First the bad news

July and the beginning of August saw us saving less money than we did earlier in the year. Several factors contributed to the slowdown:

1. I started my tooth repair marathon. Yesterday I had a $1000 crown put in; next Friday, I'll have four cavities filled to the tune of several hundred dollars.

2. About two weeks ago, I began to experience short-lived but regular episodes of sharp chest pain. After several visits to the doctor, two EKGs, a comprehensive blood workup, and a test in which I was forced to down a strange mixture of antacid and local anesthetic (yuck - not a drink I recommend ordering up at the local bar), I was diagnosed with GERD (gastroesophageal reflux disease) and put on Nexium. The Nexium costs $162 a month even with my insurance co-pay (I'm working on finding a less expensive alternative).

Anyway, the medical bills definitely caused some hemorrhaging from our bank account.

3. We've been a little less frugal lately. I wouldn't say we're being wasteful - no shopping sprees or anything - but we've been going out to eat more than we were a few months ago. We need to get back to planning out our meals at the beginning of each week.

4. One of our major contracts came to an end. We've found replacement work, but it requires more effort and better time management.

The good news is this:

1. I'm developing a healthier diet to help quell the acid reflux. I'm working on cutting out most alcohol and fatty food. I've already lost some weight as a result. By the end of the year, I hope to achieve my ideal body mass index.

2. I now know that acid reflux catalyzed the formation of my recent cavities. By changing my diet and maintaining good oral health, I hope to avoid expensive dental visits in the future.

3. We haven't taken anything out of the emergency fund (yet).

4. At least we *have* work. I don't always love my job, but at this point, who cares? 

5. Although our savings account is stagnant, we've continued to put money into our 401Ks via automatic deposit. Automatic deposit is the best thing ever. Without it, I doubt we would have saved as much as we have.

$282

Bad news: That was the price of the urgent care visit I made in January, when adult-onset allergies (which I'd not known I had) knocked me out for a good week. I received the official bill today. Of course, my ultra-basic insurance plan did not cover it.

Good news: We will be able to pay for it immediately with real money - not the credit card. I'm not sure if we will have enough in our checking account, but if not, we can pull some over from our savings account. I hate touching the savings account, but it's much, much better than the alternative, which is what we would have had to do a year ago when we had almost no savings whatsoever.

The bill doesn't make me happy, but this sign of progress sure does.

Trent: Crunching the numbers

The other day ,The Simple Dollar asked, do you want to be rich?

Well, it would be nice not to have to work at all, but the most realistic thing I could think of is that it would be nice not to have any debt. We would still need to work, but we would have more freedom to pick what we do with our money. It made me run the numbers:

Currently, our outgoing expenses (excluding 401k retirement savings) are about 83% of total incoming (after tax) money. At this point, we are sending out more than that because we are trying to pay off debt as fast as possible. So, in a way, we have the freedom to pick what we do with only about 17% of our money. If we had no debt (no credit cards, student loans or mortgage, our outgoing expenses drop to about 35% of our total current incoming money. So we would be able to choose what to do with about 65% of our earnings.

We have made some progress. At some point in early 2008, just about 100% or more of our incoming money had already been spoken for before it got to our bank. Now more of that money is ours. We are learning to be frugal and paying off debt because we want more freedom to choose what we do with our time and money.

-Trent

(Not) Afraid to Look

A couple of years ago, I didn't know where we stood financially. I was clueless. I could only vaguely recite my credit card balance ($3000? $4000? Somewhere around there...). I had no idea what Trent owed on his cards. I couldn't have told you what my school loans looked like. To be quite honest, I wasn't even sure what our average monthly expenses were - which might explain why, on several occasions, our checking account dipped into the negative numbers.

I finally started to get a handle on our finances when we began shopping for a mortgage on the house we now own. The bank needed to know where we stood, so therefore I needed to know where we stood in terms of both our debts and our earnings. I became even more interested in this when we came up with our sailing goals.

Taking an honest look at our finances was painful. Deep down, I'd always known we were dabbling with debt, but seeing the numbers - large, red numbers - on a spreadsheet made it a reality for me.

