This morning I talked about where the journey to debt elimination started, and how we came to the biggest turning point – budgeting. This evening I’ll explore how our adoption of a more consciously frugal lifestyle *before* our economic downturn occurred has helped put us in a position to deal with it without worrying about how our bills will get paid or our basic necessities met. And also where we want to go from here and what we’re doing to get there. And it all hinges on not just living within our means, but knowing exactly what our means are.

Part of what was keeping us from making the most of our money before I started the blog was our spending changing based on how we felt about our situation at any given time. When things felt tight, we scrimped and spent as little as possible. But when things felt okay, we’d loosen up a bit and go out to dinner or buy things we’d been waiting to buy until “things got better”. We never bounced any checks or overspent our money, but we also didn’t really save any of it either. When I started this blog I also started working on a budget.

The start was easy. I listed all our recurring monthly bills and I listed our income. I was surprised to see how much theoretically was left over after our bills were paid. And then when I started adding in miscellaneous expenses, groceries, annual expenses, gasoline… I was surprised to see how *little* was left over. Since we wanted as much as possible dedicated to debt reduction every month, we eliminated anything we thought we could. Our budget has, for example:

$0 for eating out

$0 for entertainment

$35/month for miscellaneous expenses

$10/month for clothing (generally from yard sales or thrift stores for the kids, who grow continually)

We make all our meals at home (and my spouse brings lunch to work every day) and we do things largely for free for entertainment. We can theoretically take money from the miscellaneous budget for those expenses but it seems other things usually come up for that. It seems extreme to some, and a bit spartan, and it is in some ways, but we’re okay with it. We did take advantage of a vacation opportunity that ultimately paid us, where we did get to eat out a bit and do some fun not-so-free activities. We switched our cell phones to prepaid plans which we spend less than $10/month each for (the most inexpensive I could find after a lot of price comparison). We did think about getting rid of the cell phones altogether, but my spouse needs one for work to be able to reach him 24/7 and I travel with my two small children and don’t want to be stranded on a roadside with them. But all in all, our lifestyle became much more consciously frugal than it was before budgeting, and left us living about 10% or more below our means every month (which has been funneled directly into debt reduction after establishing a $1000 emergency fund).

The other big change we made was not treating “found” or “extra” money as “spendable”. I do surveys online to make some extra money, and every penny of that goes to debt reduction (I used to treat myself to small things with it). I also have some ads on the blog, and that goes to debt reduction as well. If I am given a cash gift, it goes to debt reduction. At the end of the month, every penny that we didn’t spend in our budget that is not being carried over for irregular expenses (like car maintenance) is paid to debt. In about 4 months we’ve eliminated over $4000 to the principal of our debt, about half that to the credit card debt. That may not seem like a lot to some, but in our world (we’re in the 15% tax bracket if that gives you an idea of our income) it is a lot. We have a little over $4000 in credit card debt left, and we hope to eliminate it before August of 2008.

Do we save every single penny we possibly could? No, of course not. We have cable TV. Which, at the moment, is free (my spouse is required to have cable internet to have access to his work whenever he is needed, he is a computer programmer, and we have a package deal right now that makes the cable TV free until April of next year). When it isn’t free any longer, we’ll have to reassess that. We spend more than we could on groceries. I shop at discount stores like Aldi and buy generic whenever appropriate, but there are a few indulgences like the weekly frozen pizza and the aforementioned diet dew for my spouse at work. And a semi-weekly batch of cupcakes or muffins for my 3 year old son to help bake. Sometimes with sprinkles.

What’s changed though in a very positive direction is we’re aware of exactly how much money comes in, and how much goes out, and what we do with that. Budgeting really does work. And budgeting is what has shown us that even without my irregular income, we will be able to pay all our bills. When the company I contracted for ceased operations without warning at the end of October, we immediately looked at our budget and figured out exactly how much of that money had been going towards our bills and basic necessities. And the bulk of it had been going towards debt reduction. Somewhere between $100-$200 a month from July-September had been going towards our budgeted items. Since my son was switched from his mainstream preschool (which was a $75/month year round budget item) to an early childhood special education preschool (free thanks to the wonders of public education) in October, that gave us a little more room in our budget as well. We changed my spouse’s tax withholding to largely cover the gap, and the blog income for the time being will not exclusively go to debt reduction, and that will cover the gap until I find a new source of income.

Yes, I would love to still have that income and dedicate the bulk of it to debt reduction. But knowing we have an emergency fund and that we do have what we need to pay our bills is a good feeling, and one I wouldn’t have had before we started budgeting. I am actively looking for ways to increase my income, and feel confident that by January I will have succeeded in replacing the income I have lost. Having the breathing room to be able to set January as a goal and not “yesterday” is also thanks to the wonders of budgeting.

So I share all this not to pat myself or my family on the back, for there are lots more little things we could possibly be doing. I share it to show that it can be done – living below your means is possible, and being prepared for a setback is also possible. Sometimes it is hard, and sometimes it seems sort of easy. But it is our adoption of a more consciously frugal lifestyle in the first place that has allowed us to feel like we will get through this setback with our lives largely intact. Thanks for being a part of our journey and traveling it with us.

If you enjoyed this post, make sure you subscribe to my RSS feed

You can also: Stumble It!

Bookmark

Submit to Reddit

Submit to Tip’d



