Balance

For me, I think the hardest thing about trying to pay off debt is finding a good balance. Dave Ramsey encourages his followers to become "gazelle intense" when they start paying off debt, meaning that they only spend money on the absolute essentials (food, shelter, utilities and basic clothing and necessities) and ALL extra money goes toward the debt. A lot of people would call this extreme, and maybe it is, but the fact is, it works. Clearly, the more money you put toward your debt, the faster you will pay it off and the sooner you will become debt free.

The difficulty is that when you live gazelle intense, life isn't very much fun sometimes. Don't get me wrong, you can have a good life without having to spend money all the time, but sometimes spending money can be fun too. Phil and I both really like to shop for two things: clothes, and things for our home. We don't care much about traveling or eating out. We don't buy many (if any) toys for Luke. We don't go to concerts, amusement parks or really anything else that costs money. But we do like to buy nice clothes and nice items for our home. I guess everyone has their thing, right?

So we have made a decision, and that is that we are still going to allow ourselves to buy a few new things for ourselves or our home here and there and we are NOT going to feel guilty about it.

The key to this is discussing it as a couple and having a budget. We have agreed that we both feel ok about setting a little (and I mean little) money aside in our budget each month for us to buy as we please. Talking about it first gets us on the same page and helps us to make sure that neither feel like the other is being unfair. We do want to pay off our debt as quickly as possible, but we also want to feel like its ok to buy something new once in a while without feeling like we have done something wrong.

Our "Home Improvement" budget will vary each month, so if there is something we really need, or want to try to get, we will see if we can work it into the budget when we do our planning. For our "Clothing" budget we have decided that each of us will get $50 a month, and it will roll over to the next month (so if I only spend $20 one month, I get the $30 I didn't spend, plus $50 more the following month).  We are even going to give Luke his own $10 a month clothing budget (not that he knows) because he needs a few new things too once in a while!

I think the key here is learning to be flexible and find a good balance. Not everyone is the same and so not everyone will define "gazelle intense" the same way that Dave Ramsey defines it. That doesn't matter. What really matters it working together for a common goal, and one day soon, achieving it.

Don't compare

Not long ago I wrote a post about why we wouldn't be buying a house yet. I still 100% agree with everything I wrote in that post, and yet I must admit that there are times when I look longingly at other peoples' homes and dream of the day when we will own ours. We live in the most darling community. It is only about 10 years old, so pretty much everything is new construction. We are surrounded by brightly painted craftsmen style homes and modern condos. I love taking Luke for walks in the morning and looking at the cute homes, surrounded by neatly trimmed lawns and only blocks away from parks and community gardens.

Only problem? It's easy to start the comparison game.

When we moved into our apartment, just three months ago, we couldn't stop talking about all the features it had that we loved. Our previous two apartments were much older and therefore a bit run down, not to mention small. This complex was built only 3 years ago, so everything still feels new and clean. Plus, it's big. 1200 square feet, 9 foot ceilings in every room, big windows, an open concept kitchen and living room, wrap around balcony. We felt like we were "living the dream" by finding a place as nice as this.

I now am realizing however, how quickly, if you aren't careful, the charm can wear off, especially if you pay too much attention to what other people have.

The fact is, there will always be someone who has nicer things than us. That's just how the world works, and honestly I'm glad its that way. I wouldn't enjoy my morning walks nearly so much if every house on the street was the same.  Many of the reasons we fell in love with this apartment had to do with the fact that is was different than everywhere we had lived before.

So how do you keep from trying to keep up with the Joneses?

1. Count your blessings. That may sound cliche but its true. When I stop and think about all that we do have right now, I think a lot less about all that we don't have. 
2. Find like-minded friends. "Friends" doesn't have to actually mean people you hang out with (although that's important too). A few of my "friends" that help me keep things in perspective include: bloggers who live a similar lifestyle, books that inspire me, Pinterest boards with decorating ideas for our space, and Dave Ramsey (I know, nerd.)
3. Clean up. I have found that it is more easy to become discontented when our apartment is messy. When I take just a few minutes to clean things up, I see all the charm again that I loved in the beginning. Using a space well will always make you appreciate it more.

I am lucky to live such a good and happy life; I think most of us are. We just have to remember that, and most of all, don't compare.

Small successes and interest payments

We paid off another loan! Woohoo!!! It feels great to know we are slowly, but surely, making some progress. Since our move, everything has been a little crazy, and we finally starting to get our new budget in order again. Since this loan was a little bit smaller, we decided to take all the extra money we had and just pay it off with one lump sum. Hopefully next month we will have determined how much we can put toward out loans each month and really start working the "snowball".