Admitting we had a problem changed how we handled our finances. In the last couple of years, I've gone from being a fiscal ostrich, always burying my head in the sand, to being a fiscal owl who peers at the family accounts on a regular basis. Every day, we stop by our checking account, savings account, and credit card accounts, just to be safe. At least once a week, I look at my school loan website. And every Saturday, Trent and I pull out our debt spreadsheet and fill in how much we currently owe on 1) each credit card, 2) each school loan, and 3) the mortgage. Sum up those columns and, yes, the number seems colossal. But we've also seen those numbers decrease significantly in the last six or seven months, and that motivates us.

Additionally, we've made an effort to start cataloguing our regular expenses. We've tried to calculate how much we spend per month on water, gas, electricity, groceries, Internet access, and fun stuff like going out to eat (more on how well our fun budget is working in an upcoming post). Our exact monthly budget changes, but getting a general estimate allows us to have a better idea of how much money we can expect to put into savings and debt relief. 

I'm not always pleased with the amount we have in our bank account or the rate at which we're reducing debt, but one thing's certain: having the courage to look was the first step in getting the numbers to go in the right directions.

Hey! We've got comments! And a cold!

I logged in today and was thrilled to see comments on some of the posts we made last week. It's exciting! I wasn't sure anyone would read this. It makes me eager to post even more (if you can't tell by the ratio of my posts to Trent's posts, I'm the one in this relationship who can't seem to shut up).

This week, Walgreen's has consumed a nice little chunk of our (dwindling) checking account. I woke up two days ago to the cold from hell: chest congestion, nasal congestion, sinus congestion. Sleeping was so impossible last night that I didn't even bother. I stayed up until 6 a.m., ate some cereal, rummaged through the pile of medicine we purchased in the last 24 hours, found something that contained a sleep aid, and took a nap. 

The winter colds we've suffered in our family are good reminders to have some emergency cash in the bank just in case. Granted, this doesn't really qualify as an emergency, per se (though I've had moments when I felt like I might keel over and die as I try to get some air into my clogged lungs), and Walgreen's brand drugs aren't exactly expensive, but what if it hadn't been a cold? What if someone had broken an arm or a leg? What if the cold were to turn into something that required a doctor's visit? Last time I checked, our doctors charge around $200 per checkup (and of course, our insurance doesn't cover any exams outside of a yearly physical).

Trent and I talked this morning about putting more into our savings account. We are both concerned about the seeming inability of the economy to get back on its feet. We worry that five or six months from now, our contracts might stop rolling in, the offers will dry up, and we'll be in a high-stress financial situation. Putting more into savings means paying less to our credit card company (we've been paying more than the minimum), which under normal circumstances doesn't make sense. In the future, though, we may have greater concerns. Like paying our mortgage.

People talk a lot about savings accounts and how much money to put into them. Financial guru Suze Orman has said it's a good idea to sock away enough to cover eight months' to a year's worth of living expenses. I'm a little embarrassed to say that we are nowhere near being able to do that. We pay ahead on our mortgage, but if the job train slowed to a crawl, we would be in trouble. 

We'll need to take another look at how much we've been handing to the friendly Visa and Mastercard companies and see if we can make any adjustments. Of course, now that we've given up our tricked-out cable package and a monthly prepared meal service, we can send that cash right to the bank. I can't wait to see how our recent efforts to live more frugally will pay off in the long run.

-Susanne

Goals for 2009

We have a few fiscal and sailing goals for 2009. Given the unstable economy and shaky job market, we've decided we need to make the most of our current employment contracts and earnings. For us, 2009 is all about frugality, saving, and laying low. At the same time, we will continue to hone our sailing skills so that we can gain confidence and be prepared to take more advanced sailing lessons in the future.

Fiscal goals:

-Pay off Trent's last credit card.

-Put at least $75 a month into our cruising kitty (for a total of at least $900).

-Once the credit card is paid off, bump up our monthly student loan payments by $50 each.

-Stick to a "fun budget" of $150 per month - this budget covers things like going out to eat, coffee runs, alcohol, and babysitting expenses.

