Today I have decided to set another set of goals for us. Primarily, I need to put at least $350 into savings for the month of June in order to reach our savings goal. I also need to determine how much extra I want to pay towards student loans each month. The graph above shows the tiny bit of progress we made already just by making our regular June payment. Only $15 of that payment was applied to the principal, but we will definitely see more progress by the end of the month as soon as we figure out our bonus payment.
As far as savings goes, Jason and I are working on increasing our monthly income so that the $350 savings won't have to come out of our regular monthly budget. I know many people, us included, don't just have that money lying around.
The first step in this process was looking at our budget and determining places where we could be saving more, which I did last week. Eating out is our biggest weakness, and we have taken steps to reduce that portion of our budget drastically. I will admit right now that we don't plan on giving up all of our eating out budget, just cutting it back. I think of sticking to a budget a lot like sticking to a diet, cutting all of the foods you enjoy out of your diet leads to a very low success rate. We need to give ourselves a little bit of a treat once in a while to reduce the stress that extreme dieting and/or budgeting puts on us. As long as you can keep yourself on track 99% of the time, it's okay to make an exception once in a while. In fact, it can help you keep things in perspective and stay motivated.
Our second big weakness is the amount of things that we charge to our credit card every month. Generally this card is only used for Jason's lunches or if he stops to get a drink during his work day. He is on the road much of the day and in a small van, so he doesn't have a convenient way of keeping fresh food or cold drinks with him. Unfortunately, since we haven't paid the card off in several months, the payments we have made have just kept us even, they haven't done anything to reduce our balance. In order to combat this spending, we have put the card away and Jason now has a cash allowance for these sorts of purchases. Now instead of having a $300 budget to spent at will, he now has $20 a week in cash. There are a couple of ways to handle this. 1) I just give Jason a $20 every Wednesday because that is the beginning of his work week. 2) In the past we resorted to using envelopes with each day of the week written on them, and a $5 bill in each one. Once again, this seems a little elementary, but it can go a long way towards monitoring your spending and preventing you from going over budget. Once the cash is gone, you can't keep spending it.
When it comes to increasing our monthly income, we started with me going back to work. This was actually a huge ordeal for us because childcare is so expensive, I had to really work to find a job that paid a minimum amount per hour that would pay for daycare and still have enough left over to make it worth my time. The other half of the equation was finding a babysitter who is in our immediate vicinity so that there isn't any extra travel to and from her house, plus she only charges us $20 a day to watch Logan. There are a TON of stay-at-home-mom's who are up for making an extra $60 a week or so to watch your kid since they will be home anyways. They typically charge less than a daycare center, and tend to be much more flexible with weekends and early mornings (which is a requirement for my job). At the end of it all, I will really only be making about $200-300 a month after paying for the babysitter, but that can go a long way towards our monthly savings goal, and won't cut into our original budget from Jason's paychecks. (The only issue is that I was forced to use one of those stupid ADP pay cards until my direct deposit goes into effect, and their system can't validate my identity for some reason, so it is acting as a savings account temporarily until I figure out how to get my money off of the card. *sigh*)
The second half of our plan to increase income is renting out the basement of the house we are moving into. We had planned on setting up our computers in the basement where it's cool, and using the larger open portion of the basement for Logan's toys. However, we have several friends looking for a place to live for a while, and in general people are paying up to $600 to rent a basement with a private bathroom. I don't expect to collect $600 a month since the basement is only partially finished, but anything above $300 is a significant dent in our rent and utilities. Having roommates is a pain sometimes, and some people just don't have the ability to house someone else, but we made the decision to give it a shot for a while and see how it goes. Even if it only lasts for a few months we can apply that extra money to loans and come close to paying off the smallest ones.
I would like to apply at least $100 extra per month to our student loans on a permanent basis. This will cut 5 years off of our current payment plan. If I could manage to put $250/month extra toward the loans we could cut an additional 3 years off of our payments. I don't think we can commit to $250/month until we reach our savings goal though, so I will settle for $100 in the short term. The thing is that even if you can't commit $100 extra per month to your loans, any amount makes a difference. In the past I have resorted to rounding our loans up to the next $5 increment just to be putting a little something extra in. The fact is, that extra $3-4 was going to be spent on junk food or something irrelevant, so putting it towards the loans does help. If you haven't already looked at the snowball spreadsheet and played around with it, there is a link in my previous post: Week 1 Goals: Update & Helpful Links. This will give you a month to month update on all of your loans and their balances along with calculating interest.
Following this post I am going to make another post about the specific methods of applying your bonus payments to your loans. There are many little details and secrets about this process that could keep you from paying down your loans effectively.
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