Our first victory
What a month! Christmas, a birthday, school break, and a New Year’s resolution to save more than we ever had before!
The kids were excited as they had presents nestled under the tree from Grandpa’s, Grandma’s, Uncle’s and Aunt’s. We live on the other side of the world from the rest of our family, and sadly, this year we had no visitors occupying the spare room or the pull-out sofa. It was just us for Christmas. This was a first for us.
Since moving to a new country back in 2017, our little family has grown accustomed to being away from family for extended periods of time. Traveling back to Oz in May was a great chance for us to get our fix of family and friend time, even though the circumstances for our travel were pretty crappy.
It was a quiet time of year, and it was also the time of year that marked the creation of the all hallowed spreadsheet, destined to guide us to greatness in 2020. Before creating the spreadsheet, we had kind of mapped it out in our heads for how much we owe on various debts. However we never really knew what was possible for a repayment schedule or which debts should take priority.
Our first step in actioning our plan was to list out all of our debts, including those to family members, from smallest to largest. To follow the snowball method of debt reduction we should attack the smallest debt first and work our way down the list. This was largely the process we followed but we did swap a few items around to better suit our circumstances.
Having our debts written down in black and white right there on the screen was eye opening to say the least. We had managed to owe a total of $55k, excluding mortgages. This included a car lease (Dave Ramsey hates leases), a maxed-out credit card, and two loans with family members – one dated back to 2017 we used toward our wedding!
After we wiped up the blood from that punch in the face, we set our sites on figuring out a budget that would work for us. To give us an indication of what we usually spend, we dusted off our expense tracking app that we’d downloaded a long time ago and used for a few months (and then stopped using it… I know, shame on us).
The app we use is Mint by Intuit Inc. and it connects to your bank accounts to automatically place your expenses into different categories. It’s the only expense tracking app we have ever used. I know there are literally oodles of apps out there now that do basically the same thing, but Mint seems to do the job just fine for us. What expense tracking apps have you guys used before? Let us know some of the pros and cons from your perspective.
Mint was already connected to our accounts from many moons ago when we “tried” to use it, so refreshing it was a breeze. Some of the spend autocategorization was a bit off, so we had to manually change the type of spend for a few items to ensure it made sense.
We only went back as far as November for the category reallocation exercise and this gave us a good look at what a “normal” month of spend looked like for us.
Seeing what we spent in certain areas helped us design a budget and repayment plan that would work for us. We created a “Budget” tab in our spreadsheet and listed all the major categories of spend down the page, with our debts at the bottom.
Using the November spend profile in our Mint app, we were able to carve out a budget in our spreadsheet for the full year, broken down into each pay period. I will note that just because we spent an amount in November doesn’t mean we should have. We used this exercise to cut out the crap to give us a realistic (but still a stretch) budget for 2020.
Whatever our budget said would be left over each pay was the amount we’d throw straight at our debt. No more “pay a little bit and take forever” method. We wanted to knock it down fast.
In doing this, we had our “Aha” moment where we realized just how much we could save over the course of the year if we stick to this budget we’d just developed. This is where we discovered we could save 60% of household income. Challenge accepted.
With our goal in sight, the first on the chopping block was the beloved credit card bill. The 20% annual interest rate was the reason this bad boy rose to the top. Throughout the month of December we managed to dwindle down the outstanding balance to zero. And boy were we proud. What a perfect way to end the year, feeling good about our first financial win!
Bring on the New Year as we keep this snowball rolling.
Blake & Allanah - FIRE with a Family