The Starting Point

The Goal

My goal is to payoff $89,000 of debt by May 2014. A noble aspiration, but it’s pie-in-the-sky until there’s a plan to back it up. That’s quite the hole that I need to dig myself out of.

How Deep the Rabbit Hole Goes…

Here’s all of our liabilities laid out on the table:

Honda Civic: We bought this 8 months ago in August. We made a $1500 down payment after cashing in on Rachel’s government bonds that her grandfather had purchased annually in her name. Rachel had never owned a car before, and she had just gotten hired for a new job. Although we work in the same town and had considered carpooling, we decided that my schedule as a band director didn’t really lend itself well to this. I put in many 12 hour days in the fall, and often had after-school commitments, whereas Rachel was working 8:00 – 4:30 every day, no matter what. Let’s put it this way, for 3 months I was the first employee to arrive at school in the morning, and the last to leave in the evening.

Rachel’s Dept. of Ed. Loan: Rachel consolidated whatever student loans she had into a lump sum. The other 62k in student loans on the chart belong to yours truly.

Scion xB: 0% loan, that’s incredible! Actually, what’s incredible is my family members’ generosity. Last spring, my mother didn’t want me making the 65 minute student teaching commute in the old sagging-bumper, leaking-oil mini-van. With a combination of her funds and my brothers national guard stipends (thanks tax-payers!), they loaned me the money to purchase the car with cash. As long as they are doing ok financially, I’m going to focus on hitting the high-interest debt and leave this one sitting.

Frost Bank Loan: Yes, that is exactly what it looks like. A $24,000 student loan with NO INTEREST. Kudos to my mother for talking our family’s long-time bank into investing in my future in a big way. Obviously, this will be the last debt that I tackle.

Monthly Expense Budget

Here’s a typical summary of our regular monthly expenditures, ranked from highest to lowest:

  • Rent: $684
  • Student Loans: $667
  • Tithe: $587
  • Groceries: $500
  • Fuel: $257
  • Car Insurance: $215
  • Misc: $200
  • Auto Payment: $182
  • Auto Repair: $150
  • Dining Out: $90
  • Electric: $74
  • Cell Phone: $64
  • Water: $58
  • Running Expenses: $50
  • Gym: $32
  • Internet: $31
Total: $3,841/mo or $46,092/yr

Tithe: I was brought up in a family that gave 10% of its income to the church because it was the right thing to do. Now that I’m on my own, it’s harder to make that decision while my wallet is being pulled in all different directions, but it’s something that I still feel very strongly about. Whatever changes I make to pull off the 2-year goal, it will not involve accessing this huge chunk of change.

Groceries: Could we live on less? Sure we could, but Rachel is big into cooking and experimenting in the kitchen, so for right now I’m content to spend a little bit extra and eat like a king. That being said, we always look for ways to get this lower. For instance, we’ve essentially become vegetarian. No, I didn’t toss in my man-card, it was just a way to reduce cost. Also, we’re still new to the whole buying groceries together thing, and as we get more efficient this expense will go down.

Misc: This category is a sort of catch-all for minor necessities, entertainment, and shopping. It does not include dining out, which has its own category. I’ve considered taking out clothing from “misc” and giving it an individual line item, but for now this has been working well for us.

Running: Rachel loves to run. 10k’s, 15k’s, half-marathons, marathons… you get the picture. This means registration fees, new high-end running shoes, energy gels, and other accessories.

Short-Term Saving Goals

In addition to regular expenses, we have a few short-term savings accounts that we contribute to on a monthly basis.

  • Health Deductible: $300/mo – $2,400 goal / $682 remaining
  • King-Size Mattress: $50/mo – $1,000 goal / $530 remaining
  • Bicycle for Aaron: $200/mo – $600 goal / $600 remaining
Total: $1,812/yr

Health: We chose a HD health plan because it’s WAY cheaper in the long-run. The catch is that they make you eat a $2400 deductible before they help with ANYTHING. Do we plan on getting seriously ill or having major medical expenses? No. The insurance is solely to cover extreme emergencies. Once we save $2400 then the $300/mo can be redirected elsewhere. We each have our own individual plan with individual deductibles, so assuming we don’t make simultaneous ER trips I think this plan will work out nicely.

