Monday, January 05, 2009

Budget Journal

I think every Monday and throughout the week I am going to blog about our life while we learn to live on a cash budget. That is right, no more plastic for us and no more loans. I have learned something very important over the past few months, and that is that no one talks about money problems. They are more then happy to talk about being rich, and having enough, but you don't see people out there saying, "Yeah, I am in so much debt it is ridiculous" or "man, I don't have enough money for this or that". Money has become such a taboo subject, like sex and religion.

I have decided that the more we talk about our situations, the more we can learn from others and hopefully teach others too.

I may sound crazy, and people have already told me that, but I am so excited to be where we are right now as a family. We have started living on a cash budget and have also signed with a debt repayment program.

We are not in extreme debt like many families today, but when you can't pay your bills and you are dodging creditor phone calls and you fight constantly with your spouse, there is a problem.

So, we went to a counselling. Credit Counselling and that was the best thing we have ever done. I am so excited, have I already said that?

We sat down and worked out or living expenses. The housing ones, the variable ones, work ones and personal expenses. We also worked out our income, all of it. So that included work pays, baby bonus, and anything at all that comes into the house.

Then we subtracted it all and I was shocked that we were spending $200 more a month then we earned. Right there was a huge problem and explained why we were continuing to go into debt more and more.

We talked about how much debt we had and what was our best option for cleaning it up. We weren't far enough in to justify bankruptcy, and a consumer proposal would help, but we would have bad credit - which wasn't worth the little debt we had. So, we decided to do debt repayment.

Basically, we have a worker who deals with all of our creditors. She talks them down in interest, usually to 0% and works out a percentage that she will pay them back. It makes sense to me!! So, we have a monthly payment to the counselling centre and they take care of the rest. The phone calls and letters stop coming in and we all live happier!! It is a 5 year program and we take a lower credit rating for the time that it takes to pay it off plus 2 years. We are not allowed to have any credit at all...including loans and credit cards...we are hoping to pay it off earlier then 5 years though... order to get there, we had to change our budget to reflect that monthly payment amount. Which meant, finding an extra $500 a month...from negative $200 a month. I find this stuff fun...that is why people think I am crazy!!

So, I have 2 jobs now. They are just small paying jobs, so I claimed a very small monthly income. I really make more then I claimed, but I wanted to play it safe and be able to do this for real. It is going to be 5 years of my time and so whatever we did it had to make sense to us.

We were not allowed to change our personal expenses. Our worker thought that we had already budgeted a too small amount, and the fixed expenses would not change. So, we started with the car.

We have a van and a car. I am only a G2 driver, but I have to be a primary driver on one, so I called our insurance agent and was floored by how much we spent on insurance. $135 was being spent on the second vehicle, because of my license...hmmm...We took the car off the road immediately and joined the ranks of a single vehicle family. Which is working so far. In the end, we actually saved around $160 because we have an awesome agent!!

With my income of $150 and the insurance savings of $160 we had to come up with another $190 worth of cuts. That meant, tv going back to basic cable, we can't just get rid of it...being realistic. I dealt with our internet company and got a much better and cheaper deal from them which also meant that our phone bill was going down, since it was all bundled.

We cancelled our cell phones and added the penalty to the debt repayment. First we tried selling our contract to someone else through The Cellout website. It didn't sell, but it was a good find...and people didn't know about it...

We also added our house insurance to our car insurance and saved a bundle there!! We were able to come up with and extra $543 a month. Just by cutting little bits here and there. The vehicle expenses were the biggest to be saved in. Between maintenance, licensing, gas, insurance...there was a goldmine being thrown away...just to have that extra car!!

So, our program has started and now every pay we take a certain amount of money out. Some goes to our other bank account to cover the upcoming expenses, like the pool, renewing our licenses, medications, dentist visits we will have the money for those when the expenses arise. No more scrambling. It is easy to do by working out the annual cost - license, $75 and divide it by 12 months, so we now put aside $7 a month towards that bill and put it in the other account.

My next post is going to be about how we are cutting back in our grocery department...because with a big family, we need to be creative with food and eating healthy.


  1. good for you Ruth, it's exciting just to get started when you know doing this will change everything!

  2. Good for you and your family, Ruth! We have a lot more debt that I'm comfortable with. Considering the current economy in the U.S., we're in a scary place. It helps when you have plan to get out of it! Hope goes a long way in a tough situation.

    I look forward to reading about this!