Monday, October 5, 2009

No New Debt- FAIL!

Yes. We did it. We took on more debt. I am not happy about it, but I am not upset by it either. I think the difference is that now I have a plan, and we have our budget set up in a way that will allow us to work our plan.

We had a car that was having a few mechanical problems, and since I don't work or go to school I had pretty much stopped driving it. It's been paid off since early 2007, but we were still paying $100 a month on insurance for it, and not driving it. We decided to sell it, but hadn't actually gone as far as to put it up for sale yet. Then, a neighbor was at our house and David mentioned we were probably selling it, that I didn't really need or want it anymore, and our eventual plan was to purchase a motorcycle for him to drive back and forth to work and leave me with the truck. The neighbor said he'd be interested in the car for his teenage son. And wouldn't you know, he had a bike that David liked that he was willing to trade for it. The value of the car was much lower then the value of the Bike, so we traded our car and $1,500 for the Bike (which is worth a little over $3,400). We had enough cash on hand to pay for the bike, but didn't want to dip into the Emergency Fund. We had been planning on buying a bike with Davids bonus later in the year, maybe early 2010. So, after much thought we decided to take out a small personal loan, pay for the bike, and pay it off as soon as possible. The payment is $65 a month, but we'll save $20 in insurance and $60-80 in gas, so we'll put all of that toward the payment each month. As soon as the credit card if paid off (December) we'll be using the snowball to pay off the bike. However, if the bonus comes in before, the bike and card will both be paid off immediately. It also means that the $4,000 of the bonus we had earmarked for a bike can now be saved for the Fully-Funded Emergency Fund.

I know taking on more debt may not have been the best option, but we do take some comfort in the fact that we do have a very workable plan. And we are grateful that we've spent the last year working hard, so that we are able to work this into our plan.