Debt-Free in 3: February Update

Part 15 Feb Debt-Free in 3

Welcome back to our Debt-Free in 3 series! We are almost a year into our financial goal of becoming debt-free within 3 years. There have been some definite strides in the right direction – but there have also been some setbacks and pitfalls. However, there are different types of setbacks. And this is what I want to talk about today.

  
 

SETBACK CLASSIFICATIONS:

 

Unanticipated/Unavoidable:

This is that “life happens” category where an established emergency fund goes a long way toward avoiding falling further into the debt trap. You know, like when you have best intentions to start socking away rainy day funds – but then scrape together every red cent you have for the downpayment on your home.

And then your only vehicle is totaled and you have to cover a $1k deductible. And the plates for your replacement vehicle snatch another $500 from your wallet. And the cold mountain winter in your new home results in a $1k propane bill. AND…And…and…

You get my point. It is way past time to set up that emergency fund. (And to make a plan for next winter).

Willful/Without Benefit: 

These are those avoidable and conscious decisions that take a gouge out of your budget. Is that third dinner out this week really necessary? Chances are that you could make something just as good – if not better – right in your own kitchen.

And unless you’re hitting a drive-thru, it will take you more time to drive to a restaurant, wait to be served, stuff your face and drive home, than if you had just made a quick weeknight meal at home. Prepared just the way you like it and for a fraction of the cost.

Not that everyone doesn’t deserve a night out now and again, but if you are trying to wipe out debt, be selective about your dining funds and avoid the spontaneous splurges. Most likely you won’t even recall the particulars of your dining extravaganzas by the time it shows up on your credit card statement.

When you are climbing out of that black hole named debt, anything that you don’t actually need or doesn’t benefit your future falls into this category. Minimize these expenditures for the sake of your future financial self.

Calculated/Big Picture:

The final category is the financial hits to your budget that will benefit your future. Lumped into this group are education and investing in your business. This one is different for everyone, some may choose the college route, for others it is learning a new trade, workshops, self-help tools or any combination of these.

Maybe you already know enough about your particular existing or future path to financial security and just need to invest in the right equipment/tools/products. Whatever course you choose to pursue, there will be both opportunity costs and financial costs to getting there. But if you have a sound plan and the tenacity to achieve it, investing in your future always makes financial sense.

  

OUR FINANCIAL SETBACKS:

So what type of setbacks that impede our progress to becoming Debt-Free in 3 have we dealt with lately? Well, all 3 of course!

Unanticipated/Unavoidable:

I finally finished our taxes this week, and once our refund is deposited, I plan to use a third of it to pay down a credit card, another third will be used for our second annual Vegas adventure with the Outlaw Bicycle Club, and the remainder will go into a separate account earmarked for emergencies.

This first winter in our mountain home was a learning experience. We didn’t have funds set aside for a thousand dollars worth of propane within 6 weeks. We didn’t plan on having to purchase a vehicle so soon after we closed on our house. And we didn’t plan on $500 to plate that vehicle.

Bottom line – we didn’t plan. Now that we are already aware of the propane costs, we can start putting funds aside for that and plan to get on a prorated monthly billing cycle. Likewise for the $2k annual water bill that is coming due in a few months.

Of course, now that we know about these particular costs, they should no longer be classified as emergencies. We need to budget for these expenditures as well as building a fund for true emergencies. The first step is to get them added to my financial spreadsheet and to budget for these funds as I would for any other bills.

Willful/Without Benefit:

Sometimes we are fiscally financial adults. And sometimes we just aren’t. I seem to have two money matter modes (say that 3 times very fast – and then 3 more even faster – it won’t make a genie appear and grant you 3 wishes, but hey, it didn’t cost you anything other than 30 seconds you will never get back).

Anyway, my 2 modes are 1) Budget Dictator and 2) Have Plastic – Let’s Go. Neither is ideal. I’ll go for weeks where I refuse to part with a dime and scrutinize every purchase my spouse makes. (He adores this version of me. Not.). And then I go for spurts where I completely ignore our budget and we’re on a dining out frenzy, booking getaways and decorating the house.

Consistency is key to busting out of the debt trap. For the next month I plan to keep a vigilant eye on the budget, but still have fun within reason. We are going to Vegas next month and Pagosa Springs for our anniversary in May.

Which means the short-term goal is to make it to June with our financial goals still on track. A public accounting – knowing that you are reading this – helps to keep me fiscally focused. My thanks to you dear reader.

Calculated/Big Picture:

We have plans. So many plans for the future. And some of these plans are going to take money. Eventually (many years into the future at this point), we plan to join the ranks of the working retired. In other words, we want to turn our hobbies into money-making ventures. To do this, we need to be fully operational long before we quit our day jobs.

Blacksmithing, engraving, woodworking and stone masonry are a few of our hobbies that can generate income once we invest in a few additional tools and the workspace. Knitting, spinning and weaving are also possible sources of revenue. And these are all hobbies that we are passionate about.

So although our goal is to completely obliterate all debt, part of our plan for financial freedom includes investing in our future.

And how was your month??

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