gauge and we’ve now graduated to “fair.”

There is still a lot of progress to be had, but overall, we are super proud of this progress. Not to mention, being able to improve our credit scores can help us land a consolidation loan (which is something we’ve been discussing, especially for my pesky IRS debt).

February 2020 Debt Update

As always, at the end of the month, I liked to give you all an update on the numbers. In January, our debt counts looked something like this…

  • My Car Amount Owed: $20,217
  • Credit Card Total For Both: $487
  • Student Loans: $24,362
  • Matco/Snap-On: $6,673
  • Amount in Collections: $679

Overall, we put about $1,600 towards debt payments in February. At the end of the month, here are our updated numbers (with interest accounted for)…

  • My Car Amount Owed: $19,729 (Under $20K!!)
  • Credit Card Total For Both: $455
  • Student Loans: $24,352
  • Matco/Snap-On: $6,243
  • Amount in Collections: $679

Accounts Being Paid Off!

One of the biggest things we are looking forward to in March (outside of our first wedding anniversary) is paying off yet another account. This account, once it is paid, will free up an extra $106 per month. While that isn’t a ton of money, it will allow us to pay off our credit card fairly quickly. Having our line of credit open will help us further improve our credit scores as well.

Then we will switch our focus to what we have in collections and get that paid off. Because those items have the highest impact on our credit, we’d like to focus on those. In about two years, our goal is to be in a place financially where we may be able to start looking at homes to buy.

Once collections are paid off, we will refocus on paying his tools off, student loans, and then our car loan. By July, we hope to double our monthly payments towards debts ($3,200 per month). Doing that will help us pay it off even more quickly.

Readers, where are you in your debt journey? Let’s chat!

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Looking To Go From Debtfree to Homeowner, Here’s What To Consider

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Homeownership in 2020 is a monumental financial decision. Years ago, buying a home wasn’t as difficult because debt wasn’t as big of an issue as it is today. Most younger generations have to battle student loans, car loans, and credit card debt on a large scale. For example, the average graduate of a four year university in the United States owes on average between $27,000 and $33,000 in student loans. With this many people struggling with debt as it is, homeownership might seem like a fantasy instead of a reality. 

However, this isn’t the case. While the road from “debt-free to homeowner” might be a rocky one, it is certainly possible. Here are some tips to get you there. 

 

Target High Interest Debt First

The higher the interest on the loans you owe is, the more you’ll have paid cumulatively once the loan is paid off. Additionally, high interest loans also tend to come with higher monthly payments. There are a few ways you can tackle high interest debt. First, have you considered refinancing? Refinancing is when a bank or lender essentially pays off your loan and provides you with a new one at a lower interest rate. This can both lower your monthly payment and help you pay off the loan faster. 

Another way to target high interest debt is to pay as much towards it whenever you have the opportunity to. Put tax returns, bonuses, and gifts towards that loan or debt. It might not feel like it’s making a difference at first, but down the road, it will drastically affect how much money you would have paid in interest. 

 

Create a Savings Plan

When creating a savings plan for purchasing a home, consider both how much of a house you can afford and how long it will take you to save up for a down payment. The amount that you can afford will depend on how much money you’re making/will be making, how much you owe in loan payments and bills each money, and how much you’re able to save for a down payment. Use these factors to calculate when you’ll be able to afford a house. After all of your bills and payments are made for the month, put a portion of your earnings into a savings account and the other portion towards debt. While most financially savvy people will suggest putting the larger portion towards debt, we suggest doing what is right for your financial goal.  

 

Budget, budget, budget

If you want to buy a house down the road, now is the time to put in the work. Pay very close attention to your spending habits by creating a monthly budget. Track your bills, monthly payments, saving, and spending either with a budgeting software, a spreadsheet, or even a pen and paper. Once all is said and done, go back and find ways to cut spending. This can include getting a better rate on car insurance, lowering your internet bill, cutting out buying coffee or lunches, or really anything that you don’t need to spend money on. You’ll be saving up for your dream home before you know it!

