Our Debt Free Family

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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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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. See the example below.

debt free charts

You can download various debt free charts online or print a PDF of the one above here.

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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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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Realizing We Need to Refocus on Different Things

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refocus

First, this week has been absolutely insane. Both my husband and I have been fairly busy with work. On top of that, we’ve been trying to get our diet and exercise routines back on track. (You know, meal prep and “adulting” stuff.) However, something that happened made us realize we needed to refocus and reconsider some of our financial goals.

Why We Need to Refocus

Of course, being financially free and debt-free is still our main goal, but this week it has become apparent that we also need to focus on making money available to pay for healthcare.

On Wednesday, I returned back to our condo after walking the dog, like I do every day. I had the same lunch I normally have (two hours before the walk). Upon returning I started itching my head like crazy then, when I peered into the mirror, I realized my entire face was covered in welts and hives. Within 10 minutes, my entire body was covered in these welts. As if that wasn’t terrifying enough, I then began having trouble breathing.

refocus

Immediately, I called Drew to come home and take me to urgent care or the ER. The local urgent care had little-to-no wait so we decided to try our chances there. They got me back in less than five minutes because I was having a severe allergic reaction and were able to treat me quickly. After a breathing treatment and a few steroid shots and Benadryl, they let me go. The total came to right about $200. Without insurance, this all came out of our pocket.

This made us start thinking about how we might get coverage or how we can find low-cost medical care. Now, I obviously need an allergy test (which will cost another $200+) and need to enroll with a primary care physician in the area. Not to mention, I still haven’t gotten my wisdom teeth out (yes, really). So, we are looking into free clinics and low-cost ways to get some of these things done while we also research insurance options (talk about stressful).

Pros: No Additional Debt

There is one “plus” to the latest update and that’s that we haven’t accrued any more debt as a result of anything that’s happened recently. We had the cash to pay out-of-pocket at urgent care this week. Every other emergency that has come up has been paid for in cash as well.

We’ve also been able to manage to continue to make our minimum payments on everything (sometimes a bit more). Doing this has been able to keep us (basically) on track paying off our debts, but it definitely isn’t where we’d like to be. With the idea of an additional expense like insurance or medical costs looming, both of us are feeling a bit defeated. But, we shall persist and move forward.

Readers, have you looked for low-cost medical care? Did you have success?

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October 2019 Update: Searching For Relief

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Relief

If you’ve been keeping up with us recently, you know we’ve had some unexpected expenses, including my being in an upcoming wedding this weekend. We haven’t made any huge progress where our debt freedom is concerned, but we are looking into things that may help us in the near future.

Our Update For October

The last detailed update we provided on the blog was in August and we were completely stalled. We have made some progress since then, but not a ton. In August, the numbers were as follows…

  • My Car Amount Owed: $21,333
  • Drew’s Car Amount Owed: $0
  • Credit Card Total For Both: $483
  • Student Loans (Mine): $24,002
  • Matco/Snap-On: $7,543
  • Amount in Collections: $679

About two months later, we haven’t seen a whole lot of progress. Here are the updated numbers…

  • My Car Amount Owed: $21,302
  • Credit Card Total For Both: $502 (interest is a KILLER, folks)
  • Student Loans: $24,184 (I had this pushed off until the beginning of the year because my husband has been out of work)
  • Matco/Snap-On: $7,449
  • Amount in Collections: $679

If you do the math, you’ll see our overall debt has actually increased to $54,116 from $54,040. Unfortunately, this is due to interest rates and, where my student loan payments are concerned, deferring payments.

Despite us still being stalled in many ways, we’ve both been looking for ways to increase our earnings. As you know, my husband was out of work for a bit. He has gotten more steady work and is beginning to get paid regularly again. I was also lucky enough to score an Instagram influencer gig that will bring in an extra $1,200 later this month. That will all go towards paying off some kind of debt.

IRS Tax Debt

One of the biggest things weighing us down currently is my payment arrangement with the IRS. Because I largely freelance for work, no taxes are withheld and I fell behind in 2017 with saving to pay for those. Additionally, I filed for an extension for 2018, which is due later this month. This will only add to my IRS bill.

That is SUPER stressful. Right now, I am paying about $129 per month to the IRS. It will increase slightly once I file for 2018. I’ve been looking into tax forgiveness programs that may be able to assist us, especially since my husband has been out of work so much within the past couple of years.

Total tax debt forgiveness is a myth, but there are a few options you may want to consider if you’re in a similar situation.

  1. Innocent Spouse – This can give you the ability to claim deniability if your spouse owes a lot of money. It will get you off the hook for the tax bill, but your spouse will still need to pay. This program isn’t for forgiveness but helps ensure the person responsible is the one being billed.
  2. Offer in Compromise (OIC) – An OIC agreement with the IRS can help you decrease the amount you owe significantly. However, not many people qualify for this type of program. Less than 25 percent of those who apply for OIC each year are approved. You also have to provide very detailed information about your finances, which can backfire on you with the IRS.
  3. Currently Not Collectible (CNC) – If you really can’t pay anything back at the moment, you can try to request a CNC. To qualify for this program, you will need to be in a situation that would put you in financial hardship if you made the payments. The IRS will revisit your status after some time though, so you may end up having to pay down the road if you become able. Your tax debt “lives” for 10 years.

I’m not moving forward with any of these options yet. I will be consulting a tax professional, however. My husband and I are hopeful we will be able to get some help from a client of his for next to nothing. He has experience getting people off the hook for their tax bills (or finding more write-offs to make the amount owed much less).

For now, we will continue to have our sites focused on becoming debt-free, including this looming tax debt. Readers, where are you in your debt-free journey? I’d love to hear from you in the comments!

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Planning for Unexpected Expenses

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planning for unexpected expenses

There is no doubt we’ve made strides in the right direction as far as our finances are concerned. However, there is still one area in which we are failing: planning for unexpected expenses.

This week I got the bridesmaid dress for an upcoming wedding in the mail (two weeks out from the wedding) and my worst nightmare occurred. It didn’t fit! It was far too late to return it for the correct size, so I decided to take it to a local alterations place. The total for the changes needed came out to $250.

The price definitely threw me for a loop and, because we aren’t using credit cards, it came directly out of savings. I was frustrated with myself for not planning ahead for alterations costs.

Why is Planning for Unexpected Expenses Important?

Planning for unexpected expenses is key to becoming debt-free. If we weren’t so devoted to not swiping our credit cards, I could have easily racked up another $250 in debt without batting an eye. The same is true for other expenses that may come your way out of the blue.

Failing to prepare for this is can lead to you hindering your debt progress. Not to mention, it can have an impact on your emergency savings and take away from paying off your debts. It can also put a dent in your emergency savings. Then you have to readjust your finances to refocus on padding your savings accounts once again instead of using the money for my debts.

How to Plan for Unexpected Expenses

Thankfully, there are things you can do to plan for the unexpected things in life. Here are a few tips to help you avoid the mistake I’ve made.

First, identify your unexpected expenses. Of course, we can’t always see into the future, but if there’s something that comes up with some regularity, you can try to plan ahead for it. For instance, property taxes, medical expenses, birthdays and holidays, and car repairs can all be planned for.

To identify other unexpected expenses, you can take a look at the past year’s bank and credit card statements. Note any irregular purchases and try to budget for that. You can add up the total of all the expenses and then divide it by 52 weeks. Set aside that amount every week moving forward. This can help you have the money set aside when something unexpected comes up.

Doing this will help you plan ahead and (unlike me) have the cash set aside when something may pop up. Do you have any additional tips you’d add? Leave them in the comments below!

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