Working on a New Budget for the Year...

So sometimes I spend money a little bit crazily. I'm trying to curtail that by coming up with a new budget for the year.

Cathy and I worked out all of the bills. Stuff that she pays for, stuff that I pay for, stuff that we both pay for. We worked out a system where I will give her money to pay for the stuff that we BOTH pay for, because most of that stuff is in her name (cable, electric and gas, water, etc). We worked this out so that we are both paying EVEN amounts of money for things that we BOTH use. Strangely enough, after working the budget out completely, we actually had the correct amount from the get go. However, the amount is going to change a little bit now that we've added her to my cell phone plan...but nothing that a quick update to the amount can't fix.

As far as myself, I have set up a budget where I pay for things out of every paycheck, instead of once a month when they are due. By splitting up the payments for things like my credit cards, my car, and my insurance, I am not only earning more "points" with my National City account, I'm also helping myself to make sure that I don't somehow miss a bill, or somehow end up with a couple due all at the same time that I can't really afford. Not to mention, by paying every two weeks, I understand that I will actually be getting slightly less interest charged to me on those cards. Granted, it's not very much, but it will be less...and less is always better.

On top of that, I have decided that I'm going to change the way I have been paying my bills for the last two years or so a bit. I HAD been focused on sending higher dollar amounts to the larger bills first, always trying to get the balance as low as possible. While doing this, I normally would send only minimum amounts to my smaller balanced items (like my Walmart Card) and what was happening was I was seeing the large bills come down slowly, but the small bills were also coming down slowly. The minimum payments on things like the Walmart Card are basically ONLY the amount of interest that is charged, so by sending the minimum on those, I was never actually paying any of the debt down.

Well, to combat that, I'm going to for a change start sending in larger payments on the smaller debts, and make slightly smaller payments on the larger debts. For instance, I have 4 credit cards. WaMu, Citi, Walmart, and Meijer. I had been sending $80 to WaMu, $90 to Citi, $15 to Meijer, and $15 to Walmart. That was minimums on the Meijer and Walmart, and about $20 extra on the WaMu and Citi. ALL of the balances were coming down really slowly. They were coming down, but not by much.

Well, I'm going to cut the $20 extra out of both the Citi and the Wamu, and I'm going to send the extra $40 from that to Walmart...because that is the lowest balance. So now I'll be sending $55 a month to Walmart, which should pay that off in about 4 or 5 months...instead of only seeing about $2 or so every month go off of the principal balance on the Walmart card, I'll be seeing more like $40 or so go off of the principal balance.

Then, after I get that card paid off, I will then move to the Meijer card because it's balance is the next lowest. What I will do then, is continue paying the $15 that I've been sending to Meijer, but I will also roll in the $15 that I was sending to Walmart, and the extra $40 that I had been sending to Walmart from the original addition to it's bill. So instead of sending Meijer only $15 a month, I'll now be sending them $70 a month. This will get the Meijer card paid off in just a few short months as well.

After I get the Meijer card paid off, I will then add the $70 extra that I had been sending to Meijer to the WaMu card. That will have me sending in over $130 a month to WaMu, wich will make it's balance come down faster than it ever has before.

Then, after WaMu is paid off, I will add the extra $130 a month that I had been paying them to the $70 a month that I had been paying Citi. That will bring me up to $200 a month that will be going to Citi. Of course, that is a long ways off...and by that time I may need to come up with some different dollar amounts...but you get the general idea.

If you're money saavy, this may sound familiar to you. It's a "get out of debt yourself" plan that a guy named Dave Ramsey talks about. I have a couple of online "friends" that have used it over the last several years and swear up and down that it's the greatest idea since sliced bread. It's definitely different, because conventional wisdom says to focus all your extra debt paying ability on paying the highest interest rates first, where as this idea has you focus on paying your lowest balances off first. It's supposed to work well because you can actually SEE the difference in things easier when you are actually making debts go away. I can go with that...instead of seeing small, small cuts in the principal owed on things, I'll be seeing larger cuts on one bill at a time, and relatively quickly (within hopefully about 6 months) I will have two of the bills gone altogether. It's different, but I'm willing to give it a try because the two guys that I know that used it are two guys that I trust, and I'm wanting to get myself out of debt.