Our Debt Free Family wants to provide those both young and old with real life advice on how to conquer debt and live a financially stable life. We hope you enjoyed this post and invite you to visit regularly for more posts and advice.

3 Free Printable Debt Free Charts to Help You Reach Financial Freedom

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debt free charts

We are looking forward to establishing some awesome New Year’s resolutions for our finances at the end of this year. I’ll be updating you all with that in no time, but it got me thinking about the tools people can use to help them reach their financial goals. Doing some looking around, I found some amazing debt free charts and other ways to stay motivated while tracking your progress.

Debt Snowball Chart

A debt snowball chart helps you manage your debt payoff method. Snowballing your debt means you take any additional money you have and put it towards paying off one of your accounts. You do this in order from smallest to largest amount owed. As you can see below, to organize this debt payoff method, you list the debts in order, along with the minimum payment due and your debt snowball payment.

debt free charts

Using this method of tracking can help you see how quickly you are making progress on your debt freedom journey and keep you motivated. Download an editable worksheet here or print a PDF version.

Color-In Debt Free Charts

If you think tracking the numbers might get boring for you, consider using a color-in debt free chart. You can print these online in various places and use them in various ways.

These color-in charts can help you track your overall debt and how close you are to being debt-free. They can also help you track a specific debt, like a car loan or credit card. You can download various debt free charts online (free of charge) and print them out.

Savings Charts

While it isn’t a debt-free chart, per se, having a place to track your savings can be helpful too. There are a number of savings challenges on the internet that provide charts for helping you track your savings. Saving Advice is a hub of said challenges, including the 365-day money challenge, the 52-week savings challenge, and the 12-week savings challenge. Each of these can be tracked through a chart, like the debt snowball chart above, or you can use the color-in method to track your savings goals.

How to Create Your Own Debt Free Charts

Creating your own personalized debt freedom chart is fairly easy too. If none of the charts above suit your needs, simply follow these steps.

  1. Decide what your long-term goals are for your finances. Before you create a debt-free chart or any other finance tracker you’ll need to decide what you are tracking. Is it savings goals? Debt freedom goals? Investing goals?
  2. Determine how you want to break down the process. Then, once you know what you’d like to track, figure out how you are going to break it down. If you are tracking a debt-free goal, it may be best to track it by every $200 paid off (or whatever increment you decide).
  3. Figure out how you can stay motivated. If you know seeing the numbers will keep you motivated, consider something like the debt snowball chart above to track. Others may be more motivated by seeing a coloring sheet filled in. Whatever motivates you is what you should use.
  4. Start tracking. Once you decide on what will work best for you, start right away. You’ll put yourself that much closer to your financial goals by just biting the bullet and getting started.

No matter where you are in your journey, finding ways to stay motivated and track your progress is important. Consider printing out one or more of the debt-free charts above.

Readers, how do you track your progress? Share your ideas in the comments below!

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Our January 2020 Debt Update

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debt update

The end of January is nearly here already and I can’t believe how quickly the month went by! I am happy to say that, during the first month of the year, we had some significant wins in our debt-free journey. Here’s the latest debt update…

Emergency Fund Wins

The biggest win of January was getting our emergency fund fully re-established again. For now, we’ve only got $1,000 socked away. However, as we pay more things off, we will be adding to this. Because my husband and I work jobs that can vary in pay, it is extremely important to have a few months’ worth of expenses saved just in case.

Debt Update

Now, for the numbers…

Altogether, we made $1.,503 in payments towards our debts. This leaves us with the following account balances…

  • My Car Amount Owed: $20,217
  • Credit Card Total For Both: $487
  • Student Loans: $24,362 (my payment hasn’t yet hit my credit report from January)
  • Matco/Snap-On: $6,673
  • Amount in Collections: $679

See where we were in our debt freedom journey in November here.

