tell all tuesday the budget crunch edition

September 9th, 2008

Tell All Tuesday: The Budget Crunch Edition

Even though our situation has changed greatly since June of 2007 when I started this blog, we have purposely kept many parameters the same in how we deal with our money.  For example, we owe less debt because we’ve paid off the credit card.  However, we’ve kept the debt minimum payment the same amount in our budget each month that it was before the credit card was paid off, and applied that extra $200 that was going to the credit card each month to my spouse’s student loan.    I now consistently earn more money per month than I did in June 2007, but we’ve kept my monthly contribution to the general budget the same as it was in June 2007, and all money above and beyond that goes directly to our snowflake fund to pay off my spouse’s student loan.

We do all this because it is the essence of successfully using the debt snowball and snowflaking together for maximum impact.  The snowball picks up speed (and it has!) as other debts are paid off and those minimum payments rolled into a new debt target.  Snowflaking works when you consistently collect those snowflakes you earn and apply them to your goal (be it debt, savings, investing, or something else) instead of just letting them melt into the general budget.  If you start spending that money in your budget, then you become dependent on it to make your budget.

So, I am trying as hard as I can, and tweaking as much as I can, to keep both these things happening.  We base our budget on the original amount we were earning in June 2007, and we keep all extra earnings above that flowing into our snowflaking fund.  But, I must admit, it is getting harder to do so.  In June, I said one of my reasons for wanting to get out of debt was how tight our budget was and how close our spending vs earning numbers were.  We needed breathing room.  And although I have, in fact, created that breathing room, I’m not allowing us to use it yet so that we can keep making significant progress.  And the reality is, prices on gasoline and food as well as many other things have gone up, and our budget is squealing for mercy.  I sat down today to pay bills and balance everything, and after everything is said and done for the beginning of September, we have about a $59 cushion (above minimum projected gas and food expenses) to last until our next paychecks.  It should be okay, but it makes me nervous.  I went ahead and paid all the snowflakes to the student loan however, because that money becoming part of our budget is a last resort for me.  I’m going to have to reevaluate how much money I contribute to our budget by next year though, and we’ll see.  I might also have to stop snowflaking my spouse’s last raise.

Here are our current numbers as of today, after paying my minimum student loan payment and applying the minimum plus snowflakes to my spouse’s student loan:

  • Debt at start of blog (6/19/07) : $36,451.71
  • Current total as of 09/09/08: $15,260.46
  • Principal paid to date: $21,191.25
  • Broken down into:
    • Credit Card: PAID OFF 2/7/08
    • Student loan (at 7%): $11,084.68 (paid $144.50 today)
    • Spouse student loan (at 9%): $2579.15  (paid $1131.41 today)
    • Car loan (at 4%): $1596.63
  • NCN Network Chart percentage of debt paid:  58.14%

The spouse student loan payment was $437.59 budgeted minimum plus $693.82 snowflake amount that included all my earnings from the end of last month and the beginning of this one, minus the $500 I contribute to the budget every month.  I earned less from tutoring because it was summer, so hopefully I can bump that number up a little this month.  We have past the $20,000 mark of debt paid off!  I do not think that we will be able to pay off the student loan by October like I was originally hoping, but we are on track to definitely have it paid off by the end of the year.

On to next week – I’ll pay the car payment and knock the debt down a little bit more.  Is your budget squealing?  Good luck with handling the pinch!

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14 Responses to “Tell All Tuesday: The Budget Crunch Edition”

  1. Your progress is amazing! Great job!!

  2. You should try to start making more food items at home instead of buying them pre-made. We started doing that this year and it’s amazing how much money we’re saving. I didn’t think it would be as much as it is. We’re saving about $100 a month on the 2 of us. Plus we’re much healthier because we’re not snacking on empty calories any more.

    It’s so admirable that you’re trying to keep the budget the same. You do have to act as if you haven’t gotten a raise, that’s the best way. If the money wasn’t there you couldn’t spend it. Keep up the good work!

  3. I do make the majority of our food at home – the vast majority of our meals are made from scratch and we hardly ever eat out (in fact, we have $0 budgeted for eating out and hit it most months). I do buy some pre-made snack foods as well as fruits and veggies for snacks, but most I wouldn’t have a clue how to make. :)

  4. Awesome progress!

    Just curious, you said you have a $59 cushion on your budget until your next paychecks. Do you mean that is the cash you have in your account or do you keep a larger cushion there just in case? I ask because I have recently gone back to keeping a larger cushion of cash in my checking account (basically my emergency fund) and I feel so much more comfortable every month not having to worry about when I pay bills, just paying them as they arrive.

  5. I mean that once all the bills clear, my checking account will have $209 in it, $50 earmarked for gas and $100 earmarked for groceries for this weekend. We get paid again a week from Friday.

    Our checking account has our emergency fund linked to it and would get pulled from if I had an overdraft (for a fee, of course). For me this works better – if I put the money into my checking account it suddenly becomes “available” in my head and I slip back into some old habits.

  6. Congrats on going under the $20,000 mark! That’s amazing!

  7. How very inspiring! We are at the top of the debt trash heap right now looking at a big clean up ahead. This gives me hope! Thanks for sharing.

  8. oh, ps – I’ve never actually overdrafted though :)

  9. I’m just like you–if I have extra money in my checking account it becomes a part of the “general fund” and is too easy to fritter away. Even money in my savings account at the same bank is a little to tempting, so I usually keep things in an external online account. The game I have to play with myself…

  10. I admire your tenacity in paying sown your debt!

    I’m just the opposite with my bank accounts…I have to keep a cushion in my checking account as well as my emergency fund in a separate account. I just make myself not go below a certain amount in my checking. My income is sporadic with my contract work and keeping a cushion helps me sleep at night.

  11. You guys have done soooo great!
    You’ve just got to feel good about it!
    The ends are in sight!

    Remember tho that along with the hardwork is the
    need for a reward/play/feel good item. Sounds like
    you are in need of a short break or reward for the
    great strides you have made! Or maybe you just need
    permission from yourself to take a breather when you reach one of your next goals.

    An alternative to not snowflaking the spouse’s raise is to snowflake 2 out of 3 or every other one, or half of it each month, etc. The price of everything HAS gone up – and if you are down to bare bones budget, you might just have to get partially into that raise. That’s just Life and taxes :)

  12. I agree with everyone else – you’ve done so well! You and Lynnae from Being Frugal keep me going! Hang in there!
    Blessings

  13. Woo hoo! You are helping me stay inspired!
    We just had a $2,100 problem happen to our house, but I am so grateful that we had enough in our emergency fund to cover it (yay saving!).
    Now we have to cut back on our debt reduction for a handful of months in order to rebuild our emergency fund, but that’s ok, because now I see firsthand how important it is to have that money on standby!

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