Yesterday I wrote about Budgets…It’s a Philosophy. I realized over the weekend that I had always filled my “deserve-to-have” needs. I thought these were needs too, and if I had the wherewithal, I could satisfy them. So far, I have always had debt, but was luck enough to have a way to continually pay for it.

Today, I have a different priority and that is to become DEBT-FREE. I actually calculated it last night and found that over the next four years (if we can actually employ this change in our spending) we can pay down more than $170,000 in debt. IN JUST 4 YEARS WE CAN GET RID OF MORE THAN $177,000 IN DEBT!! This is how I figured this number out.

I tallied our monthly deposits and from this subtracted: monthly utilities and insurance bills, debt payments, and living essentials. I figured out the left over cash we have each month and decided to put a portion of this toward our “rainy-day” fund and a larger portion of this toward our debt. Here is what my mega arithmetic equation:

Becoming Debt-Free

Monthly Income
-Cell Phone Service
-Auto/Home Insurance
-Electric
-Cable/Internet/Phone
-HOA
-Water
-Church Tithe
-Preschool Tuition
-Student Loans
-Credit Card
-1st Mortgage
-2nd Mortgage
———————-
Subtotal: Before Living Essentials
-Groceries*
-Household Items*
-Toiletries*
-Diapers/Wipes*
-Clothing/Shoes*
-Gas*
-Medical Fees*
-Entertainment*
-Extras* (Haircuts/Memberships)
-Weekly Donations*
-Lunches*
-Home Decor*
-Home Improvement*
-Auto Maintenance
-Life Insurance
-Rainy Day Fund
-Holidays
-Blog
-Birthdays/Fathers Day/Mothers Day
-Anniversary
-Vacation
-New Years
———————-
Total Cash Left Over

The items that are (*)’ed I am planning to pay for in cash to keep better track of what we are spending. Physically handing over your money makes an impression on you and says, “wow, that cash is gone!” The other living essentials we are putting in a savings account for the special occasion.

We decided to tackle a balance of higher-interest debt and lower balance debt to save money and to keep our momentum going. (If you pay off a debt balance that commands a higher interest rate faster, you end up paying less in interest, and thus save money.) We plan to pay down the credit card debt first and after this balance is eliminated we are going to apply these payments to our next debt balance. We figured out in 48 months we would be able to eliminate our: auto loan, all credit card debt, one student loan, and entire second mortgage, all the while paying down our other debt balances. We were pretty amazed that a debt-free life can really be a reality in such a short time.

I need to keep reminding myself: to reevaluate often,  be resourceful, and be humble. We need to constantly be reevaluating our situation to see if this new budget will work for us, and if it isn’t working, we need to be flexible and devise a new plan of action. We can certainly get more for less here in the US. (That rhymes…) Isn’t that what America is all about? By looking for sales, swaps, coupons, and using my own creativity, I am positive we can live very comfortably spending less cash. And finally, my reminder to be humble is actually to a reminder to think of those on our earth who don’t live comfortably, don’t have any cash to afford even food for their children, and simply have to make do on very little. Since I already own so much, I need to ask myself constantly do I “need this to live” or is this something I can do without to reach my goal of being debt-free?

I don’t think this change is going to be easy. I am already imagining those evenings when I am tired and just want to order expensive take-out. But I know my husband and my family is supporting me 100%, and that if my children will benefit from our financial security it will be more than worth it. Wish us luck! Happy Organizing.