Hello Murphy. We've been expecting you.

This is my husband David, and yes, he's holding a set a training wheels.

Thursday morning, a little before 7am, I got a call that I'd hoped I would never get. David had been in an accident on his motorcycle on his way to work. It was a pretty nasty crash, and he'd been taken to the emergency room. When you think of motorcycle wrecks, you think of the absolute worst. I was so relieved when I got to the ER and found that he only suffered a broken hand, sprain ankle, bruised ribs and some road rash. It could have been so much worse.

In July of 2008, when we started our Total Money Makeover (by Dave Ramsey, of course) we started expecting "Murphy" to make a visit. You know-everything that can go wrong, will go wrong! But it never happened. In fact, our journey to be credit card debt free was almost easy. Since then we've moved on and are working on the emergency fund. But it feels like we just got the wind knocked out of us. Luckily, the bike was paid for and with David being a Marine all his health care is paid for and he won't be losing any income. But we didn't have full coverage on his bike, and insurance isn't going to pay for it. He's going to sell it for parts and try to recover some cash to add to savings for a new bike.

But it made me realize something I might not have other wise-that we have become complacent in our financial journey. We worked so hard to get the credit card paid off, and it felt so good to accomplish that. But it seems like we've really lost focus on building our savings. Just because we don't have any credit card debt does not mean we are out of the woods and can "live like no one else", we are SO not there yet. We've started to become lazy in our goals and loose with the budget. And that's a nasty combination. But I am re-motivated now and ready to build up that emergency fund, but Murphy finally showed up for a visit and I don't like him.

**By the way, David's co-workers brought him those training wheels, flowers and balloons so he doesn't have any more accidents. Isn't that the funniest thing ever!?

Emergency Savings are crutial!

I haven't posted anything this month because I've been busy and out of town. At the beginning of the month, my Grandpa passed away. We were not ready for it, but it was not completely unexpected. He would be 80 next week and had several health problems, but we thought we had more time. We're all heartbroken of the fact that he is gone, but through our faith we know that he is with our grandma, who he loved and missed dearly and is at peace. That being said, we had to make an emergency trip home for a week, and my brother had to fly in from Virginia. We were definitely not preparing to spend that extra money to travel back to Florida and luckily we pulled from our entertainment and blow money to cover most of the trip and the rest came from Travel Savings. We were able to make the entire trip home without even having to touch the emergency savings-but it was there if we needed it! That's a wonderful, peaceful feeling. It's amazing what a difference a year makes! If this had happened a year ago we would have, without a doubt, put the money on our credit card. And why? David brings in the exact same income he did last year. But because we thought it was "normal" to have credit card debt and keep up with the Jones (Who are BROKE, by the way!) we put stuff we didn't need on debit cards, and when we had real needs those had to go on the credit card. Then a year ago we decided, "Hey? Let's try buying what we NEED first with cash, SAVING enough for our future needs and goals, and using the rest of the cash on fun?" And it has changed our lives. Do bad things still happen? Of course they do, case in point this month. But it seems like Murphy isn't nearly as scary when he has to face an Emergency Fund!

February Summary

February was a really great month for us, especially financially speaking. It really is amazing the things you can do and the motivation you find when you aren't paying a "stupid tax" on a credit card. We were blessed with getting a larger tax return then we planned on, and with that we were able to almost pay off the bike loan!
In addition to our regular income, we got back $1,556 from Uncle Sam. That is actually a LOT more then we anticipated. Usually our returns are small, about $500. But with the extra $800 stimulus whatever it was (I seriously do not understand all of that!) we got back a larger amount. And wouldn't you know, it was enough to cover all but about $170 on the Bike Loan! We were thrilled, this was out last debt to pay off before saving to buy a house next year. (More on that in the coming months-SO exciting!)

