Paying down debit and building good habits.

Mac and I decided we wanted to pay down our debit, we are lucky to only have 1 truck loan and 1 student loan and are focusing on the truck loan 1st) We also knew however for our personal success it couldn’t be in the stop spending every dime and put everything towards debit method.  I have a lot of respect for people who can do that, however I also knew it wouldn’t work for us for a few reasons:

1) The most common method includes building a 1,000.00  emergency fund and after that throw everything at debit. My brain could NOT handle a emergency fund that low, I would be having anxiety attracts all the time…not good.

2) If we cut back that hard I would loose hubby’s support in a month, and obviously this was our decision so lets not do that.

3) Something about that method just didn’t feel ‘right’ for us.

I couldn’t really explain number 3 though, until yesterday when I was listening to the Budget and Cents podcast. Carrie described that feeling perfectly. I didn’t want to just get this debit paid off, I wanted to set us up for a better future!

So with that in mind here is the plan we have been working with for the last 6 months or so.

  • Use a cash budget for areas we tend to over spend.
  • 5% of my check is direct deposited into savings
  • Through out the month we move as much as we can into savings
  • All ‘extra money’ things we sell on e-bay or whatever goes to savings
  • Currently we are paying down some medical bills once they are paid off that $150 per month will be automatically put in savings.

All of this money is going towards 3 things Emergency fund, Vacation Fund, Truck Payoff. I have a spreadsheet (just a Google doc) where I keep track of what is what very simply. I enter the amount deposited in the first column and it automatically divides it between the 3 areas. < That is the basis of this whole thing. throw as much as we can in savings and then divide it up amongst our goals.  The current distribution is 50% Emergency fund 25% Vacation Fund 25% Truck Pay off.

Side note on the vacation fund. Our vacation fund would be lower except hubby is in a wedding in Texas this fall and we want that paid with cash. Once we hit our goal of $2000.00 (this includes tux, bachelor party, gift…everything) that % will go down our truck payoff % will go up and we will start saving for an epic Disney trip in 2019 or 2020.

We have several goals for our emergency fund (minimum, mid range, comfort level and ultimate goal) as we hit those goals these distributions will change and some categories will be added. It seems a bit complicated on paper, but the spread sheet does all the work for me so really its nothing more than looking at the balance. Check it out I made one for you to use too!

Want some more detail? Here is our exact roadmap. Obviously it could change but its the plan for now.

  • Minimum $5,000.00 distribution rate 50/25/25
  • Mid-range $7500.00 distribution rate 25/25/50
  • Comfort level $10,000.00 will add a car and home category for future purchases and repairs distribution
    • 20% Savings
    • 15% Vacation
    • 10% Car
    • 10% Home
    • 45 % Truck Pay off
  • Ultimate Goal $18000.00
    • 0% Savings unless we use some of it then we will build it back up
    • 20% Vacation
    • 20% Car
    • 20% Home
    • 40% Truck/Student Loan Pay off.

I know that is all a bit much but its a great way to establish good spending/saving habits and along the way also save up for future items that could possibly cause us to acquire debit again. PLUS with it all being in one savings account if we really needed it for something we could easily access it.

Since starting this plan we have put over $2000.00  into our savings

and paid off an extra $562.00 towards the truck!

Leave a Reply

Your email address will not be published. Required fields are marked *