The thing that just kills me about loans are the interest. If for no other reason, I would just want to pay off these loans to avoid the interest that we are racking up. Phil took this loan out while he was still completing his undergrad and the total principal was $5,500 at 6.4%. We had already paid around $1,100 on it before he started his Masters at Thunderbird and then it went into deferment while he was in school (but it was still accruing interest). So guess how much we had to pay to pay off the loan in full? $5,550.54!!! That's more than the initial loan was even for! And that is not even including the $1,100 we had already paid in the past, so it was all that interest just adding up over time. And that's just one of our "small" loans. That's nothing compared to the $18,000 loan at 7.9% interest! Yikes.

So, we are really trying to just put as much money to these as we can and knock down the principal so the interest doesn't just swallow us up. The best thing you can do is to never borrow money in the first place (we have learned our lesson). The next best thing you can do is pay more than the minimum payment on the debt you do have. When you make a payment, the amount goes toward paying off the interest it has accrued first and then the principal, so if you only pay a little it basically does nothing to get your loan amount down.

We are definitely in this for the long haul, but we know it will be worth it in the end.

Why we aren't going to buy a house...yet

Lately we have been asked a lot if and when we are going to buy a house. This questions almost always immediately arises after we tell people that we are living in an apartment. We never got this question in any of our previous apartment homes, but I guess now that Phil is done with school and has a "real" job, apartment living is not considered very cool.

I get it. Owning your own home is part of the American dream. It's a step into adulthood and responsibility. We want to own our own home one day too. But, we have decided that it's going to be a while before that happens. Here's why:

1. We already have a ton of debt. There is no reason to take on more debt when we are trying so hard to get rid of the debt we already have. If we can achieve our goal of paying off our student loans in 5 (or less) years we will start looking to buy a house around that time. 
2. We don't want the extra expenses. Sure, renting can be a hassle at times. You don't get to paint the walls or remodel the way you want. You have other people living literally all around you. You usually don't have a yard. But owning a home can mean a lot of extra expenses that you don't have when renting. There are HOA fees, property taxes, maintenance, and insurance to pay for and those things add up fast. 
3. We don't need or want the extra space. Yes, you read that correctly. We are Americans who don't want an enormous home. Why? Because then we have to furnish that enormous home. Having a smaller space helps us avoid the desire to get more things, which inevitably costs more money. We like to live a simple, minimalistic lifestyle, and we hope that our home and possessions reflect that. Obviously, not all homes are big, so we could buy something small and upgrade later, but that just doesn't make sense to me. It's fairly easy to move into a bigger apartment when you run out of room; it's not always so easy to sell and move out of a smaller home into a bigger home whenever you want. 
4. We like apartment living. I know that sounds crazy to a lot of people, but for us apartment living works at this stage in our lives. We like having someone else do the maintenance. We like the amenities such as a swimming pool, fitness center, and playground. And despite arguments that renting is just throwing away your money, we don't mind paying the monthly rent. The way I see it, paying rent isn't all that different than putting gas in your car. You fill up at the beginning of the month and drive your car everywhere you need to go. Once the tank is empty you don't think, "well that was sure a waste of money", because it wasn't. The money you spent on gas provided you the means to get where you needed to go, just as paying rent each month provides us with a roof over our heads and a nice place to call home. It is money well spent. 

We do want to own our own house one day, and we will. But for now, we are happy to call our apartment home. 

More ways to save

Another way that I have learned to save money is by making lists and doing what I call "pre-shopping". Doing this has made a huge difference in helping me to avoid both impulse buys and buyer's remorse.

This method has two parts (both easy): first, make a list, and second, research the item. Its not rocket science, and I'm sure many people already do this, but I think its worth talking about anyway. I'm a big list maker, so step one is easy for me. I use this method most often when it comes to clothes, but it works for anything you want to buy. As I see or think of an item of clothing I want, I write it down (I have a list on my phone that I add to) and then I will look online or window shop for the item and compare styles and prices. Keeping a list (which I review while I am shopping) helps me to remember all the items I am hoping to get, and not just splurge on something that I don't really need. If I see something that I really want that is not on my list, I have to decide if I am willing to cut something else in order to get it. I don't just buy it all (I have to stay within my budget, remember?) so I decide to either add the new item to my list and hope to get it later, or buy it now and push something else back for a later time (or cut it altogether).

Another benefit of making the list and researching the item is that it helps me decide if I really want the item or not. Often, I see something and think I have to have it, but after a few days have gone by I usually realize it wasn't so great after all.  If however, I am still thinking about the item after a few days or even weeks its a good sign that its something I really want and am willing to spend the money on.

Remember, just because you have a list and know that you really want the items, doesn't mean you can just blow your budget. Sometimes you just have to go without (Phil and I are really good at that) and never get the thing you long for. But at least having a list and doing some research helps you prioritize the spending that you do do so that it doesn't get out of control.

