A month ago, my husband and I decided to live on one income and use the other income to pay off our debts including credit card, tuition, and card loan. I used to pay off my credit card in full every month until I was out of work for 5 years from 2009 to 2014. During that time frame, I worked part time at a fast food for 5 years, as a tax preparer for a tax company during tax season for 5 years as well and a substitute teacher for 3 years for 4 school districts in 4 different towns. You could say that I was not really without jobs. I tried to have multiple part time jobs if that were all I could find with 2 master degrees in Accounting and Business Administration. During that same period I worked at Wal-Mart as a cashier and few months later as an accountant working 16 hours a week. One year I didn’t have job for about half a year. Despite all my different part time jobs, most of them at a minimum wage, I didn’t bring much home. Substitute teaching jobs pays better but I applied with 4 towns and yet I didn’t find job every day. Further I worked around my husband hours so that we didn’t send our kids to daycare. We didn’t have food stamp either. Some months, we paid for food using our credit cards so that our cash could be used to pay for rents and utilities. Many of these years I would have about 6 W2s in my names and it was quite a bit of work doing our own tax return. One year my annual income was around $2,000.
My husband and I accumulated credit cards debts along the way as we couldn’t pay them in full every month. But somehow we always paid more than the minimum due and on time.
In 2014, I found a job. Few months later, we bought our first house and I created 3 side businesses as I learned from my jobless experience that the key to financial success is to be in the business for yourself and not just be an employee.
We then started our journey to be more financially responsible. Remembering our lean years, we decided to live within our needs but below our means. We tried different approaches. For instance, we paid more than the minimum mortgage every month and raise it every year as if we were renting. Rent goes up every year around here. We paid more than the minimum due on credit cards. We transferred some amount to 0% card that we paid off before the 0% expired. We paid ourselves first every month that we invested in our Roth IRAs. We used envelop system for food expenses. For over a year I tracked our expenses and trimmed every category of our budget. We remarked that most of our income go toward debt payment not monthly expenses. The approach we were using allow us to pay debts and invest at the same time which makes the process to be debt free move slowly. My husband and I review our budget periodically and set new goals and challenges. Few times, I asked him if we could live on one income and he didn’t think so. I kept shrinking expenses and modifying our budget until last month I presented him a model and asked him if we could live on one of us income by starting with the highest income. The mortgage would be included in the monthly expenses as well as the excess we pay toward the principal. We would stop paying ourselves first. The other income would be used in full to pay debts including my husband credit card, tuition loan and card loan. My credit card is paid off earlier this year. It took me about 3 years to pay off about $10,000 debts on my credit cards. My husband paid more than that within the same time frame on his cards. He ran the numbers and finally agreed that we could live on one income and use the other to pay debts. We decided to pay the minimum on car and tuition and the rest to his credit card until it is paid off. It has the lowest balance and the highest interest rate among the three debts. Once it is paid off everything would be used to pay off the next lower balance and forth. Without an emergency fund, in case of unexpected expenses, we would apply a part of the income used to pay debts toward that. Once the debts are paid off, we would tackle the mortgage. Our house is 3 bedrooms 1.5 bathrooms and about 1,000 sq ft on a 10,000 sq ft land. I don’t feel like having a mortgage on it. It is a shelter for our family of 7 and the bank should not own it. I grow food at the front and back. Our house provides shelter and food for us. I turned down any refinancing propositions and remodeling suggestions we were offered since we bought the place. One example is a window company that gave us quotes twice already one every year to replace our window to more efficient one. After research, I turned their third appointment down because it is proven that it takes 30 years to recover the cost of the window from the energy saving. I don’t really see the point of changing the window now when we could not afford it cash and the saving won’t make much change either.
My husband and I set our new challenge a month ago to live on one income and use the other one to pay off our debts.
We use envelops to take our food, fruit, meat money out of our checking account. We take all the variable expenses out of the checking account and use the checking account to pay fixed expenses like utilities, and mortgage. We take $100 each for our monthly allowances that would cover lunch or snack at work (we take food to work to save), our clothes and shoes, and the rest could be invested.
I tried to go organic and buy meat and eggs from farmers but the cost is more than what my current tight budget can afford. So I just stocked up when some grocery items are on sales using my food budget to build up my food pantry. I cut down on school lunch by sending my kid to school with lunch and snack. Read how I did it here.
Financial success is a journey. We just didn’t feel comfortable anymore living above our means and spending money we don’t have.
How are you gauging your finances?