So all combined, here are the numbers for the month:
$351 toward the Truck (regular payment, but still lowering the balance!)
$1,617 to PAY OFF the Bike Loan
$60 Vehicle Savings and Maintenance

Total: We increased our net worth by $2,028

Staying Motivated

Good news! With the exception of the truck loan, we are DEBT FREE. Bad news? Now that we're not focused on paying off unsecured debt, we have lost some steam. It was easy to be motivated to get rid of that "evil credit card" and the motocycle loan. But now that we're saving to fully fund an emergency account, we're finding it to be harder. Yes, it's thrilling to be putting away money each pay check instead of sending it away, but at the same time, now we feel like we have "wiggle room" to cash flow things and frankly, we've been doing too much wiggling! We (mainly me!) have been justifying buying thats because I was putting so much stuff off when we were focusing on credit card debt. Now that we have cash in hand, I have been spending a lot on things we were putting off for the last few months. And I guess that fine, things have to be replaced, and now we have the cash to do it. But I am so scared that I'll get into the habit of spending and we'll one step forward, two steps back.

Also, I think another reason for my lack on motivation is because of my lack of posts! Now that the credit debt is gone, I feel like I have nothing to post about anymore. I've been thinking about branching out into other topics, and definitely adding a monthly summary so I can see how much we've been able to save. I've made a couple posts about cheap date/entertainment ideas, and I'd like to continue with those. I need to do something to get my focus back into saving and being finacially smart!

Big News!

I have never said on here our actually amount of Credit Card debt. We only have a couple cards, our MasterCard through our bank, my Ann Taylor MasterCard from when I worked there, and our Military Star (Military Exchange Credit Card). We only ever used one, our bank MasterCard, but boy did we use it! I was so excited and proud when they raised our limit to $8,500 when I was only 21 years old! I can remember thinking "Wow, they must think really highly of me if they'll 'give' me that much money!" WRONG! What was I thinking? They didn't GIVE me any money, but that's how I saw it. It was mine-it had my name on it and I could use it as I wanted. And no, they didn't think highly of me. They were hoping I wouldn't pay it in full so they could charge me interest. And I totally proved them right.

But today, a year after starting my blog and 6 months into our Total Money Makeover I am ready to confess our credit card balance. On the first page of my Money Binder, in a sheet protector is a printed statement from January 20, 2009. The balance was $6,700 and change. Do I need to wait for you to catch your breath? But wait-that wasn't the highest it's been! At one point it was $8,046. That number STILL makes me sick to think about. But why am I confessing today? BECAUSE YESTERDAY I PAID IT OFF IN FULL. Yes! In less then a year, on one income and at the ripe old age of 24 we are credit card debt free.

We were able to accomplish this by making a couple changes. First, in November of 2008 we committed to stop charging things we couldn't pay for. Now, this doesn't mean we haven't used the card, because we have. For example, my brother is in the Navy, stationed in VA and I always help him book his plane tickets. I use my credit card to purchase them and he writes me a check when he gets here, which I then use to pay the credit card. So the key is that even if you use it, to PAY IT OFF. Secondly, we stopped adding to our savings. At first that thought scared the crap out of me. In the first recession of my adult life, I stopped saving money. Instead, I put that money toward paying off that credit card. When I really say down and thought about it, it made complete sense. I was saving money, that was making me 2% interest, which WASTING money by being charged 9% interest on the credit card balance. I was paying up to $50 a month on a finance charge, while making pennies on my savings account. (I do agree with Dave Ramsey though, and I kept at least $1000 in savings at all time for emergencies. We were also lucky enough that David would take short deployments at work, and while gone, he tried to save as much travel money and per diem as possible to put toward our debt. His sacrifice it what made it possible to pay off that card.

I can't put into words the peace I have now that we are credit card debt free. It's a peace that sinks deep into my heart. It's wonderful to make goals for 2010 that don't include paying off a stupid credit card. We can do so much more with our money when it's not going to a credit card company.

Christmas Savings

So I've been thinking...it's only 9 months until Christmas. I know, I know-Christmas was just here. But when it comes to saving up for it, it's never too early. As of right now our "savings" for Christmas consists of the points we earn from our debt/credit card ($50). Last year we were able to cash in our points for $400. But then last year we used the CC a lot, and had big purchases like a move, furniture and car repairs. This year, we aren't earning any CC points really, and a moderate amount for debt purchases, but nowhere near as much as last year. So my question is how should we save for this year? Our options are:
1.) Set up and Christmas Savings Account
2.) Set aside cash each month, like the envelope system.
3.) Rely on points and hope we have enough.


Another option is to buy gifts as I go. I've already bought a few, but the downside is trends, sizes, and preferences can change in 9 months and by then things can't be returned.

So what do you do? What works and what doesn't?