Tuesday, February 28, 2012

Frugal Tuesday Tip: Pay Cash, Avoid Interest

I'm home with a sick baby (who is snuggling up next to me) today so I'm going to link up to Frugal Tuesday Tip @ Learning the Frugal Life.

This week my tip is to avoid the high cost of paying interest.   When we took Financial Peace University, one of the things we learned was that in order to become financially independent,  you can't be making payments to a bank all of your life.

As it tells us in God's life handbook...the borrower is slave to the lender: Proverbs 22:7. 

Following dumping all of our credit cards, our family became passionate about paying off all of our debt.

At the time, we were paying 6.7% interest on Justin's Honda Accord making monthly payments.  We sold the car, got rid of the payment and paid cash for a sweet....2002 Chrysler Town and Country. 
Pretty sweet, huh?  Especially when you are age 27.  :)  Was it glamorous?  Nope!  Did our friends make fun of us?  Yup!  But--it was a car we could pay cash for at the time.

Instead of making the monthly $300+ car payments (much of which was interest), we started socking that amount away in a savings account.  Month after month, we were paying ourselves instead of the bank.  This method has allowed us to pay cash for 3 other vehicles since the van (not brand new) AND been pivotal in allowing us to pay cash for a house, eliminating even another monthly payment.

So, if you are paying outrageous monthly interest on a car (or anything) that's depreciating anyway, don't do it.  Sell it, downsize and start paying YOURSELF that amount each month!

Friday, February 24, 2012

Blessing: A House

It's official...we purchased our 2nd home.  The inspection cleared and we are set to close at the end of March.  It's been a roller coaster of emotion because we were (and are) kind of unsettled about what we wanted to do with our living situation. But, the trailer we are living in sold and there is NOTHING else to rent in this town.


Before I talk about our new purchase, I want to give a little background...

Rewind 8 years.  Two weeks before our wedding in 2003, we purchased a very nice, large home in Clive.  I LOVE my house in Clive.  There really wasn't one thing about it I would change.  It has a very open floor plan, an amazing kitchen, double fireplace, huge closets, great location and the list goes on.  However, along with that large, beautiful house came a large, not-so-beautiful mortgage payment.  I was totally willing to make large mortgage payments to have a nice house early in our marriage. However,  the unexpected premature birth of Alexis and all of the financial burden that came along with that often times made it very hard to have any money at the end of the month.  We were "house-poor" as some would say.  It was a stressful few years early in our marriage, mostly because of financial burden.

Fast forward 7 years.  We re-locate to Newell.  We decide it would be smart to rent rather than buy so we rent the only 3 bedroom place available (to rent) in town.  Let's just say it's a far cry from our beautiful estate in Clive.  I don't love many things about this house but the one thing I do love is it allows us so much flexibility with our monthly budget.

You see, our trailer is only $450 a month to rent, which went up from the $400 it was our first year here. That is less than 1/3 of the cost of our Clive mortgage payment.  So, while it was not by choice that we landed here in our trailer, it has been a blessing in many, many ways.

We've gotten so used to the flexibility in our budget, which has allowed us to get even more serious about our FPU 7 Baby Steps that we decided to buy an "in the budget" house.  Instead of building a new, expensive house here or moving back to our expensive house in Clive, we've purchased.....a 2100 squarefoot house..........with............CASH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

(***Side note: We so debated professing that to the world because to some people, finances are somewhat private and while we were keeping the fact we paid cash for an $80,000 house on the DL, we decided why?  We shouldn't apologize for living a very disciplined lifestyle and SHOULD be excited about this amazing journey.  We hope to help others learn to live a disciplined lifestyle so they, too, can be financially free someday!!)

While our new house is not my dream house, my dreams of becoming financially independent at an early age are coming true.  We will not have a rent or mortgage payment.  (At least not one that we're paying with our own  money, anyway.  We do still own our Clive house but we've rented that out so the rent there is covering our mortgage).  It will feel so good to not owe anyone a dime.  It will free up money in our budget to do things like:

  • Give more generously
  • Save $ to send our kids to college
  • Save for our dream house :)
  • Vacation
  • Have more fun and less stress!!!

God has truly given me a passion to live a frugal lifestyle. Justin is becoming more and more frugal by the day and I love it.  We are excited to be able to live below our means for a few years to help our dreams, and the dreams of many others come true.

Stay tuned for more details on our new purchase.  I'll get pictures up soon.


Sunday, February 19, 2012

Blessing: Financial Peace University

One of the biggest blessings to us as a couple has been Financial Peace University (FPU) by Dave Ramsey.  If you haven't taken the class before, I strongly suggest you do.  There are classes all over the country. 

