Debt Free in 14 months?

It has been an interesting 48 hours... I should back up a little more.

In January, I sent and email to Jess Mecham, the owner of You Need a Budget (YNAB). In his podcasts, he has spoken about having a passion for small business to use YNAB. So I inquired about more information from him about this to support my husband's small business (technical writing and editing - Borealis Communication Solutions). He forwarded the email to Mark Butler, their financial coach and blogger, to reach out to us to hear more about Steve's business. We met via Google Hangout and chatted about business finances.

I then said to Mark that it was too bad that he was not taking anymore clients for coaching, he said he was and said he had a few minutes now... WOW!!! We sent our YNAB budget in screenshots to Mark. He was trying to be kind about what he saw but I told to just tell us like it is. Basically, he said to us we are in a financial crisis in that we have more going out than coming in. I had a hard time wrapping my head around that as I thought we were managing just fine. Mark made some hard suggestions that Steve and I needed to talk about if we were serious about getting out of debt and into financial freedom.

1. We should stop contributing to the girl's TFSA's and cash them in to pay off our debt. That one hit our egos HARD! I have been so proud of the fact that we have not used any of the money that the Canadian government sends us for our children. We have been saving it since the day Hannah was born - 5 years - and built up $13K into them for their further education. What Mark pointed out is that the money in the TFSAs would pay off our MasterCard and get a chunk out of our personal loan.

2. We need to look at trading in our van for something we can pay cash for. This one we are still investigating. We paid a lot of money to get our van with every bell and whistile available. We are making a $630 a month car payment for this. We looked on the dealer website and saw a van that can meet our needs IF we can make it happen. If not, we will deal.

3. We need to look at getting out of our townhouse and find something that will not cost us an extra $260/month in condo fees. We have looked into that and we do not believe it is a possiblity. We have applied for school for Hannah in the area and with the housing market where it is, we will not be able to get the money out of the house that we need, as we would need to get our down payment out of the sale ofhte home.

4. He strongly suggested we look into taking Dave Ramsey's Financial Peace University (FPU). This is a course, as I have researched it, about handling money God's way. Thankfully, we have an amazing couple in our lives, Michael and Tania Spears of Spears Bookkeeping & Financial Consulting Inc, who have a passion for helping people like us get out of debt. They have also been through FPU and we hope will be our accountability partners and mentors through this process.

Another thing Mark suggested is that we create a "fake budget" in YNAB to see the possibility of what could be. We did that Friday night and it helped me to see that we are in fact putting out more money than we have coming in. I went one step further and created a spreadsheet in Google Drive to see what making these changes would do. What they would do is make us DEBT FREE, except our mortgage, in 14 months! That is overwhelming, exciting and terrifying to me.

I will blog as we move through this process. God and I have had to work through my ego issues and fears. I know we still have more to get through and with His help, we will get there.

Emergency Fund vs Paying Off Debt

I have thinking about this for quite awhile now. What is the better way to go?

I can "justify" both ways. An emergency fund is a great thing to have. If something goes wrong with your home or car, you have this as a back-up. Or, as is our situation, one partner's hours are cut at work, you have a back up until things settle down.

On the other hand, paying off debt is huge. It's not paying 19% monthly interest; it's not having that weight hanging over your head. It's having the freedom to use the credit card in case of emergencies and then pay it off.

What are your thoughts on this one?

Time to Reorganize

I am an organization person - not that you can tell by my house.  I love to rethink and reorganize things around me. The beginning of something like a season or year is when I love to do it the most.

That being said, I been thinking about reorganizing my YNAB categories to see if this will help me budget even more. My categories currently look like this:

 I have been using YNAB for about a year and I really enjoy it. At the beginning of using it, this is similar to their preset categories. I have used it for the last 11 months and now I think it's time for a change. This is the proposed changes:

