Week 4: What Debt Should We Pay Off First?

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You are reading Week 4 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

We talked last week about making a debt payment plan.  This week we are going to focus on determining what debt you should pay off first.  We will also discuss 2 different methods – debt avalanche and debt snowball.  This is one of the most important questions to ask as you begin changing your financial strategy.  You really want to make the most of your money, and these tips will help you to do that.

So, What Debt Should We Pay Off First?

There are often debates about whether you should begin paying more toward your lowest account balance (debt snowball) or the balance with the highest interest rate (debt avalanche).  While both are great options, it can easily depend upon the individual income availability to go toward debt relief.

Pay anything that is in arrears first.  This should always be your first focus when getting rid of debt.  If you have any account that is currently behind on payments paying it first should be your goal.  That includes things like utilities, mortgage, car payments and any credit card or lender.  Get caught up on any outstanding accounts before you focus on paying more toward paying off debt.

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Week 3: Making a Debt Repayment Plan

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You are reading Week 3 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

Now that you have set out your goals and created a budget, it is time sit down and begin Making A Debt Repayment Plan. This means you will be taking time to look at individual debt to determine which to focus on paying off first. It can also include looking at things like settlements, negotiations and closing accounts.

BEFORE you start trying to pay off debt, you need to establish a $1,000 emergency fund.  We talked about this last week when you set up your budget.  If you have $200 left per month after all your “must pay” expenses, that money goes directly into a savings account.  Once you get $1,000 saved up, you can move on to repaying debt.  Remember this $1,000 is for emergencies, not because you want a new iPad.  Focus on your debt relief goals.  You can do it!  The new iPad will come later.

MAKING A DEBT REPAYMENT PLAN

1. Get honest about what you can afford. This is the tough part. You really have to get honest with yourself and accept that you may be living outside your means. Look at your budget and start slashing items that are optional until you have created budget monies to get you caught up and start paying down debt.

If you have slashed optional items and still have no spare money, you maybe looking at a deeper financial need of more income. That is something we will deal with in future weeks, but you can begin now honestly evaluating your current job and income situation.

2. Focus on getting current first. While you want to immediately focus on paying off at least one debt, for your own credit score and financial security in the future, it is most important to get caught up on any outstanding debt you have incurred. If you are behind on payments, this is the time to work double time to get caught up.

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Week 2: How to Make a Functional Family Budget

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You are reading Week 2 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.  If you just joined us, please start with week 1.

Once you have set up your debt relief goals, it is time to look at your budget and determine how to make those goals happen. This week we will help you learn how to Make A Functional Family Budget. Budgets do not have to be a dreaded thing, nor restrictive. They are very simply a guideline to help you to stay on track and not over spend.

How to Make a Functional Family Budget:

1. Make a list of all monthly income. Make sure to include everything that regularly comes in. Child support, spousal support, employment paychecks, dividends from businesses and any self employment income. You want to have a good working knowledge of what you have to work with each month.

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Week 1: Establishing Debt Relief Goals

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You are reading Week 1 of 52 Weeks to Eliminate Debt & Curb Spending.  Please read the overview here to learn more about the series & get your FREE financial planner.

If you are reading this, then you already know that your financial situation is not where you want it to be. This week we will begin the process toward getting out of debt.  We will start with Establishing Debt Relief Goals. Before you can make real progress on your finances, you must understand what you truly need to make happen.

ESTABLISHING DEBT RELIEF GOALS

Be honest about ALL of your debt. Now is not the time to pretend a debt doesn’t exist. Pull out all of your bills, creditor notices and even court cases pending due to lack of payments. Be honest about every debt you have. Include things like late utility bills, debts owed to friends and even that nagging student loan you have put off paying. It’s time to get serious, and that means full honesty with yourself and your spouse about the debt you currently have.

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52 Weeks to Eliminate Debt & Curb Spending

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Are you ready to get your budget under control?   Do you long to live a life without debt?  Then get ready for our new series: 52 Weeks to Eliminate Debt and Curb Spending!

Each week we will discuss practical ways to help you get out of debt and take back control of your finances.   Now, this isn’t an easy challenge but it’s one that you must commit to in order to help secure your financial future.

Some of you may be thinking it’s not possible to be debt free.  Maybe you’re living paycheck to paycheck and are just barely making your minimum payments each month.  Regardless of your financial situation, you can still get out of debt.

For some people (depending on the amount of debt) it may take just a few months, but for others a few years.  However long the road to a debt free life, it will be worth it in the end.  Just stick to the plan.

