#1 RULE: To NOT use our credit cards anymore...at all...ever...and that was hard because we were so used to buying whatever we wanted, whenever we wanted. But after starting our pay-off plan, we just set our minds to doing it. We made a budget, and are sticking to it.
#2 RULE: Pay with CASH! We are using the Cash Envelope System (or here) for most expenses, debit card for gas only (easier at the pump), online bill pay for all other bills even utilities, and saving for any items we want that are not budgeted for. The Cash Envelope system is really working! It is so much harder to overspend when you have to shell out cash instead of whipping out a debit card! Our envelopes are simple right now, "Groceries" "Me" "Him" and "Other" (other is pet, cleaning, paper, beauty, school, fun, etc) but each family will have to make their own envelopes and priorities. We plan to add more after our credit cards are paid off (like Christmas, gift, car maintenance, school, etc)
So here's what I did for our credit card pay-off:
- Listed all of our CC info in a spreadsheet, with balances, interest rates, and the minimum payments across the top (in order from smallest to largest balance)and month and amount paid down the side. **you could do all this with pencil/paper**
- Start entering payments/new balance for each month. NOTE: We only were paying the MINIMUMS for each bill! Our TOTAL credit card payment is the SAME each month.
- When the smallest bill was paid off, that minimum payment is now added to the next smallest bill, and so on, until each one is paid off!
- All of this is printed out and when a bill is due, I look at the spreadsheet to see how much to pay.
Seems easy enough, but it it is still taking us 18 months to pay them all. And it seems really scary when you are writing that MUCH BIGGER check for the next bill...are we going to have enough to cover that? it's a lot more than the minimum, maybe we don't need to pay ALL that, etc...we had all kinds of excuses that get us off track. What do we do to stay on track? That brings me to our next rule.
#3 RULE: We printed out that spreadsheet and POSTED IT ON THE REFRIGERATOR! We see it all the time...it reminds us to be good stewards of our money...it reminds us of all the hard work we have already done...it reminds us to wait to buy that new item until we have saved enough to cover it...it reminds our kids of what we are working for so they don't constantly ask for this and that.
#4 RULE: What to do with extra income? What I do is plan in any extra money that we will be getting (ie. TAXES, gifts). I estimate how much refund we will be getting back and add that to our total payment amount in March/April. And there are 2 months a year that we get 3 paychecks, so I add extra to our total payment then, too. So add any extra to your smallest bill to try to pay it off sooner.
At first, my husband questioned my method (or madness) about this until he saw the whole thing working really well. He thought we should be paying off the highest interest rate credit card first. But I kept plodding along until soon, we had paid off one credit card, then another...we have now paid off 5 of those stupid things! (Yes we still have a few more:( But we are sticking to our plan)
Tonight we are celebrating...we have paid off one-third (33%) of our debt!!! Yay!! So we are going to go out to eat (using coupons ;) and we are going to show ourselves and our kids what a lot of hard work and determination can lead to. And that leads me to my final rule...
#5 RULE: Budget some fun/mad money every once in a while so you don't get discouraged...treat yourself to a little pampering (like getting your nails done for $10)...or take your hubby out for a cheap date (Applebee's 2 for $20 deal?)...or go to the movies (we are going to see New Moon for FREE using the General Mills Free Movie Ticket deal)...stuff like this keeps our spririts up and keeps us from falling into our old routines.
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