Bringing Down the Debt

I feel like I have been in debt since birth...in reality it’s probably since I purchased my first ‘new’ car at 17? Maybe I was 18? I’m not entirely sure, but since that time I have had some type of debt in my life. Credit Cards, Student Loans, Mortgage, etc. It can be crushing and overwhelming. Sadly, so much of it is unnecessary. I didn’t need that car I purchased in the late 90’s and I didn’t need most of the other items I purchased either. Ahh...hindsight really is 20/20, isn’t it? Now, how do we deal with it?!

Before we were married in November of 2011 we had few serious discussions regarding finances. It is very important and just a little advice for those soon-to-be-wed folks out there...Please have a real and honest sit down conversation about money and how you’re going to coexist. We opted for something I like to call an Augmented Joint Approach.

We both transfer a predetermined amount of money to our joint account each time we are paid. For example, let’s say I get paid $1,000. I would transfer $900 into our joint checking account and keep $100 for my own spending. These are just round numbers, but you get the idea. With that $100 I can do whatever I want, buy or save, it doesn’t matter. We each get about the same amount of spending money. It’s a bit of freedom, within reason of course...no drugs, hookers, or Justin Beiber concerts.


Here is everything that we cover with our Joint Account...*deep breath*
Apartment - Rent, PSE&G (Electric and Gas), Verizon (TV, Phone, and Internet), Renters Insurance, Household Items, Groceries, Cell Phone Service
Cars - Car Payment, Car Insurance, Fuel, Repairs
Health - Health Care Services, Veterinary Services
Debt - Credit Card Payments, Student Loan Payments, Mortgage Payment (Rental Property)
Other - Donations (Church, Salvation Army, etc), Gifts (Birthday, Wedding, etc)

Here is what we are responsible for ourselves...
Clothing, Cell Phones, Gifts for the other, Restaurant Meals, etc


The key to making this work for us is to make very few exceptions. We both needed some clothing about a year ago and neither of us really had enough to cover what was needed. After reviewing our finances we agreed to allocate $75 to each person to spend, but we both have to agree.


We knew that paying off as much debt as possible would provide a better future for us. I created the mother of all spreadsheets to help us accomplish this task...

Tab #1
Joint Checking Account

Balance	Action	Date	Details	Notes
Current Balance	Money in / Money out	Clearing Date	Who is taking or giving us money?!	More details, if needed.

This is how I manage all of our accounts, basically an excel check register. The great thing is that by using formulas I can’t screw up the math!


 We have our checking account mapped out for about the next 6 to 8 months. This really helps us cover things that aren’t paid on a monthly basis and we can see where we might fall short. If a bill isn’t a set amount each month I overestimate it a little, it’s better than underestimating and it provides some breathing room. PSE&G is a good example...I estimate that our bill will be $160 every month, in the Summer/Winter will be close to that, but in the Spring/Fall we are able to greatly lower the bill by opening the windows. When we get the bill each month we are excited to see how well we did saving energy! 


**Note: Since you cannot pump your own gas in New Jersey we budget a set amount each week for this cost and pay in cash...seems like the safest option.**



Tab #2
Savings Account

It looks the same as our checking account layout above. We agreed on a set amount each week to put into savings. It’s not huge, but it’s a little safety net and we are trying to continue to grow it!


Tab #3
Spending Account

I opened up a separate account to use at the Grocery and Drug stores. We received a reward for opening the account and our budgeted amount is directly deposited from my bi-monthly check. No hassle! We are only allowed to spend this amount on food, personal products, OTC medicines, etc. If we run out we have to start living on the items in our pantry. This is the account I use when couponing, we have a small stockpile built up and hope to get to a point that we have a 3 months’ supply of everything that we need, minus fresh foods of course.


Tab #4
Debt Overview

This tab is very different from the other tabs ...

Account	Interest Rate	Balance	Min. Payment	July Payment	Next Due Date	GOAL 2013
Who are we paying?	%	Duh	Required Payment	Planned Payment	MM/DD/YY	Goal Balance!

I have this divided out by Credit Cards, Student Loans, Car Payment, and Mortgage Payment. The bottom of the spreadsheet shows a grand total for everything that we owe, that is not a pretty number! It is better that it once was, so I’m happy!


I update this each time a payment clears and if the account isn’t set up for auto payments I set up the next one. We have yet to miss a single payment. Missing a payment really impacts your credit score and often carries a monetary penalty. As my father says...you might as well just go burn a $20 bill!


We round all of our payments up to the nearest dollar and then we use a ‘Dave Ramsey’ like system for paying down debt. The basic premise is that you pick the account with the lowest balance and pay it off first. So, if you allocate $1,000 each month to paying off debt and the required minimum payments add up to $800, use the left over $200 to make an additional payment on that lowest balance account. When it’s paid off go to the next lowest balance account, you’ll be paying the minimum + the minimum of the recently paid off account + the $200 additional. Keep this going until your debt is paid off! By the time you make it to the last account you will be paying the full $1,000 toward the balance. Think about how quickly it will be paid off, amazing!


We are in the process of paying off our debt and when I first heard of this method I really didn’t believe it would work. I assumed that paying off the account with the highest interest rate would be the best course of action. So, being the numbers nerd that I am I did the calculations and our debt will be gone nearly THREE years earlier using this system! That is crazy!


**Note: I don’t factor in the Mortgage payment since it is a rental property and is covered by the payment I collect each month**



Tab #5
Tax Deductible Items


We have a few items that we get to write off on our taxes each year. Charitable Donations, Mileage, and the expenses we incur for my contract work. Check with your tax professional so you know what you should be keeping track of as the year goes on, it will really save you so much time during tax season. Did you know you can write off the miles that you drive to the doctor? Do it!

Anyway, that’s basically what this tab is...Money we donate, miles we travel, and expenses that can help defray the self employment taxes all in one tidy space.

The remainder of the tabs are individual tabs for each of the debt accounts. It is in the same layout as the checking and savings accounts. These give the ability to note any transactions that occur. Our goal is to not use any of these accounts to make new purchases, so we are mostly tracking interest charges and payments. Tracking all of this so closely made me realize that one credit card charged us the ‘Yearly Fee’ TWICE last year! I called them and they reversed the charge, but how many people don’t notice these types of things?!


We obviously run into unforeseen costs from time to time and we have to deal with those as they come along. Medical bills are horrible, but if you politely call the doctor’s office they will usually work with you to make a few smaller payments if you can’t come up with the entire balance.


So, that’s how we do it...simple, right? Any questions?!