Next Month

Next month we will at least make the same amount in payments and hopefully more. We also will continue to add money to our emergency fund when we have it. There are a few additional expenses occurring next month that will soak up a bit of our savings and debt payoff cash though.

We are preparing to register our car in Georgia (finally). Our North Carolina registration is up at the end of the month. To pass inspection here, register the car, and get our licenses, it will like cost around $1,000 (oof).

Outside of that, I can’t wait to update you on where we are in another month’s time. Remember, if you are on your own debt freedom journey that every tiny step forward counts, even if it seems insignificant now!

Readers, tell me about your recent debt wins! 

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My Word For 2020: Productivity

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productivity

Social media has changed the world in so many ways (some good, some bad). One thing it has certainly done (for me) is provided me with new, interesting ways to think about things and approach projects. Recently, I have seen people choose a word to represent the year to come. Many people have chosen words like “hustle” or “positivity.” My word for 2020 is “productivity.”

Why I Chose This Word

Of course, everyone wants to be productive, but I chose this word this year because last year was really busy. Even though I was running around and felt exhausted and busy constantly, I didn’t get as much done as I wanted to. Then I came across this inspirational post on Facebook and it really spoke to me. It said…

Be productive, not busy.

When I read that I was like, “that’s it! That’s what I need to focus on.” It is kind of like that old adage “Work smart, not hard.” I want to focus on improving my everyday processes to reach my goals (both short-term and long-term). Before starting projects, I’ll analyze what the best approach is to protect my time (and money).

Productivity Goals

A lot of my productivity goals for 2020 will require a bit of planning. To start, I’ve begun waking up just a bit earlier every day and jotting down a brief schedule of what I have planned. If you saw my last post, I talked about my main goals for the year and I plan to achieve each of these by being productive and planning out my day.

For instance, to achieve my goal of learning German, I will carve out 10 to 20 minutes every day for a quick lesson. To be able to read a book a week, I am scheduling about an hour a day devoted to that alone. My goal of practicing self-care every day will be achieved by waking up just a little earlier and taking care of my skin and practicing yoga.

Our main finance goal of paying off at least half of our debt will also be helped along by being productive instead of busy. Last year, we were a bit frantic with our financial plans. This year, we will track every penny and have a set plan for paying off our accounts.

All in all, I am hoping that setting a goal to be more productive (and less busy) this year will free me up to do more of the things I enjoy, like spending time with my husband, hiking, reading, doing makeup, and crafts. As I’ve stated in the past, a huge part of me being successful in life, and in my finances, is being able to achieve a balance. That’s why I’m choosing to be productive and NOT busy this year.

Readers, do you choose a word to describe your year? What is yours?

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Determining Your Maximum Debt Limit: How Much Debt is Too Much

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When you look back on what you have been able to accomplish in your life, chances are that it was all possible due to debt.

Without a loan, you wouldn’t have owned your first home.

Without a loan, you wouldn’t have driven that first car of yours.

And without a loan, you couldn’t have earned that first degree.

In other words, debt can truly be a good thing. However, according to the old adage, you can have too much of a good thing. If you feel that you have piled up too many loans, there are tips to help you pay off your debt in a smart and efficient way.

So, how much debt is too much? Here is a rundown on how you can determine your maximum debt limit. Let’s get started!

How Much Debt Is Too Much?

A good way to determine how much debt is too much in your situation is to look at your ratio of debt to income.

To get this figure, you should divide your recurring debt each month by your gross income each month. You will then express this figure as a percentage.

Your monthly debt includes anything that you have to pay each month. This includes, for example, your mortgage, credit cards, car payment, and student loan.

Meanwhile, your gross income is the amount of money you bring home prior to paying taxes, Social Security, and insurance.

Example of Debt-to-Income Ratio Calculation

If you have $3,000 in current debt and generate a gross income of $6,000 per month, your debt-to-income ratio comes out to 50%. Unfortunately, this is not a good figure.

