We started Dave Ramsey's financial plan a while ago and have been loosely following it since we don't have THAT much debt. However, I was a bit disappointed with my spending habits last Christmas and we did acquire some credit card debt [although not very much, really], as well as a few major medical bills that were charged. We've been working to pay those off as soon as possible, as well as our car payments and mortgage. Dave Ramsey's plan outlines a strategy of "snowballing" debt. For example, in our case, we had two credit card bills, a hospital bill, two car payments, and our mortgage. Instead of paying what you normally pay each month on each bill, Dave recommends paying the minimum on all debts except the smallest, then applying any extra that you were paying to the others to the smallest. For examples sake, let's say you have a medical bill, three credit card payments, two car payments, and a mortgage:
Pre-Dave Monthly Payments:
Credit Card 1: $150
Credit Card 2: $100
Credit Card3: $50
Hospital: $75
Car 1: $300
Car 2: $350
Mortgage: $900
Let's say that the third credit card is your smallest debt, so after reading all about Dave's plan and committing yourself to it, your payments would look like this:
Post-Dave Monthly Payments
Credit Card 1: $60 [minimum]
Credit Card 2: $40 [minimum]
Credit Card 3: $200 [leftover amount that you were paying to your other two cards, plus the amount you previously paid on this card]
Car 1: $300
Car 2: $350
Mortgage: $900
Hospital: $75
This means that your 3rd credit card with the smallest balance will be paid off 2-3 times as fast as it would as you were paying it previously. Once the card is paid off, you then apply all of the money that you were paying on that one with the minimum for the next lowest balance, paying the minimum on the rest. You end up "snowballing" your money and paying things off much more quickly, celebrating each small victory as a huge step out of debt. I'm proud to say that Adam & I are now completely credit card debt-free, and we have zero medical bills to speak of! We are now applying everything to Adam's car, and it will be paid off very soon, then my car, then we can apply everything to our mortgage! If everything works out as it is now, we should have our house paid off within the next 9 years -- that's 20 years earlier than our mortgage term! Amazing! Can you imagine how awesome it will feel when we are able to send J to college as DEBT-FREE parents, not placing any extra burden on him with student loans?! That alone was enough to make us COMPLETELY commit to freeing ourselves from debt.
I also wanted to free up some of our monthly cash spent on utilities to put in our savings account. Now, you can't exactly negotiate your power bill or water bill, but you CAN conserve energy and water. We make sure that lights are turned off, our heating/cooling units are not working overtime to keep our house at more-than-comfortable levels, and that water is conserved as often as possible. If you have Duke Energy, you can sign up to get your bills online, and you can get a completely customized energy report for your home. It shows the biggest energy hogs in your house, as well as how your home compares to similar homes in your area. I'm pretty proud that our home is always at the lowest end of the similar homes, meaning that we use WAY less energy than those.
I also called DirecTV & Charter. Obviously, DirecTV supplies our satellite television, while Charter supplies our phone and internet services. I hated to have these services with two different companies, but Charter is the only company that offers high-speed internet in our area, and dial-up is frankly just not an option for us. I'd rather go without water than Internet. :] Just kidding. Kind of. Anyway, I called Charter first because we knew that we HAVE to have them, unfortunately. Since there are no other options available, I couldn't exactly say that we were able to get a better deal elsewhere, since no one else offers anything for us. I called them and spoke with someone in the retention department. When she asked what I needed, I flat out told her that I wanted to cancel our service because we just "couldn't afford it" anymore. After offering me a $7 price reduction, I told her that $7 just wasn't enough to justify our monthly bill on a service we never use [the home phone] and asked how much it would be to keep the Internet, but lose the home phone. She placed me on hold to "speak with a supervisor" and came back after a few seconds, offering me a $25 discount for phone & Internet for the next 12 months. Sold! That basically makes our home phone free, and we really do need the phone so that Adam can fax papers to his office.
After doing a little victory dance and looking up our DirecTV information, I called them and told them the exact same thing, except this time I had a valid complaint and I made that the main point of my phone call. A few weeks ago, I e-mailed DTV customer service, asking if we could get a replacement remote control because ours is almost completely worn out. The only thing they did was send me the link to purchase a replacement from their website for $19.95. I don't think so. I will build my own before I pay $20 for a freaking remote control. I started off the conversation with, "I would like to cancel our DirecTV programming." Of course, the retention guy immediately states, "We are very sorry to hear that, and from such a loyal customer! Tell me why you'd like to leave and what we can do to fix this!' I told him about the remote and honestly said that we are trying to eliminate as much spending as possible, and that satellite wasn't something we truly needed. He immediately ordered a new remote for us and offered overnight shipping, all for free! Then, we talked on about what type of price range we needed, and I told him that a significant discount is the only thing that would keep us from leaving. He offered us a free upgrade to HD DVR, an extra receiver, and $35 off our monthly bill. Sold!
All in all, it took about twenty minutes, and we now have an extra $60 each month. Combine that with the gym membership that I cancelled today [my contract was FINALLY up -- just FYI, never, ever, EVER join Coop's Gym.], as well as the car payment that will soon be done with, and we now have a grand total of an extra $400 each month. That's amazing! Now, if we can cut out just a couple more things, and I keep earning as much money on eBay as I have recently, and there is truly no need for both of us to work full-time. Ridiculous. I want to spend WAY more time with my sweetpeas. I can't believe that my sweet baby boy is starting K4 in August! That is so unreal.... and what will I say when he's graduating high school?! "Sorry I worked away my entire life and never had any time to just PLAY with you, all day, every day, with NO interruptions, no crazy house cleaning to do, and no stress from work. Now you're all grown up, going to college, so that you, too, can work your entire life away! Please get a wonderful job and tell your sweet wife to stay home with your millions of babies and maybe one day when you retire, you will get to enjoy your GRANDchildren the way that I always wanted to enjoy you!"
Yeah, that's kind of overboard, but you get my point, right?
Here's the point: Save money. Live your life. Don't be a slave to what people tell you that you "need" to do. I made $200 on eBay last week. I will make another $200 this week. People may roll their eyes, but it works for our family and I can't WAIT to spend more time with my two boys.... and hopefully add another sweetpea to our lives. ;]
Until next time.....