As you can see, I have broken the categories into Expenses on the 1-14 and 15-30 of the month. I think this is going to help me with tracking. I am curious to see, though, if the double sub-categories are going to work or not. That's one of the other great things about YNAB, you adjust as you go along - which happens to be Rule 3: Roll with the Punches.
This category set up would be an ideal setting if you are paid on the 1st and 15th of every month - which my husband is. I am paid every 2 weeks so I will just add mine in as they come up.
For those of you reading this who are not familiar with the YNAB principles, they are pretty simple: put in your paycheck every time you get paid then give every dollar a job - what does my money need to do before I get paid next (Rule 1).
The 2nd rule is Save for a Rainy Day - which you can see in the above pictures. I will admit, we are not very good at this one yet. I am still wrapping my head around not looking at my bank webiste, seeing there is money in there and want to spend it - hence the title of the blog. I have really good intentions every month but fail - hey, it's a process, right?
The 3rd rule, as I mentioned earlier, is Roll with the Punches. Nothing about YNAB is set in stone. You personalize and adjust as you need to. I have used other software and it is set up just the way it is. You can make minor changes but not like this. The other part of this rule is YOU DON'T HAVE TO BE PERFECT - another thing I am working on. I want to put everything in and have it work perfectly... yup, doesn't happen. There are adjustments made all the time.
The 4th rule is Live on Last Month's Income. I think my hubby and I are starting to do that more than we think. We started Dave Ramsey's baby steps as well by saving $1000 emergency fund. We were actually able to double that in the last month which was good timing for us. We may need to truly use it as an emergency. If, Lord willing, we do not need to use it in an emergency, we are 1/4 of the way to living on last month's income. Now, we have it set aside in a different account. As I said earlier, I cannot see money sitting in our joint account and not want to spend it.
I will keep you posted in week or two as to how the new categories are going.

Thankfulness

We have come to a point in our financial journey where we are back on track - for the most part. Our summer vacation, which we did not budget for, was our down fall. We had a lot of fun but used our credit card to finance it all. Then when we returned, we had a few set backs. We chose to use our credit card for gas and groceries until we could get back into the "black".

I know all of the die-hard Dave Ramsey fans are telling us that we should have cut them up long ago, and they are right - to point. Although we used our credit cards, they also helped us get to a point where we can live on cash again. Yes, credit card debt gets a lot of people in trouble but it also helps get people out. I think there needs to be discipline when it comes to anything.

The other thing we have done to get back on track is around food. We went "shopping" in our freezer one week and found an entire weeks worth of meals frozen. That really did not shock us but made us realize that keeping track of what we have in our home already is part of stewardship.

We have also started freezer cooking. This also helps with how busy we are with both working full-time. It is a large upfront cost but well worth it. We made 18 meals from www.whoneedsacape.com around Canadian Thanksgiving (mid October). Near the beginning of December, we were still finishing them up. We did not use them on Mondays (we have our Bible study group and bring something separate) or on the weekends. We have done a second batch with 40 meals. They have saved many nights. Prep the food in freezer bags, take them out the night before, throw it in the slow cooker in the morning and supper is done when you get home. It sure has saved us from eating out or unhealthy on many of those nights. Twice a year we also buy 1/4 beef from a farmer in Saskatchewan. I am proud to say we did budget for that.

It is now Christmas and we have used our credit cards for our shopping. It is now maxed out and we have made a plan to pay it off in the next year. Mark from YNAB posted a blog post a few weeks ago about setting a REALISTIC goal for the next year. We have done that and I believe we have a good plan going forward. Having goals is not something we are very good at but it is a promise we have made to each for the coming year.

We may also be facing a challenge. My husband is a contract technical writer and he was just informed that his current position, where he has been for a year, will be reducing his hours to two days a week in 2014. He has been applying but has not been offered a new contract. We have also planned, or started to plan, for that. It is something we should have planned for months ago.

This year, or almost full year, of using YNAB and taking a good look at our finances has been very eye-opening. We are very, very thankful for all we have talked about and learned. Here's to 2014 and more improvements in our financial journey.

Slacking Off

It has been a very long time since I have written anything on our blog. I have thought of it many times but it has not happened. So what's going on, you might ask...

Budgeting is hard work and it SUCKS at times. We were just hanging out thinking this budgeting thing was easy. Well it's not. I was thinking "I know this" and my husband admittedly was burying his head in the sand. 

Then I got into two fender benders - both my fault - and we had to rent a car AND pay for the deductibles on our insurance. For all of that, we did not budget and pulled out our MasterCard again. I was also buying a few things online with my Visa. In other words, racking up the credit card debt again. Then we went on vacation - which we did not budget for and put it all on plastic again. 

It seems like we have fallen back into our old patterns. We are now in our overdraft for a few months, temporarily, and we have credit card debt to pay too.

That is very difficult, and a bit depressing, to admit. We were both bound and determined this year was going to be different - and it was for a few months. Then "unexpected" things caught us off guard. I don't know if we should have used our emergency fund for the repairs and then built it back up. We also had an $8000 payroll debt that we had to get a loan out for and pay back - which we have.

It just seems like we are behind the 8-ball again. We have committed to each other that we are going to "meet" once a week to discuss our budget. We have not done that - and that was wrong. If you are in a relationship, discussing your money issues together is vitally important, in my opinion. If you can't discuss your finances with that person then who can you?

So, our new plan is to meet once a week, get back into the "You Need A Budget" and "Dave Ramsey" podcasts and bogs. As they say in the YNAB world, it's time for a Fresh Start.