When we set up our spreadsheet to examine our spending, we used categories like “Lunches,” “Gasoline,” “Groceries,” “Clothing,” “MBNA Mastercard from Hell,” “Providian Visa from Hell,” “Miscellaneous Household,” “Car Insurance,” “Life Insurance,” “Car Payment,” etc. We could see where our money was going during a two week period. As I mentioned, the results were disturbing. We were spending around three hundred dollars a month eating out at restaurants for lunch and dinner, several hundred dollars a month on the servicing of credit card debt, and we discovered a lot of money that was just going into thin air on Dr. Peppers and Mountain Dews that we purchased with gasoline and other frivolous items. All told, at least 25% of our income was being spent on essentially nothing. When we went to the grocery store, we just walked through picking up whatever we wanted at whatever price! We were just clueless.
Our first step was to start limiting our lunches to once a week and our dinners to once every two weeks. We also decided to discontinue expensive dinners at places like Outback Steakhouse or lunches at boutique joints downtown. This alone freed up a lot of money to shift over to paying down the worst debt – credit cards. Think about this: four lunches a month at $8.50 equals $34.00 per month and $408.00 per year. Our credit cards ranged from 18% to 9% interest rates. We began paying these off aggressively, even using our Christmas bonuses and tax refunds to whittle the balances away. Since we worked in the same building at the time so we also began carpooling together in our car that got the best mileage. This led to some quality of life improvements. We listened to NPR or the news channel and discussed events. We decided to start eating in the office at lunch. We made sandwiches and ate leftovers from the new meals we were cooking. My husband lost about 10 lbs. just because he wasn’t eating Chinese buffets and fried chicken at lunch three or four times a week. Something thrilling happened in our new spreadsheet…
(Stay tuned for Part III)
Tags: Getting Out of Debt
We did the same thing- wrote it all down and realized a large amount was just being “blown”- nothing to show for it. For us- that’s when we started using the envelope system.
We have a similar envelope system. While it’s not an actual envelope, we do have sections in our budget spreadsheet to set aside money for expenses that will be coming up. It works great for us so that we’re not overwhelmed when some big expense comes up.