Nina's Soap

In one of my previous posts, I described my family’s journey toward paying off our debts.

We have tried different methods in the past years. We tried to pay more than the minimum every month on our debts and invest in our investments accounts at the same time. We tried to shop groceries and planned meals based on weekly sales ads and stocked more when an item is on sale.

Not all of these tactics worked well for our finances.

Online Store

First, I remarked that by stocking up on items on sale, I couldn’t stay within my food budget and I over spent on groceries because something I use was always on sale every week or month. What works for me now, is to set a budget and stay within that budget. When the food budget is maxed out.  We don’t make purchases even when something we use is on sale. We spend on food stables every month and keep something on hand for weekly sales. This helped me stay within my grocery budget for over a year now. Which freed more money to be put toward debts.

Second, by trying to pay off debts and invest at the same time, we were incredibly slow at paying off our debts. I didn’t feel comfortable not investing for our future and have to use it to pay for our past expenses. I was more comfortable at trimming my present expenses to pay for our debts but it was not all about me. One of the present expenditures I wouldn’t mind cutting would be our cable cost which is over $100 a month. That is over $1,200 a year. But with all the disagreement I received toward that idea, I decided to get our grocery expenses to fit within its budget. Which was successful.

https://ninasoap.com/ninas-soap-products/lye-soap/olive-oil-soap/olive-oil-peppermint-soap/

We reduced our allowances (my husband and I) to $100 a month per person which is about $25 a week to be spent on lunch at work, our personal items like clothes, computers, shoes… By including these items in our allowance budget, I reduced our expenses for these items to zeros. I included our children’s clothes and shoes in the food budget as well as toilet paper and non food items. Our food budget a month is $375 for a family of 6 at the moment.

Should you Pay off your debts first or Save while you Pay them off?

By grouping some expenses with others, limit how many things to budget for and free more money.

Then after a year of consistently spending within budget because the most variable part of a budget is groceries, and not using our credit card to purchase anything we have not saved for, I agreed with my husband to stop investing and put most of our income toward our debts payment.

We continue to contribute to our employer 401K. We take food to work to save a part of our allowances which we  invest in stocks.

https://ninasoap.com/ninas-soap-products/lye-soap/olive-oil-soap/ninas-olive-oil-goat-milk-soap/

To summarize it after trying different methods, what really worked for us was to:

* stop spending money we don’t have

*Stop using credit card for expenses we have not saved for.

*Use envelops every month. We takes our allowances out of the checking account. We take our food budget out of the checking account and split it between 3 envelops. One for food and nonfood, one for fruit, and one for meat. The checking account remains for fixed bills and debts payment. The envelope method helped us not over drafting our checking account as we usually did  in the past.

* Stop paying ourselves first which in the past was used to invest in stocks.

* Have a budget and track our monthly expenses to compare to the budget.

*Be mindful with the way we use resources in the house to reduce our bill like electricity , water and gas.

*Live on one income and use the other income to pay off debts like credit cards, car, and tuition loans.  By spending below our means, staying within budget,  and not paying ourselves first, we were able to reduce our expenses to one income. We dedicated the other income toward debts unless there is an emergency. Then we pay the minimum on debt that month and spend the rest on the emergency.

By stop adding more debts, we were able to decrease our current debts very fast.

We started with my husband credit cards as mine were paid off in 2017. We paid the minimum on all debts and pay what is left toward my husband’s credit card debts.

My husband paid his credit card off at the beginning of January 2018. Then we tackled the car and paid it off in March and by mid April 2018 he paid off his tuition loans. Our tax return went toward the tuition payment.

We don’t claim any exemption on W-4 with our employer. Therefore, we pay a lot in income tax during the year and during our tax return we receive the difference back. I would not financially advise anyone to do that as we lend our money for free to the IRS for a year. I chose to do that because in the past our spending habit would not allow us to save it. We both prefer to leave it as is until we feel like we are more responsible with our money.

By leaving on one income and paying off debts with the other income, we paid off over $500 in credit cards, over $4,900 in car loan and over $10,600 in tuition loan,  a total of  $16,000 of debts within the first 4 months in 2018.

This was possible because my husband and I worked together on our budget targeted the same objectives and financial goals. It didn’t matter whose debts they were, we wanted to pay them off to free our income of the burden. And we did it thanks to God.