Many lenders generally like to see ratios of around 36% maximum. In fact, some financial advisors state that ratios of more than 20% are indicators that consumers are borrowing too much. Still, others say that near 30% is the magic number.

What does this tell us? It tells us that there’s no black-and-white answer for how much debt is too much for you. However, if you find that your disposable income each month seems insufficient, you’re probably carrying more debt than you should.

How to Help Yourself

If you’re wondering whether to get that next loan, ask this question to yourself first. “How much debt is too much?”

There are many different reasons to get a loan. Irrespective of the circumstance, you must eventually pay back the borrowed money. Therefore, it is always advisable to not borrow more than you need and your repayment ability.

When you start feeling the burden of too much debt, consolidating all of them into one can help you simplify your finances. In some cases, you may even be able to reduce the monthly payments.

The next time you decide to get a loan, determine your requirement, check about your ongoing debt payments and figure out how much you need. There are lenders who also help you to determine the ideal loan amount and then design a suitable repayment term for you.

Always find the right fit lender and loan fit for your financial situation.

Image source: Institute for Money and Technology.

Our ‘Skinny’ Christmas

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Skinny Christmas

As the end of the year approaches, we are doing a bit of reflection where our finances are concerned. 2019 definitely threw us for a loop in many ways. We didn’t get as much debt paid down as we’d like to because it seemed every time we turned our heads there was something else we needed to spend money on. All of this has led to us deciding we are going to have a “skinny” Christmas this year and focus on 2020 and what’s next for us.

Our Christmas Plans

Initially, we’d planned on visiting our family for Christmas, as most people do. However, both of us were stressing about how exactly we were going to be able to afford to do that. A good rule of thumb is if you’re stressing financially about how to do anything that isn’t necessary, you probably shouldn’t be doing it.

Not only that, but my husband has gotten a new job that starts two days before Christmas! This job should be a game-changer for us in 2020, but asking for time off immediately is never a good look. So, no trip home for Christmas made the most sense for us.

Instead, we will be staying home and I’ll be cooking a small meal for us here Christmas Day. We won’t be doing any large Christmas exchange and will be saving our money for new furniture (which we need terribly) and, of course, paying off more debt.

Looking Forward to a More Prosperous Year

We know two awesome things going into 2020 that are helping us look forward to a more prosperous and more successful new year.

  1. My hubby has a new job that will have guaranteed pay. Having a guaranteed weekly minimum paycheck will definitely help us with our budget and plot our road to debt freedom!
  2. We’ve completed paying our security deposit so our rent is going down! This will save us about $200 per month.

Once he’s gotten his first couple paychecks and we have our emergency fund back in order, we will be paying things off as fast as we can. We have three accounts all under $500 right now, which will be paid off soon (how exciting is that?!). For now, we are waiting out the holiday, looking forward to a quiet Christmas at home, and plotting our amazing journey for 2020.

Readers, have you started thinking about what you’d like to accomplish with your finances in 2020? Let me know about your goals in the comments below! 

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Thanksgiving 2019: Debt Update and Planning for 2020

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Thanksgiving 2019 update

It is that time of year again, where many people are making resolutions and ours, yet again, is to pay off our debt in 2020. We have had some success this year, and even this month, but we are making aggressive plans for next year to help us become debt-free and plan our future. Here’s the latest progress we’ve seen and what we’ve decided for next year so far.

Reviewing the Numbers

These were our debt numbers last month…

  • My Car Amount Owed: $21,302
  • Credit Card Total For Both: $502 (interest is a KILLER, folks)
  • Student Loans: $24,184
  • Matco/Snap-On: $7,449
  • Amount in Collections: $679

We’ve made some progress! Here are the numbers this week…

  • My Car Amount Owed: $20,550
  • Credit Card Total For Both: $490
  • Student Loans: $24,362 (the interest is from having the loan deferred until after the new year)
  • Matco/Snap-On: $7,129
  • Amount in Collections: $679

While it isn’t much, it is another $900+ paid off this month, and we are making big plans for 2020.

