How using cash helps you get out of debt

During our debt free journey, I have had a lot of people ask me what changes we have made. While  changes have really added up over time, the one big change we made after creating a budget is using the cash envelope system!

If you are a Dave Ramsey fan, you have heard him speak about this method multiple times. In a world where we are used to swiping a card for our purchases (debit or credit), it is hard to fathom that people still know how to use and count cash.

Have you ever made a large purchase with cash? It is hard, isn't it? You have to really think about that purchase because once you make it, the cash is gone. Using cash also helps with your budget too. Once you withdraw cash when you get paid and put it into the envelopes, it is accounted for as a line item in your budget.

If you are interested in getting started, here are some helpful tips based on our experience.

1. Develop your cash categories. Look at your spending and see what spending trends you have. Once you do that, you will be able to eliminate excessive spending and identify categories which will become your basics. Every person or family will be different, but our categories include:

• Groceries (this also includes household items such as detergents, toilet paper, etc.)
• Clothing.
• Household (for minor repairs or new furniture, etc.).
• Entertainment (for nights out or in with your significant other or family).
• Holiday (birthdays, Halloween, and Christmas).
• Dining out (family meals or date nights at restaurants).
• "Fun money" (cash that you can spend on meals with friends or anything not identified in the categories above for yourself. It's your money to have fun with!)

2. Assign amounts to each category. Look at your trends in spending for each category and assign amounts to each. This will be difficult to do because you will need to cut back from each category to really make progress in paying down your debt. For example, most of our categories are $50 every two weeks with the exception of the grocery category (which is more). This will really force you to look at where you spend your money.

3. Put your cash in an envelope and label each category. No, seriously - this is what you do! We have ours labeled in an organizer. It is pretty simple and basic, and you get used to it over time. Once you spend what is in that category, it is gone until the next payday. It really forces you to become mindful of your spending choices.

4. Adjust your categories as needed. After a few months of spending, you may notice that you do not have enough in one category. Maybe you have taken out of one category (after talking to your spouse of course) to pay for something out of another category. This is a sign that you need to adjust your amounts. This could change several times depending on where you are at each point in life. For example, with growing kids we should adjust our clothing category accordingly. This isn't a reason to spend more, but is designed to help you focus on what you need.

5. Save up for something within each category. This is one thing I love about the cash envelopes. If you want a really nice night out on the town or something new for the house, you can save up your cash within that category. After three months, you may look in the household envelope and realize you have a small savings there to buy something you have been wanting for your home. It is also great for Christmas because you have had all year to save your holiday money!

I cannot express how much using cash has helped us pay down almost $30,000 in debt in one year. Once you are mindful of your spending, you will begin to notice changes. It's worth the work and effort.

Save money and eat healthy during the week!

Americans spend a lot of money on food and coffee every year.  We are social creatures who love to spend time with each other and connect over food and drinks. From lunches to coffeehouse meetings, it can all become expensive. I compiled some of my thoughts, best practices, and experiences while our family has been on a journey to becoming debt free. With a little planning and communication, you can save some money and lose a few pounds in the process too!

1.       Make your own lunch.

According to the Huffington Post, Americans spend close to $2,000 a year eating out at lunch during the workweek. After reading that, this tip goes without saying. Plan a shopping trip and purchase foods that are easy to pack such as sandwiches, salads, and fruits and veggies. Make your lunch the night before if you can to save time in the morning. If you go to work without a plan or a packed lunch, you will be tempted to “grab something,” which can result in spending too much money and eating way too many calories. Think of how much you will save your pocketbook and your waistline!

2.       Don’t eat two helpings at dinner.

If you get bored with your food easily like I do, this tip is for you when making your own lunch. Did you have a delicious soup for dinner? How about a casserole? Was there anything salvageable for dinner? Soups and casseroles can go a long way. Get creative when you make your lunch the next day and reuse the leftovers. If you have the urge to have a second helping at dinner, fill up on fruits and veggies instead. You will save time and money the next day, and your waistline will also thank you.

3.       Pack a “picnic lunch” for lunch with friends.

I have to credit a good friend for this idea! Lunch with friends is always a great idea, so why not pack your lunch and meet up with them at an agreed upon location? The park is always nice. If the weather is too cold, maybe you could open up your house for a lunch meeting. It is nice to get out of the office and enjoy each other’s company on your terms and not the restaurant’s. All it takes is a little planning (see items 1 and 2 above) and communication with your friends.

