I hope that FPU members get it in their hearts that operating with debt has not brought them blessings. If not, why are they coming to FPU? When they come through our door I hope they are open to making some changes.
Paying off debts is not easy, it takes “purposeful intention.” You did not intend to wander into so much debt – it just happened over a period of time. You are most likely not going to wander out of it either. You will need to get really focused and a bit radical.
I want you to get radical about increasing your Cash Flow! There is always the part time job, but, before we go there, let’s take a look at some other areas.
I pick on coffee drinkers because I am one. At one point, I would visit my local baristas about five times a week. My drink of choice was an extra hot, non fat, no whip mocha. A medium ran me nearly five dollars (ok, four dollars and some change, but let’s round up because math is hard for me, remember?).
Spending $25 a week does not seem too bad. I get paid biweekly, and really, I cannot live without my coffee. I can afford this luxury.
Then I annualized how much I was drinking - $1300 a year. In coffee!!
I could increase my cash flow to pay of debts simply by decreasing how much coffee I bought.
Short Term Loans to the Government
Another area that I mentioned earlier was by looking at my tax refunds. I was getting $5, 000 dollars back from the Government. It was like Christmas day when that refund was deposited into my bank account. Once I started my total money makeover, I saw that I was sending the Government $5, 000 TOO much and they were just giving it back (without interest).
I divided that amount by each paycheck to figure out how much was going out extra and adjusted the claimed exemptions on my W4 until I got close to that amount with out going over.
With simple paper work, I increased my cash flow to go to the debts.
Retirement and Kid’s College Savings
The last thing we did, and possibly the hardest, was stopping the retirement investments. 401k, Roth’s – everything. Yes, we lost the company match for nearly two years.
(If we were investing for our kid’s college at the time, we would have stopped that as well).
This single action not only increased our cash flow to pay off debts but it also helped us to fund the Baby Step 3 Emergency Fund and to buy a used Toyota Sequoia with cash.
Live Like No One Else
“Live like no one else, so that tomorrow, you can live like no one else” is the motto that helped me to make these life changes.
Today, we are investing 15% of our income to retirement. I NEVER would have been able to do that before while making payments on new cars.
We are not only cheerful givers to our Church, but we also look for opportunities to give outside of the Church. Cindy and I would hear of a need, but have nothing to give. Now, we are often able to find that extra bit in our budget.
We are also funding the kid's college starting this past February. I realize that we are late in getting started, but we are making some headway!
And yes, I am enjoying coffee (all though, today I prefer a tall Americano, and with my Barnes and Nobles membership card it cost $1.99).
I have not, however, decreased my exemptions on the W4. I will keep as much as I am legally allowed to keep.
It can be done!
If you are adjusting your W4 withholdings, you might want to investigate the IRS Withholding Calculator. Personally, I found that it went a little too high for my liking.
Also, according to DR, your Human Resources should be able to help you to achieve the right balance. Be sure to listen to the caller (there is a subtle “VCR” control on the page).