Plans for 2020

My husband and I have decided to bite the bullet and buy the Financial Peace University from Dave Ramsey. It is going to be our Christmas gift to one another (plus something else small for each of us). We’ve been listening The Dave Ramsey Show pretty often and believe purchasing the program and following the steps closely will really help us reach our goal of being debt-free.

By following the program, it is quite possible that we will be debt-free in 2020 (or soon after). The idea of having all of our debts paid off and potentially be able to buy a home afterward is the dream for us. We both know it will be a lot of hard work, but it will be so worth it. And I can’t wait to keep you all updated on our progress next year!

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November 2019 Update: Hustling to Pay Down Debt

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November 2019 update

I chatted a few weeks ago about needing to refocus on our financial goals. Sometimes the road to debt freedom isn’t straight. We have gotten off track and faced some setbacks with unexpected expenses, but we still make a little bit of progress every month.

However, we are both a bit tired of how slowly it has been progressing. Because of this, we’ve been looking for additional ways to make money to snowball our debt.

The Debt Snowball

If you’ve been following the blog for a while, you know all about the snowball method. Essentially, this method of paying off debt has you set aside an emergency fund. Once that is done, every extra penny you have goes to paying off your debts.

This involves having a set budget. Once you look at your budget and see how much excess money you have, you can see how much you can put towards your debts. It is important for people who are snowballing their debts to also budget for some entertainment. Not doing so typically leads to overspending or abandoning your budget altogether.

The debt snowball method oftentimes includes searching for additional work to throw at paying off accounts as well. For instance, if you can make a few extra bucks selling things in your attic or walking the neighborhood dogs, you’d use that cash to pay off debt. We’ve been looking for more ways to increase our income so that we can do this.

How We Are Hustling to Pay Off Debt

First, we have both been looking for ways to trim the costs of day-to-day life. This includes my husband coming home for lunch every day. This saves us between $25 and $50 per week, all of which goes toward paying off debts.

My husband has also been picking up small jobs to earn a little extra money on the side. For instance, someone in our building needed a battery put into their car. He went down on a Sunday. It took all of 10 minutes and he earned an extra $50 to go toward paying off his tool accounts.

I’ve also been picking up a little extra work here and there. Every once and a while a freelance article pops up and I take it. This usually only makes me between $25 and $100 per article, but every bit counts. I’ve also picked up a modeling side gig that pays $175 per photo. This is less consistent and doesn’t happen as often as freelance work, but it is still a great way to earn a little extra to put towards my student loans and other debts.

As the weather gets colder, we will also be cleaning out our closets. We will be trying to sell these items on Facebook Marketplace for extra cash to snowball our debts. All in all, each of these things seems very small but they are helping us tick down our overall debt tremendously.

Readers, have you picked up a side job or hustle to snowball your debt? What have you done? 

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Good News! The IRS Has Increased Retirement Contribution Limits for 2020

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retirement contribution limits

Most people on debt-free journeys aren’t thinking about retirement very often. If you follow the Dave Ramsey mindset, you don’t even begin really contributing to your retirement accounts until you’ve paid everything off. However, this week, the IRS announced some good news. The agency is increasing retirement contribution limits in 2020.

What This Means

If you are currently contributing any money to a 401(k), 403(b), or 457 plan, the amount you can contribute will increase starting January 1, 2020. It has increased from $19,000 to $19,500. Additionally, catch-up contributions will also increase from $6,000 to $6,500.

 

How This Can Help You

Retirement accounts are typically not taxed. By contributing the most you possibly can, it decreases the amount of your taxable income, which can help you save money as well as better prepare for your financial future. All in all, it is a great way to begin building your wealth.

It is important to keep in mind, however, that if you are currently still struggling paying off debts, it may be a good idea to hold off on retirement contributions. Instead, use the extra money to snowball your debt. After all, once you are debt-free, you will be able to throw as much money as you want towards your retirement goals.

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