the auto fund is connected to the credit card fund....

It's been awhile since I've done a debt-proof living update. The beginning of the new year seems like a good time. 

We're still on track.  We've been living this way of thinking since January of 2006.  Three years.  And I'll be honest, there are definitely high and low times, in other words - sometimes I wish I never heard of such a thing so I could spend and enjoy unawares, and others - I'm grateful.  Mostly, I'm grateful.  We put a lot more thought into our purchases now, live a lot smarter, plan ahead like we never have before and little by little we're making dents.  And we're constantly learning.

Today, for realsies this time, we paid off the jeep.  We had planned to pay it off in December - but some changes came up at Pa's work and the bonus he normally gets just before Christmas is now coming in April. Surprise!   Let's talk about that for a second.   Three years ago, that would have knocked our socks off - in fact, my first thought was - wow - some of the guys at work are really going to be broadsided by that one, because the fact is, we used to do all of our Christmas shopping with that check.  Thank goodness we changed that habit two years ago.  I now put into a Christmas fund monthly - and the bonus is exactly what it should be - a bonus, and money that we shouldn't count on, as came to light this year.  But, we had been planning to cushion the funds and pay off the jeep with that bonus, so it did set that back a month.

And it's always a gamble.

What we have is an auto fund.  This fund is used to  1. Pay for automotive repairs and 2. Save up for a new vehicle.    The reason that it made sense to pay off the jeep is because the money in the fund was more than what we owed on the jeep.  But. We still want to be cautious and make sure that we have enough in there should the radiator go, if you know what I mean.

So there's that. 

Now.  The jeep being paid off doesn't mean we have that extra money in our pocket.  The theory is that we've been living just fine without that money until now - so we'll continue to use it to pay off debt. It was a debate what to do with that payment - to put it into the auto fund, because the reality is, both the vehicles are old - we'll need a new one at some point.  OR. Roll that payment onto the credit card bill.  We decided to do that, because in doing that, we should see the end of that bill by early fall....and at THAT point, we can roll that money into a vehicle fund.  It's working, it really really is.  And it's a heady feeling. 

The other thing we have going on this year, as I mentioned, are some changes at Pa's work.  They are cutting costs and saving pennies as a lot of companies in Michigan are right now, and one of the things that they've done is to switch the dates when we get paid. 

heh.

For us it means that our very first paycheck of the year is coming one day later than all our heavy payments - the mortage, that type of thing.   Three years ago this would have been a problem - but now, thanks to the emergency fund, it won't be.  It'll balance out.  But it does mean some adjustments on how I pay some bills - it'll be another learning curve for us - and it would be nice, ideally, to get one check ahead.  We ain't that savvy yet tho, but getting there.

So 2008 was good for us - we paid off both the vehicles, paid off a nice large chunk of other debt, didn't add any bad debt at all and are making steps forward.  We remind ourselves of this when things do feel tight - we often feel like we don't have any money for extras, that the higher gas bills really took a bite out of our travel plans - but the bottom line is that we're making strides and we'll appreciate the payoff in the long run. 

This year we plan to pay off our only credit card, save for a vehicle, start building some more funds and continue to avoid bad debt. 

If anyone has any questions - feel free to email or comment here and I'll do a q&a post as well.  The link in the first sentence will bring you to more of my debt proof living posts.

It's a good thing.

Comments

[Jan Connair]

I have a confession to make. Last year at this time, I had "Debt Proof Living" in my hands and was all gung ho to set up a budget and see if the book was as good as you say. But I procrastinated. And another year passed. We don't live paycheck to paycheck, per se, and we don't have credit card debt to pay off. But we don't have a huge emergency fund, and we're getting too close to retirement to be complacent. I know we could save more if I'd just set up a budget with some funds like you have and JUST DO IT, as the Nike ads say.

So I have the book out again and we are starting with Mary Hunt's advice to monitor every cent we spend for 1 month, just to see where the biggest leaks are occurring. Next month as I try to set up my system, I may be emailing you, Sharyn. Could be I'll need a life coach for this one, lol!

[Dale Anne]

GREAT JOB!!!

[Dale Anne]

Ooops....meant to add, everyone could learn from you these days.