A brief time-line leading up to our FPU journey:
  • 2003; Graduated college in May, Justin started his first "big boy" job in June, purchased a house in July, married in August, I started teaching in August.
  • 2004; Find out we are pregnant with Alexis in April and deliver her (3 months early) in September.  
  • 2005; Justin loses his job in January and we bring Alexis home from the hospital in February. 
  • 2006; We are in a financial tailspin, barely scraping by and putting things like Alexis' monthly perscriptions on credit cards.  Started FPU in September.
Dave Ramsey teaches seven baby steps to financial freedom.  Here they are:
  • Baby Step 1 – $1,000 to start an Emergency Fund
  • Baby Step 2 – Pay off all debt using the Debt Snowball
  • Baby Step 3 – 3 to 6 months of expenses in savings
  • Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
  • Baby Step 5 - College funding for children
  • Baby Step 6 – Pay off home early
  • Baby Step 7 – Build wealth and give!

We dove head first into FPU.  During our first year we....
  1. Saved $1,000 emergency fund. 
  2. Downsized cars to eliminate payments.
  3. Paid off $18,000 in credit cards.

We were truckin' right along and on track to start our 3-6 month emergency fund when Justin lost his job in October of '07.  There goes the $1,000 emergency fund and we had JUST cut up all of our credit cards.  Yikes.  More stressful times.

Thanks to a recommendation from a great friend, Justin got a new job in January of '08 and we were back on track.

FPU Timeline from '08 to current...
  1. Saved the $1000 emergency fund again.
  2. Paid cash for Amy to get her Master's degree .
  3. Decided Justin would go back to school for his Master's degree.
  4. Start our 3-6 month expenses in savings.
  5. Move to Newell, rent out our Clive house.
  6. Finish and exceede our 3-6 month in savings.
  7. Decide instead of invest in Roth IRA's to hold off and save $$ to buy another house to avoid 2 mortgages.
  8. Purchase a house in Newell.
Since taking Financial Peace University in 2006, we have been passionate about living like no-one else, so we can live like no-one else.  Dave Ramsey taught us so many great foundational things that quite honestly saved our marriage.  Financially, we were going down a very wrong path.  We hope to someday have the opportunity to help others learn what we have learned.  It is life changing!

Tuesday, February 7, 2012

Blessing: 2 healthy years!

Our little Austin turned 2 on Friday.  He has been such a blessing in our lives and brought much more joy than we ever thought possible.  His first 2 years have been much different than Alexis' first two.  It's amazing to see all of the growing and changing a typical 2 year old does.  Things Alexis didn't do until much later.  We are mostly thankful that he has been extremely healthy in his first 2 years of live.  We pray for the health of our kids often because know how much life can be a bummer when they aren't healthy.  Austin, thanks for being such a blessing to us.  We love you to the moon and back!

Here are a few highlights of his birthday party from the weekend.

 We had a baseball theme
 He is such a happy little boy!

 Blowing out my 2 candles!

 As expected, he loved the cake but love the "ice ceam" even more! :)

Thursday, February 2, 2012

31 Days of Nothing-- Recap

I am very proud of how our family did during "No-Spend January".  It was very enlightening to know that we didn't HAVE TO have anything extra this month.  For the most part, we escaped the world of consumerism and survived!!

Here are the details of our month:

1.  Typical grocery budget: $250.  Spent this month: $123.  Amount saved: $137  
  • I originally planned to spend only $100 this month but I did stock up on some chicken, cheese, soup and purchased diapers, detergent, and a couple of toiletries too as well as a bunch of produce so I feel like $137 is pretty darn cheap!  I'm happy with that.
2. Typical restaurant budget: $150.  Spent this month: $6  Amount saved: $144
  • I'm happy with this number.  We went until the 29th before we spent any and that is only because we in Des Moines with my sister for the day.  We ate as cheaply as we could.  :)
3. Typical entertainment budget: $200.  Spent this month: $0  Amount saved: $200
  • The beauty of living in a small town is most often, you make your own fun.  We went to lots of ballgames, went to grill steaks at a friend's house and hung out with family for the month. 
4.  Typical gas budget: $250.  Spent this month: $70.  Amount saved: $180

 5.  Typical blow money ($100)  and shopping budget ($150): $250  Spent this month: $24.50.  Amount saved: $225.50
  • $14 was for our monthly memberships to Rhapsody and Dolly Drive.  I could have canceled these for the month but didn't think about it until it was too late.  Oh well...I can live with $14. :)  The other $10.50 were the girlscout cookies that were def. not a necessity but Justin was in my room when they asked us to buy so of course, he couldn't say no.  Oh well!
6.  Typical items sold each month.  $0   Sold this month: $607.  Amount saved. $607

Amount to go in our get-out-of-the-trailer-fundGrand Total:  $1493.50

I am SUPER happy with our progress during our no-spend challenge.  Sure, we could have cut a few more corners but over all, we did AWESOME.  I am so happy that my prayers of a healthy family in January were answered + we had no unexpected expenses. PRAISE GOD!!!

I had so much fun reading how others did with this challenge too. I'll miss reading about the progress.  Maybe I'll find another challenge for us to be in this month.  :)