Wednesday, March 21, 2012

A Time to Cut Back: More Than You Ever Wanted to Know About Our Finances

Patrick and I have really buckled down on our finances.  Our house mania a couple of months ago (which, by the way, has since subsided) forced us to take a really close look at our cash flow.  See, we thought we were managing our money well, but when we actually sat down and crunched numbers, we were surprised to see a much larger margin between our income and necessary outgo than we expected.  At first, in the midst of our I-want-a-bigger-better-house-and-I-want-it-now mentality, that was an exciting find.  It meant we could afford a larger monthly payment, right?  WRONG. 

We realized that we had been just blowing through our margin each month, not decreasing debt or increasing savings AT ALL.  Then, after much time spent in denial, followed by about a week of non-verbalized but simultaneous doubt about whether we should move forward in our plans to "move up" in housing right now, we finally admitted to each other that we need to get our finances in order before committing ourselves to a larger monthly payment.

Since that time, we've (finally) paid off the hospital where Madison was born and started saving to pay off our last old, bad debt.  And when I say "bad", I mean "don't drive through Wichita Falls or you'll go to jail" kind of bad.  It turns out that it's not a good idea to throw away your traffic ticket and forget about it; eventually, they'll remind you, probably right around the time you renew your license.  Oops.  So, yeah, we're about two months out from being debt free(excluding our mortgage).

Our basic blueprint for our finances is Dave Ramsey's Baby Step Program.  If you've never heard of Dave Ramsey, well, crawl out from under the rock you've been living under for the last seven years and go check him out.  He is, admittedly, extreme in his financial views, and for good reason.  He became a millionaire in his twenties, lost it all and some(largely because of the risks he took with credit), then started over, building more wealth than ever, without using debt.  He is a firm believer that "the borrower is slave to the lender", and now so are we.

By our estimate, it will take us until the end of the year to finish Baby Step 3 (fully funding our three month emergency fund).  Until then, we are operating on an extremely limited budget.  There is a little wiggle room; Patrick and I each get $2.50 discretionary spending for each paycheck.  I've got my eye on a pretty sweet bookmark, and if I can talk them down a little, it just might fit in the budget!  I'll be sure to share the deets with you as soon as I close on the deal.

But seriously, you can expect to see some posts on saving money pretty soon.  A few areas of concern right now:
  • Home decor
  • Madison's Birthday Party
  • Groceries
  • Madison's Birthday Party
  • Clothing
  • Madison's Birthday Party

I feel like I'm leaving something out.  Oh yeah, Madison's first birthday party!  Pinterest, here I come.

So you're all caught up on the goings on over here at the Philpot abode.  What have you been up to lately?

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