My family is finally living debt free.  Our goal was always to be debt free except for our mortgage.  Once we wrote that last check, it was liberating.  I felt like a weight had been lifted from my shoulders, and I want all of you to feel the joy of not owing your hard-earned money to someone else.

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Are your ready to eliminate your debt?  Get started with Day 1 on January 5th!

Week 1: Establishing Debt Relief Goals
Week 2: Make a Functional Family Budget
Week 3: Making a Debt Repayment Plan
Week 4: What Debt Should We Pay Off First?
Week 5:

Don’t miss a week of the series.  Get each weeks post straight to your inbox and get a FREE Financial Planner!  The planner includes:

  • Savings Goal Worksheet
  • Debt Payment Checklist
  • Debt Repayment Plan
  • Bill Pay Calendar
  • Monthly Budget Worksheet
  • Cash Envelope Template

Sign up below or click HERE to get your FREE financial planner.

I’ve also created a Pinterest board that you can follow along as I pin each weeks post plus more ways to keep your budget on track and curb your spending.

Now let’s get started!

Disclosure:  I am not a financial adviser nor do I have formal financial training.  All articles are for informational purposes only and should not be interpreted as financial advice or consultation.  Please consult your account and/or financial adviser before making changes to your finances.  All situations are different, so please consult a professional to determine your individual needs.

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Thrifty Thursday: How to Set a Budget

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Having a budget is one of the most important financial decisions you can make.  As Dave Ramsey says, you need to make your money work for you.  Once you know how much money you have coming in each month and how you’re spending that money, you can start to overhaul your finances.

So, how to do go about setting up a budget?

First, you need to know that the perfect budget doesn’t happen overnight.  It takes, on average, three months to get a budget right for you and your lifestyle.

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January & February 2011 Grocery Tally

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I’m WAY behind!  I didn’t get my grocery tally up for January and our February just ended on Friday.  I didn’t do too much shopping in January, so we had extra money.  LuLu just had her birthday the beginning of March, so I spent a good portion of the last weeks budget just on cake supplies, without coupons.

We have a $70 per week or $280 per month grocery budget.   Want to learn more about my family and our spending habits? Read THIS post
*I use the  free Savings Tracker to track my grocery spending

January 2011

Total Shelf Cost: $460.05
Total Savings: $295.54
Total Rebates Owed: $2.50
Savings Rate: 64.24%

Total OOP in January: $167.36 or $41.84 per week
Total Remaining from Budget: $112.64

February 2011 

Total Shelf Cost: $589.67
Total Savings: $349.91
Total Rebates Owed: $0
Savings Rate: 59.36%Total OOP in February: $239.76 or $59.94 per week
Total Remaining from Budget: $40.24

How have you done with your Grocery Budget in 2011?

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December Grocery Tally & 2010 Finals

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My December savings is atrocious!  My shopping basically involved running in the store for holiday party items & whatever else struck my fancy that month :-) 

December 2010

Shelf Cost: $355.21
Savings: $199.33
Total Paid: $156.18

Average per week $39.05
Total Remaining $123.82
Savings rate 56.03%

My 2010 Savings 

Total Savings: $5624.89
Rebates Submitted $193.90
$56.60 weekly spending average
Variance for year (leftover from budget) $876.78

My plans for 2011 spending:
Not slack off too much but remember to give myself coupon breaks 
Continue to add more natural & organic foods
Increase donations

How did you do in 2010?

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My 2011 Financial Goals

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I posted my personal goals for 2011 yesterday, so today I wanted to mention our financial goals for the new year.  Thankfully, our only debit going into 2011 is our mortgage!  Our plans are to save more & enjoy life as a family. 

Financial Goals:

– Save for Disney: We’re planning a family trip to Disney in either June or November.  My mom was planning to take the kids, so she’s paying for them.  Yeah! 

– “Car payment”:  My explorer is only a 2004 with 80K miles, but we’ve had a LOT of problems with it.  We’re planning to add a car payment category to the budget sometime this year.  The money will go directly into savings, so we can pay cash (I hope) for a new vehicle.  Our hope is my truck will last at least 3 more years, though.

– Ski weekend in February

– Weekend trip to mountains this summer

– Increase retirement savings

– Increase monthly payment to the principle on our mortgage

– New dishwasher

– Paint & landscape outside

– Add to general savings account

– Kids & Derrick want a dog

– Remodel kitchen (gotta dream big right ;-) )

* Derrick wants new tires for his jeep.  Since that is not a necessity (tires are good for another year or 2) he better start working some overtime!

What are your financial goals for 2011?

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