-Put 15% of earnings into our retirement accounts via automatic draft.

Sailing goals:

-Sail at least six times this year on the local lake. We do not own a boat, so we will need to put money aside to rent one.

Frugality goals:

-Go to the grocery store just once a week, instead of 2-3 times like we used to.

-Start using coupons when we go to the grocery store (our local Kroger actually lets us "load" the coupons onto our customer cards - no need to carry around paper ones).

-Distinguish between wants and needs: we need to pay for doctor's visits; we do not need new hardwood floors.

-Continue to look for free activities around town: the park, our running group, etc.

The beginning of the dream

Our goal is clear. We want to pay off credit cards, school loans, and maybe even our mortgage so that we can buy a boat and, in five or six or seven years, sail: down the Intercoastal Waterway, to the Florida Keys, on to the Bahamas, and maybe even beyond.

If you look at our goal from a traditional perspective, it seems pretty crazy. We both have college degrees. We both work (a lot). We have a child. And bills. We're not rich. Shouldn't we dig in for the long haul, make enough money so that we can retire comfortably, send our kid to college, become grandparents, enjoy our golden years, and then, well, die? Isn't that kind of what we've been training ourselves to do?

We've tried hard to get enthused about this well-worn road, but both of us feel the urge to do something different. We've both had so many adventures - hiking the Appalachian Trail, backpacking in the Alps, living in Korea, camping in the deserts of the Southwestern U.S. - that we're addicted to the high of getting off the beaten path.

We've been focusing on this goal for less than a year. Last May, just after we'd purchased our house and moved in, Trent and I found ourselves wondering, Is this it? Are we going to be sitting here in front of the television in 10 years, doing the same thing? In 20 years? Sure, maybe we'll take some vacations, get a raise, upgrade to a larger home at some point, maybe buy some land...but where's the adventure?

That's when Trent said, "We should do something different. We should... sail around the world! Why not?"

That surprised me. Trent's usually a realist. I'm the crazy one with the cockamamie ideas, and such a thing had never even crossed my mind. I said, "But we don't know how to sail. It's dangerous. It's expensive. And we have a lot of debt, debt we won't be able to pay off for...forever. That's impossible." After all, we'd racked up a lot of credit card debt in the eight years we'd been married, and the balance remaining on our school loans seemed absolutely colossal.

The idea stuck with us, though, and the more I thought about it, the more it appealed to me. We came up with a tentative plan that started to look more and more realistic and doable: learn to sail. Go out to eat less, purchase less, spend less on things we don't need, distance ourselves from consumerism, and put more of our money into savings. With every day that passed, we became more devoted to this self-imposed pilgrimage to find and live out our dream. The beauty of it? No matter what, we'd be better off in five years - not just financially, but as a family, too, because we'd know how to work together in an effort to achieve a common goal.

Between May and December of 2008, we managed to...

-Pay off more than $12,000 in debt, including both of Susanne's credit cards

-Learn how to sail - Trent and I both earned our Basic Keelboat certification in September

-Set up 401K plans

-Put money into a "cruising kitty" - an account we're using to save up for a boat, which we hope to purchase outright, no financing

I'm convinced that without keeping our dream in sight, we would have never accomplished so much in such a short time. 

We're not especially unique people; we're not the kind of folks you'd really pay much attention to if you saw us at the local park or the grocery store. We're average. We both work from home. We both parent our 2-year-old son. We both run. We're a normal family with a middle-of-the-road income. But we don't buy into the idea that anyone has to live a typical life if he or she has a hankering for something more atypical. And neither of us believes we should be slaves to money, as we have been for a good long while by now.

The more we work toward our goal, the freer we feel - little by little. We're confident we can make our sailing dreams happen, but if for whatever reasons we do not, we're confident we'll be better off for this effort.

-Susanne

Coupon trap

Don't fool yourself into thinking your are always saving money by using coupons. A 50 cents off coupon on a brand name cereal may bring the price down to $3 a box. You are spending three bucks not saving fifty cents. A store brand cereal that tastes just as good maybe selling for two bucks. Spend two bucks, don't "save" 50 cents.

-Trent