Ways to save

I'm always looking for new ways to save money. Some are obvious, some take a little more work, but they all make a difference in our ultimate goal of becoming debt free. One money saving tool that we use is menu planning.

I have planned our weekly menu on and off since we got married, but lately I have been really working hard to stick with it and it truly makes a difference in our grocery budget. To make planning easier, I have created a list of about 35-40 meals that we like to eat, and I just rotate those meals in and out during the month (I do try out new recipes fairly often, but its nice to have a basic list of meal ideas that I can always fall back on). 

I plan the meals one week at a time (sometimes I'll do two weeks in advance, but I'm not always as good at that), then create my shopping list. I always make sure to have a good supply of stock items, such as milk, flour, eggs, sugar, tomato sauce, spices, pasta, etc, so most of my weekly list items are meal specific. I get everything I will need for the full seven days (or two weeks) and only go to the grocery store again if I forgot something essential (which is rare). I have become a much more creative cook and am often substituting items in and out of our meals so that I don't have to go to the store again.

Menu planning saves us money in lots of ways. First, making our list keeps us from wasting money at the grocery store by buying items at random, or buying more than we need. Also, have you ever noticed that you go to the grocery store for one thing you end up buying five things? Getting everything we need for the whole week in one trip keeps us from buying those extra things when we meant to only get one.  Menu planning especially keeps us from being tempted to eat out, which often is a result when you come home hungry and don't know what you have or what to make. It is also healthier because we make almost everything from scratch.  

I know I'm not the first person to plan out meals in advance, but I also know that most people don't do this. If you are looking to save money, this is a great way to start. 

More on budgeting

I want to write some more about budgeting because I feel like there is so much more to say. In my last post I talked about budget tools and the importance of creating a budget together.  I want to talk some more about how having a budget has helped us and some of the day to day things we do.

Right now we are pretty much living off of savings so we have to be really strict to make sure we don't plow through that money too fast. We sit down together on the Sunday before the beginning of each month and plan out how much we have to spend and what we will spend it on. Usually your total income will be the same each month, but it can vary due to extra jobs, commissions, bonus, etc. Our "income" varies a little right now because we are using savings and so we can go up and down as we determine our needs for the month. For example, last month we determined that we could pay for all our expenses with $1900 from our savings and so budgeted for that amount. This month, however, our rent increased and we planned to get some work done on our car so our expenses are a bit higher. We budgeted for $2100.

Sometimes determining expenses can be a little tricky, especially if its the first time you have used a budget. We have been using mint.com to track our expenses for a while, so we have a pretty good idea of how much we will spend on most categories. Once you start tracking expenses it can be shocking to find out how much you actually spend on some things. I think one of the biggest culprits is eating out. You don't think much about $10 or $20 here and there, until you get to the end of the month and realize you spend $300! (or more!) And I'm not exaggerating. We have lots of friends that eat out for the majority of their meals (especially for lunch and on weekends) and don't even realize how much it all adds up to.

A few things we have learned to help us with our budget are:

1. Assign every dollar to a category. Even if the category is your savings account, every dollar should be accounted for, otherwise its easy to spend it somewhere else (and likely go over your budget).
2. You must live within your means. There were lots of months where I would set up our "budget" but then we would just go out and still buy whatever we wanted and not actually stay within the budgeted amount. For most people, budgeting not only means organizing your money, but also learning to go without a few things. Phil and I have had to cut back on lots of things we would like to do or buy, but the end goal makes it all worth it.
3. Be realistic. We like to eat out. We (I) like to shop. We have hobbies. Its ok to set aside money for those things. We still want to have a life, but we also want to get out of debt, so we have to find a happy medium. We agree that its ok to eat out once or twice a month, but no more than that; and its ok to buy a few new items of clothing, but not if it goes over a predetermined amount (usually around $50).
4. Be flexible. This month we knew we would have expenses for Mother's Day and Birthday gifts, but somehow we forgot to budget additional money for Phil and Luke to get me a Mother's Day gift. They still got me something, but then we went back to our budget and saw where we could move some money around so that we didn't go over our total monthly amount (specifically, I decided to wait a little longer to dye my hair again, and our printer that we thought we would have to pay to fix magically fixed itself, so we took money from those budgets and applied it to our "gift" budget).
5. Review your budget often and together. I look at our budget almost every day (I might be a bit obsessed); I like to view our recent transactions and make sure we are where we are supposed to be. Also, reviewing frequently allows you to make changes if needed, adjust categories (like we did for Mother's Day) or slow down on spending if you went a little over board during your last trip at the grocery store. Doing it together keeps everyone on the same page and keeps you happy as a couple. There are no secret or surprise expenses that one or the other might not agree with or be upset about.

All of that being said, there are probably lots of other tips when it comes to budgeting, more of which I'm sure we will learn as we go along. But for now, we feel good knowing that we tell our money where to go, not the other way around.