4.       Make your own coffee at home.

I used to think I was single-handedly keeping our local coffee shop in business with my morning caffeine fix. If you are a coffee junkie like me, this can become quite an expensive habit! Once I started watching my dollars and cents, I noticed I was spending close to $60 a month on coffee. After picking myself up off the floor, I made a small upfront investment in portable coffee cups. Also, I started buying bulk coffee at the grocery store and using our single serve coffee machine. Mix this with a little creamer or almond milk and you have the potential for some great coffee. Be careful with the creamer if you are watching your calories though – it can quickly add up. Do you want to have coffee with friends? See item 3 above and replace “picnic lunch” with “picnic coffee.” Remember to still treat yourself to a gourmet coffee once in a while, but don’t make it a daily habit.

5.       Pack nutritious snacks.

Does your tummy start grumbling around mid-morning like mine does?  How about that mid-afternoon slump? There is a lot to be said about packing your own snacks. Some ideas include Greek yogurt, fresh fruit, granola, protein bars, or sliced veggies and hummus to name a few. If you have friends in the office, alternate weeks where one of you brings a community fruit or veggie tray at the beginning of each week to share. Make sure either of these options include snacks you will eat so you are not tempted to run to the vending machine and purchase empty calories at a marked up price.

With a little bit of planning, each of these practical ideas can make your dollar stretch and your waistline shrink!

"Escape"-ing debt

This past week, our family made a very difficult decision. It wasn't a sudden decision. In fact, we spent a month coordinating schedules and practicing with one vehicle.

We sold the orange Ford Escape.

I loved this SUV. It was the first vehicle I "bought" on my own. In all actuality, I didn't purchase it myself because I had a loan on it. As an Oklahoma State grad, I loved the color and proudly drove it around. After my husband and I started dating, the vehicle transitioned to a fun and reliable family vehicle that we all grew to love. It had equity though, and we were ready to pay off more debt and get rid of another loan.

*POOF!* Just like that, $5,500 in debt was gone along with the SUV.

It was a sad day, but we all knew that it would only benefit us moving forward. My husband and I talk about how one day we will pay cash for a nice, used vehicle. Maybe another Escape with leather seats? Maybe a sports car? The possibilities are endless. For now, we have a duty. That duty is to become debt free and build a solid financial future for our family.

Goodbye, dear Escape. You were more than "just a vehicle" to us. You are now part of the "Escape" from the chains of debt.

Quick Wins

I am a believer and HUGE fan of the Total Money Makeover!! We have paid off almost $8,000 in debt in the past 3 months! This is due to our fine tuned budget and a nice tax return (which didn't hurt, but we will have to change those exemptions to have that money in our wallet this year).

We still have our car loans, my student loans, and some medical bills. It seems like there is still such a long way to go, but it is important for us to remember how far we have come in such a short time. Dave Ramsey claims that in the debt snowball (organizing your debts smallest to largest and paying off the smallest first), that you will get "quick wins" which will keep you fired up and ready to get out of debt.

I couldn't agree more.

There is a light at the end of the tunnel. Somedays I feel like it is really dim, but I know it is there. Our schedules are crazy and we haven't had much time together as a family this year. I would rather make these sacrifices now while the kids are young, so we can make memories that last with them starting in the next few years.

I can't wait to yell "I'M DEBT FREE!!!!"

For those of you on this journey, dig in and keep the faith! You will get there.

Tired of Debt

 

Debt makes me sick. You know, the nauseating "I am in my first trimester" kind of sick? It ranks right up there.

If you are a friend of mine, you know how I am on a journey to get out of debt! I put my small successes and lessons I learn on Facebook frequently because the idea of being "debt-free" is something I want and pursue with great passion.

Growing up, my family never really talked about money. We just didn't have any, so it was pretty much a non-issue. I went into the world not knowing how to budget and racking up debt on credit cards and school loans. One day, I became completely fed up with making payments and never feeling like there was any money left.

When my daughter was born last year, I started to think about finances a little differently. It was okay for me to "get by," but it was not okay for my daughter and my family. It was time for a change. I started listening to Dave Ramsey.

His Total Money Makeover has me hooked! We have been doing the baby steps (as a family) since January of this year. We have a budget. We already have our emergency fund of $1000 and have even paid off some small debts. What a wonderful feeling! It's pretty amazing to realize that the power for change when it comes to finances lies in your own hands.

There is a ways to go, but these small victories keep us moving. I know it keeps me motivated. I have given up my frequent hair color changes, daily lattes, and "retail therapy." There is sacrifice, but the pain is only temporary. The rewards are everlasting.

I look forward to updating you as our family continues on this journey. For those of you who want to get started, there's no time like the present.

Click the link below and just do it! I know you can. Watch how it will start changing every aspect of your life.

http://www.daveramsey.com/new/baby-steps/