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Two years ago, my family was a financial mess. We spent tons of money on Christmas presents we couldn’t really afford and we paid for them with credit cards….that were nearly maxed out. To be honest, during that time in our life when things were so bad financially, I chose to be like the proverbial ostrich…with my head in the sand. (While doing research on ostriches, I learned that ostriches don’t actually put their head in the sand, but I like the analogy, so I’m going to go with it!) I knew we had a lot of debt, but I had no idea just how bad it really was.
On New Year’s Eve, my hubby came home with a book (paid for with a credit card of course) that would force me to drag my head from the sand and face our finances. The book wasThe Total Money Makeover by Dave Ramsey and boy did it open our eyes.
Over the next week, we gathered all our financial information, crunched numbers, and discovered (to my shock and horror) that we had over $60,000 in debt (not including our house) and no money in savings!
To tell you our getting out of debt story would take days…and if you come back and read here often…you’ll eventually get the whole picture, but today I wanted to share a few tips that have helped us as we’ve tackled debt and worked hard to get our finances in order.
I even turned my tips into an acrostic to make it easier to remember! (And my acrostic word muse means to think or think about carefully or at length which is important when making financial decisions)
1. Meet monthly (or weekly) to assess your financial progress.
When we were drowning in debt, we met weekly and updated our financial 3 ring binder monthly. We checked to see what bills were due, what bills had been paid, and how much money was left.
2. Use cash!
It is so easy to underestimate how much you spend. A quick run through the drive-through here, a gorgeous sweater that was marked down to a price you couldn’t refuse, a dinner out on a night you were too tired to cook, that coffee you grabbed while you waited for soccer practice to be over…it’s all easy to gloss over and forget about. And if you and your spouse are both doing it, it can seriously lead to an overdrawn checking account!
3. Set Financial Goals
Whether you’re drowning in debt and desperate to be debt free or figuring out how you’re going to pay for a much needed vacation, writing down your goals is crucial. Once you have your goal in black and white, figure out what baby steps you need to achieve them. We started out with a goal of cutting 50% on our food budget which meant a whole lot less eating out and doing some menu planning on my part.
4. Earn Extra Money
When you have a mountain of debt that exceeds your yearly income, cutting back isn’t enough. We looked for all kinds of creative ways to make extra money. Over the last 2+ years, I’ve made extra money by selling things on Craiglist and eBay, blogging, taking on typing projects, doing freelance writing projects, editing, critiquing resumes, and starting a home based business. My husband has fixed computers, done handyman projects, and written some computer software. It doesn’t matter what you do… you can babysit, set up a lemonade stand, sell your crafty creations on Etsy, or deliver pizzas. The important thing is to gain some financial momentum and earning extra money will do that!
Now it’s your turn…
What’s your best household finance tip? What have you done that’s worked or hasn’t worked for your family? Leave me a comment. I’d love to know!