King-size Mattress: We’ve got to improve our sleeping situation. Our Full size mattress was acquired from a friend of a friend of a friend that was moving out and couldn’t take it with them. The springs offer no support, there’s a Grand Canyon-esque sag in the middle that forces us to get cozy, and my feet hang 12-inches over the end. With better rest comes better productivity during the day, so we see this as a solid investment.

Bicycle: In July we’re planning on relocating to an apartment complex close to our jobs. This would significantly lower our vehicle expenses and enable both of us to walk or bike to work. I’ve outgrown every bike I ever owned, so it’s time to invest in a quality set of wheels.The $600 investment will quickly be returned by the savings we’ll get on travel costs, not to mention the health benefits.

Summary: Regular expenses of $46,092/yr + Savings goals of $1,812/yr = $47,904/yr in planned expenditures.


After taxes and other deductions, we’re left with $4,447/mo in take home pay from our day jobs, or $53,364 annually. If expenses remain consistent that’s a net gain of $5,460/yr or $455/mo. Assuming the $89,000 sink-hole I’m in stays the same (which it won’t) I’m on track to knock it all out in a solid SIXTEEN YEARS! Holy debt-crisis Batman!

The Plan

Simply put, there are two ways to change my situation:

1. Slow the rate of the sink-hole growth (Cut expenses)

2. Get a bigger shovel (Increase revenue)

I’ll get to the cost-cutting measures in my next post, but for now I’ll take a look at the revenue part of the equation.

The Shovel

Phones: In November, I started a business where I buy used cell-phones on Craigslist and sell them on Amazon. It was slow going at first as I built up the necessary capital, but it’s started to cash-flow nicely. Here’s a quick month-by-month summary:

Nov: $127 profit

Dec: $619 profit

Jan: $317 profit

Feb: $392 profit

March: $783 LOSS.

Woah, what happened there? Well, I got overzealous in my booming capital so I decided to invest $1200 in a bulk purchase that was supposed to net me $300-$500 in profit. Unfortunately, I got ripped off and these brand new Sprint phones were unable to be activated on the Sprint network. That’s the last time I go into a deal without getting all the facts because some stranger on the internet seems “trustworthy”. After a month of trying to make even just a small profit on my investment, I’m tossing in the towel and will sell my $1200 investment for a $300-$400 loss and move on. I’ve learned the error of my ways, I just need to get my capital back. When all is said and done, I think this venture has the potential of netting me $1,000 a month when I get it streamlined.

Rachel’s job outlook: Rachel is currently working at our school district’s child-care center, but is seeking an elementary school teaching job. If the elementary job doesn’t pan out she would be happy staying where she is, as they are likely going to have a position open in the pre-school room. As long as she’s happy, I’m happy. However, let’s assume for a minute that she did land an elementary job. That would be an increase in revenue of roughly $22,791/yr or $1,900/mo. Not bad. That would upgrade us from a blue fisher-price plastic spade to my grandfather’s wood and iron grave-digger. (yes, he was a cemetery caretaker).

Let’s do some rough math. $22,791 + $12,000 in phones + original surplus of $5,460 = $40,251/yr. With those two things alone, that 16-year estimate gets cut down to 2.2 years. Now there’s a staring point I can wrap my brain around. Unfortunately, it’s still not breaking the 2-year mark, doesn’t include interest on the debt, and is very much a best-case scenario. I’ll have to get creative in generating more income, and/or we’re going to have to cut costs.

More to come later as I continue to formulate this plan of attack.


3 thoughts on “The Starting Point

  1. I just wanted to leave you a note of encouragement – I left school with debt, as did my husband, and then I managed to add credit card debt on top of that. By the time we decided to deal with it we were $65K in the hole. By now we are $250K in the black and I can’t believe how quickly it all happened! You guys are well on your way with the awesome goals you’ve set for yourself and you are a lot more hardcore about biking (something I’m trying to get into more). Good luck and keep up the good work!

    • I don’t have a twitter at this time, but you can subscribe via email or RSS feed if you like.

      I’m working on a big update over the next couple of days to sum up one year of debt paydown madness, so stay tuned!

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