As I wrote about recently, my home remodeling project was over budget by $33k. As you can imagine our savings took a big hit due to this and we are a bit house poor at the moment. So this year we had to make some adjustments to our budget in order to pay down the remaining debt quickly.
Initial debt pay off strategy
At the beginning of 2013 our plan was to use all the extra income from any overtime worked to pay down the extra $18k that we ended up transferring to two 0% credit cards. However, the overtime hours were cutback extensively this year at work so we didn’t have that much extra cash to send to to our credit cards. We realized that some cutbacks had to be made to get us back on track.
How we trimmed our budget
We agreed that we really didn’t want to drag this credit card debt out more than two years if at all possible. So the first thing we did was take a good look at our budget. We decided that we needed to trim the fat out of it where ever possible.
- Eating Out: We usually went out twice a week to a sit down restaurant and spent around $75. Now we order take out and spend around $20.
- Allowance: We cut our bi-weekly allowance by $200.
- Clothing: We have avoided going out shopping for clothing. We have only bought the necessary items.
- Concerts: I love to go to concerts and attended a few in the beginning of the year but for the second half I did not buy any concert tickets.
- Vacations: We also take a vacation every year but we decided to forgo the vacation this year.
We have been able to trim $420 from our monthly budget. In addition, we have saved approximately $200 from concert ticket purchases and ~$2,000 from not taking a vacation this year. Given that we started trimming our budget in May we have had a total savings of $4,300. Unfortunately, we had a couple of items in the home that needed immediate replacement (more on that on a later post). Therefore, our total savings from trimming the fat out of our budget has really been about $3,000.
How we plan to pay off debt moving forward
By the end of the year we will be able to pay off one of the credit card balances entirely from our savings. Our plan is to transfer the remaining balance of our second credit card (~$8,000) to another 0% interest rate card. We receive offers all the time in the mail so we should be able to get approved for one. Then, in 2014 we plan to aggressively work on paying off that remaining debt. We believe this plan should put us right back on track for rebuilding our emergency fund.
Photo by: Flickr
Readers, what are some of your strategies for trimming your budget or paying down debt quickly?