[Ally]

Congrats! That's really awesome. Thanks to you, a few months later, I started living this way too! We too have had our setbacks, but I just did a major refinance and it's going to allow me to get so far ahead!

[Leslie]

Other than our mortgage, we don't owe money to anyone. It is a huge piece of mind. But we don't have much of a cushion either. It we lost our income, it wouldn't be more than a month or so before we lost our debt-free life. That is my goal this year. Build a savings/emergency fund. I really need that. We're forgoing a lot of "fun" spending to do that. As much as I'd love a mid-winter beach vacation, we're staying put.

Thanks for the inspiration

[Terry]

good for you Sharyn. The only debt we have is the house and the cars. Paying off one car in a few months, the second car the first qtr of 2010 and hopefully the house then also. Tough times make me appreciate our position.

[tania]

go YOU! that's awesome that you don't have that added stress from his paycheck change.

[Colleen]

That's great! It's a great way to live and does make things less stressful in the long run! I have to thank my husband for being so good with his money and working together at all of this!

[marci lambert]

we're about to pay off the third of four credit cards this month. can't wait. the final one is more than i'd like but i think we can take care of it this year. and then i want to add more to the emergency fund. it really does feel good to take charge of this area of our lives.

[Janet Anne]

Thanks to you Sharyn, I paid off all our credit card debt in Dec '08 and got our mortgage principal down. It helps so much to have a Christmas fund and an emergency fund. I follow the pay US first rule. Thanks again.

[callie]

I am curious Sharyn, did you ever get a dishwasher yet.. not a human one.. and electronic one?

[Kris J]

I've been reading your previous posts on debt proof living. After I finished reading them, I ordered the book...should be arriving anyday. I'm sure I will have tons of questions after reading it. I have one now, how did you track every penny you spent? Just curious as my husband and I are about to start doing that. Thanks for the information...and the inspiration.

[Tonja Trump]

Way to go Torm! I'm about to get back on track with this this year as well..thanks for the inspiration!!

[Mindijo]

I bet that feels awesome! Yay for you guys!

[elizabeth]

way to go!

[pcsmart]

i would love to adopt this plan - but i just can't seem to get dh on board. it is frustrating for me but i have found a way to create my own "emergency fund" for the things the kids and i need when things get tight. keep us posted, this is fascinating and so informative!

[Alissa]

Hi there,
I found your blog while looking for some more information on Debt Proof Living. Your posts on the subject are great!! We've been following our own version of this system for a couple of years now, and although it seems like it would be confining, I've never felt so free. :) We started the Freedom Account for just the types of things that she talks about... Christmas, insurance, car repairs, etc. And we were using cash to pay for all of our regular expenses, like groceries, gas, etc. But then my husband suggested one day, why don't we just use the Freedom Account for ALL of our expenses? It seemed like a great idea, so we went ahead and did it - it's basically an envelope system. We keep all of our money in savings for the month (only putting enough in chequing to make our debt payments), and then use a rewards credit card to make all of our purchases. Each purchase gets deducted from the appropriate fund, and then when the credit card bill comes in, I transfer the amount owing from the Freedom Account over to our chequing account, and pay the bill. So in addition to all of the funds that Mary advocates, we also have a Food fund, a Gas fund, etc. These expenses are not fixed every month, so any money that we don't spend from the Food fund gets rolled over into the next month. This helps smooth out months that have 5 weeks in them, and also allows me a little extra money to stockpile when things are on for a good price. Same goes for gas, I pad our "Gas" fund when gas prices are lower, which gives us some wiggle room when the prices are higher. So basically, ALL of our expenses (except debt payments, which are fixed) are considered Freedom Account expenses. We even each have an Allowance fund, where we put our personal fun spending money for the month. I found it really simplified the system, by making all of the expenses Freedom Account expenses.

The only thing I've been trying to figure out is, what do you do with the 10% that you've been setting aside for your Contingency Fund once it's funded up to 6 months of your income? Do you just keep contributing 10% indefinitely? Or do you switch and add it to your debt repayment? Not that we're anywhere NEAR that point, but I like to plan ahead. ha ha.

Anyway, great blog, I'll be back again.

Take care,
Alissa