How We Paid Off Our Credit Card Debt

Several years ago, my wife and I paid off our credit card debt.  Here’s how we did it -

We changed our spending habits.

We stopped using our credit cards and started using the envelope system.

We started to have weekly budget meetings and created a zero-based budget.

We reduced or eliminated non-essential monthly expenses.

We created a debt reduction plan.

We chose to follow the debt snowball, illustrated here.

We focused on balances, starting with smallest balance first, for the psychological boost of eliminating entire accounts from our debt reduction plan, quickly.

We made use of a zero-percent balance transfer, which we paid off before the introductory rate expired.

We worked as a team.

We refused to argue about money.  Instead, we created a plan and we stuck to it.  Even when we had setbacks, we remained committed to our goal.

We established and used an emergency fund.  This helped us avoid accumulating new  credit card debt.

We earned extra income.

We sold things we did not need.  I worked to earn a bit of side-income.  We used eBay and yard sales.  Rather than keep clutter, we got rid of it.  Every extra cent went towards debt reduction and eliminating our credit card debt.

Getting out of credit card debt can be done.  For us, the process took a little less than a year.  We kept our focus, dealt with the inevitable setbacks, and worked the plan.

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What To Do With All That Change

We continue to use the envelope system to manage our cash.  We also have three kids, who get paid for some chores – so we always have change around our house.

My son, in particular, likes to collect coins.  Right now, he’s into sorting pennies and saving a few in his coin collecting books.  Once he goes through a roll of pennies, he’ll keep the ones that he needs for his collection, and put the rest in his piggy bank.  (Which is actually one of these coin-counting banks.)

My kids, like all kids, like to spend their change on gum, candy, and those machines in restaurants.  Recently, we have been encouraging them to save their change, instead.  So, they have quite a bit of change saved up – and with Christmas around the corner – the kids are ready to cash-in and buy presents.

I do not know much about coin collecting, but apparently, pennies that are older than 1982 have a higher amount of copper, and are actually worth MORE than 1 cent.  So, any “old” pennies (including wheat-backs, which kids love to find) are put into a “keep” bucket.

When we are ready cash in our change, we hit the local Coinstar.  We cash in for Amazon gift certificates, so we do not have to pay a fee.  The kids then use the gift certificates to buy presents for grandparents and cousins.

Our local bank will also count the coins – and deposit the money into our account.  Usually, this is what I will do with my change (which I have very little of, now that the kids are into this whole money-saving thing!).

From time to time, we’ll wrap our coins in those little coin wrappers.  If we can’t get to the bank, we’ll print the coin wraps for free using this pdf.  We’ll then use the wrapped coins to save up for a special purpose.  Last year, the kids saved their quarters, for a whole year, and used them when we went on vacation.

Finally, we try to keep some change in our pockets, for when we are shopping.  The kids love to put money in the “big red bucket” for charity.

Side note – We also keep an eye open for “silver” money.  Certain older coins actually contain silver – and are worth more than face value.  At present, we are sorting through half-dollars – and have found over a dozen silver coins!

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Getting Ready For 2014

It’s almost Christmas!  I cannot believe (he says, in old-man voice) just how quickly this year has flown by.  It’s almost 2014.  Wow.

This year has been an interesting year for our family.  We continue to move forward with our financial plan – paying off mortgage and saving for the future – and we are excited for the next year.

My wife and I have created a list of financial goals for 2014.  I’ll share details in a future post, but they include: (continuing) to eliminate mortgage debt, increasing side-income (is that a word?), and saving for the purchase of a car (for our oldest, who is now 14!).

I want to thank you for continuing to read No Credit Needed.  Posting has been sporadic, as we all adjust to my new work schedule and our busier-than-ever-yet-very-blessed lives.  Thanks for hanging in there.  You guys rock!

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Forgotten Budget Categories – Home Maintenance

When making a monthly budget, it is easy to forget certain budget categories.

One of the most often overlooked and underfunded categories is Home Maintenance.

It’s easy to understand.  None of us want to think about stuff breaking – especially in our home – so we tend to ignore this vital category.

Over the years, we have employed two different techniques for including Home Maintenance in our monthly budget.

1.  We simply lumped it into our baby Emergency Fund.  That’s kinda what the baby emergency fund is for, in a way, so that’s what we did.  When something broke, we stopped our accelerated debt reduction, fixed the broken item, and then continued with debt reduction.  This worked well for us, but wasn’t the perfect solution.

2240344525_bf3036b5992.  We created a separate Home Maintenance category in the Savings portion of our budget.  This worked very well for us – but it was a bit tricky, figuring out exactly how much to budget, each month, for an expense that may or may not be incurred.  At this point, we have enough data, from several years of budgeting, to have a pretty decent idea of what our monthly Home Maintenance costs might be.

Budgeting is, ever, an inexact art.  Over time, we have worked hard to minimize the surprise costs associated with household finances.  By taking the time to plan ahead – we have avoided the emergency-borrow-emergency-borrow cycle.

Side note – For those interested, here is a partial list of the Home Maintenance expenses we have had to deal with over the past 3+ years of home ownership:

We replaced two broken windows.

We repaired two pieces of siding.

We replaced the garbage disposal in the sink.

We repaired and reconfigured the outlet for our dryer line.

We replaced the blower mower on our HVAC unit.

As you can see, none of these are killer expenses, but all of them required a bit of money, and if unplanned for, could have been real headaches.

Image credit – austincameraguy

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