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A Total Money Makeover Update
By DaveM | September 18, 2007
The Money Matters blog is LONG overdue for an update, so I’ve decided to share where we’re at with the debt reduction plan we started back in March 2006.
Before getting into that, let me first apologize for hardly blogging over the past few months.
Honestly, I have no excuse other than laziness and procrastination. 
I suppose I’ve become one of “those” bloggers I dislike… You know, the ones that get pruned from your RSS reader list every so often.
If you’re reading this, I guess I should consider myself fortunate for having made the cut thus far.
Anyway, just to refresh your memory, here are a few links going back to March 14 when I first started posting updates about our dismal debt situation and the plan to remedy it:
- March 14 - Financial Troubles…
- March 16 - Membership in Credit Card Hell
- March 20 - Let the Debt Reduction Begin
- July 20 - Killing the Debt, Slowly but Surely
I’m proud to report that, even though I haven’t been blogging about it, we have been sticking to our debt reduction strategy. In fact, the original plan was to reduce our debts by $1000 per month. At first, that wasn’t happening but in the long run, we actually exceeded it without really thinking much about it or trying very hard.
Let me break down the numbers for you…
Here’s where we started:
March 2006
$16,000 credit card debt
$ 9,200 car loan
As of August 2007 (current)
$4,150.00 credit card debt
$ 0.00 car loan - PAID OFF!
So, in 18 months, we reduced our original debt load by $21,050 which comes out to $1,169.00 per month. Not too shabby for a lazy procrastinator, eh?
In addition to that, the following events also occurred during the same 18 months:
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1) Purchased another used car for $1,500.00. It’s a ‘94 Chevy Lumina owned by a little ol’ lady and it had 20,000 original miles on it. Needless to say, it was a deal we could not pass up!
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2) Caught our daughter getting into a credit card jam and we bailed her out by paying off $1,400.00 and cancelling her cards. She’s now paying us back $100 per month with zero interest. Have I mentioned how much I hate going to a store and hearing, “Sir, would you like to save 10% today by applying for our credit card?” ARGH!!!!
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3) Even though we stopped most of our investments during this debt reduction phase, we continued to contribute to our 401K’s at work. So, we added a total of about $12,000.00 combined to our accounts since March 2006, but they increased in value by another $8,500 or so all by themselves.
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4) Our other investment accounts (ROTH IRAs, SIMPLE IRAs, brokerage account, etc), even though we haven’t been adding to them out of pocket for 18 months, increased in value by 20%.
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5) Just this month had LASIK surgery at a cost of $3,500.00 for both eyes. I’m extremely happy I went through with it, but I did not want to take on this additional debt right now.
On a somewhat positive note, we financed it for 12 months at zero percent interest. Still not ideal when you’re trying to get rid of debt but — I CAN SEE WITHOUT GLASSES!!!
The $3,500 won’t actually “show up on the books” until next month, so it obviously sets us back a bit with the overall numbers. However, once the $4,150 credit card balance is paid off (in ~3 months), we then add that $1,400 monthly payment to the LASIK bill and it should be paid off in full by this coming January.
In light of everything mentioned above, our net worth over the past 18 months has increased by a total of 21.73%.
Now, one thing you’re probably wondering is why we continued adding to our 401K’s when we could have used that $12,000 to be completely out of debt by now (except for the mortgage of course).
Well, that’s a darn good question!
First, as you know, 401K contributions are pre-tax money, so it wouldn’t have been a full $12K in our pockets.
Second, I couldn’t stand the thought of not getting the company matching contributions. To me, it’s just silly to leave free money on the table. So, we contributed enough to get the full match from our employers and left it at that.
And third, the credit card debt is on a zero interest card, so it’s not costing us anything to make payments.
So… If you’re reading everything in this post and thinking it all just sounds impossible, let me assure you — it is VERY POSSIBLE!
Honestly, the one thing that gave me a much needed kick in the pants and motivated me to stick with it was just one book — “Total Money Makeover” by Dave Ramsey.
I’ve read many other books and studied quite a few debt reduction strategies. The beautiful thing is, they all work if you just follow the instructions and stick with it. In Total Money Makeover, Dave Ramsey puts it all in the simplest terms possible. He talks to you straight, and makes a whole heckuvalot of sense.
If you’re fortunate enough to also pick up his radio program in your area, I highly encourage you to listen in for added encouragement and motivation. Check out DaveRamsey.com for radio stations and show times.
If you’d like to explore other great debt reduction programs, I also endorse Transforming Debt Into Wealth, by John Cummuta. and How to Own Your Paycheck Again by Leo Quinn.
PLEASE don’t get caught up in “analysis paralysis”. Either get Total Money Makeover, or one of the two programs recommended above — and START DOING SOMETHING TODAY!
While you’re working on your own debt reduction plan, it also wouldn’t hurt to (re)program your brain a bit. Having the wrong thoughts, beliefs and habits is probably the number one reason most people don’t succeed long term with their finances. Read more about this special little “brain hack” I use…
In other news, I started a new job two months ago for a really BIG computer company (name withheld to protect the innocent). Of course, that increased my take home pay a bit and added some other nice benefits I didn’t have before.
I also work from home now which is out-freakin-standing! The only downside is the job is 100% travel. In other words, if I’m at home, it means I’m not really working. However, there is a lot of downtime - so basically, I work hard and then play hard too.
The plus side of that is that I see my family a whole lot more now than I ever did working in Dilbert land!
Until next time… Expect Success!