Financial Fitness Update: A Very Good Start

As I promised in last week’s New Year’s resolution post, I am keeping you posted weekly on our financial fitness progress. Happily, the news is good. (Honestly, I’d be pretty embarrassed if I flopped after just one week of my resolution.)

First, we paid off a car loan. Just today, as a matter of fact. Jay bought his beloved Scion XB in June 2007 (ironically, it was the same week he was diagnosed with fatty liver syndrome, which he has now cured by getting physically fit!) The company-provided car he had been driving was being taken away since he had a new (better-paying) job, so he needed wheels. He had his heart set on that Scion, and I wasn’t about to stand in his way.

But there we were with a big ol’ car payment now, and a big ol’ five-year loan to pay off. Ouch.

For about the first year, we simply made the minimum loan payments. During that time, we were paying off some other loans. Once those were paid off, we turned to the car loan as our next big challenge. Eight months and some very aggressive payments later, we are car debt-free!

Shouldn’t there be some balloons and confetti showering down on us as we click online to make that final payment? Or at least a singing telegram showing up at our door with some congratulatory candy? Well, there wasn’t. But we’re still celebrating on the inside.

I can’t attribute this success directly to our resolution from one week ago. Obviously, we’ve been working on this car loan thing for about 1.5 years. But it’s a big step toward our goal of eliminating debt. And it puts us in a strong position to pay off our last remaining big debt (not counting our mortgage).

The other big news this week: we created a household budget. For real. I found it rather painful to put together, because it forced me to think about every single dollar we spend, and who likes thinking about that? But just like with weight loss, to become financially fit, you have to be aware of every dollar spent and earned. Otherwise, you live in this la-la land of money, and can be blissfully ignorant that you spend way too much on groceries (or whatever).

I organized all our expenses into payment cycles, from weekly and biweekly to monthly and quarterly. I then did a little math to figure out our total monthly expenses (such as multiplying weekly expenses like groceries by 52 and then dividing by 12), as well as our total monthly income.

This helped us realize just how much money is currently not assigned to anything … it just mysteriously gets spent on who knows what. That needs to change. We have now designated a majority of that no man’s land money to paying off my giant Sallie Mae loan from grad school.

Just for perspective, I graduated with a master’s degree in 2000 and a fat $30K debt. For the next eight years, I paid the minimum payments and have made very little progress. There’s still more than $26K to pay. Our plan is to kick Sallie to the curb by the end of this year, if we can swing it.

The other hard part of budgeting was going over each expense and discussing if and/or how we could decrease it (or even eliminate it). We found many of them to be fairly non-negotiable, like energy, gas, water, child care, etc.

A couple of areas that need serious trimming are groceries and eating out. I am the primary grocery shopper, and I spend way too much. That’s because I don’t plan our meals, carefully monitor coupons, shop around for the best prices or base my trip on a budget. I just buy whatever I feel like, I make multiple trips throughout the week, and I use coupons very infrequently. It’s easy for me to spend $250, even $300 a week on groceries. Yikes!

We also eat out without much thought about money. Jay eats out for lunch most weekdays. I had been going out for lunch more frequently, too. And whenever our daughter (who eats like a freakin’ bird) has a hankering for something, we go out and get it just so she’ll eat! There goes probably another $100 a week.

As part of our budget discussion, we decided to aim for $150 a week on groceries and $50 a week on eating out. I’m going to have to do all the right things to make the grocery numbers, and Jay is going to be the main user of that eating-out budget. This week, I packed my lunch at work four out of five days (spent $10 on Friday going out with a friend). I know it won’t be easy to stick to this, but I’m going to make a serious effort and see how we do. I’ll let you know how it goes!

P.S. Since last week, I’ve discovered a few more budget-oriented sites I’d like to share. My cousin Alison pointed me to two of her faves, Baby Cheapskate and Freebies4Mom. One of our WMAG readers/commenters blogs at the Morning Money Memo, which is cool. I was also told by Twitter peeps to check out The Frugal Life on Slate’s The Big Money, Like Merchant Ships, Almost Frugal and Frugal Babe. Thanks, all! These are great.