"Definitely. I'm so glad you made it in time. You're making great progress already! Are you all set for Christmas?"
"We decided to keep Christmas simple this year. We've been focused and we've made progress that we're really proud of. But I have to admit that it is really tempting to go find those cards and make the kids' Christmas dreams come true."
"Are they the kids' dreams, or are they your dreams?" Jane asked. And Jill knew her friend was right. She knew that her kids were young enough that they would be happy with whatever they received, but inside she still felt a little guilty knowing that their friends would be getting the latest and greatest. And she really wanted to do something special for Jack.
"Just keep pressing on, Jill - you are doing so well. By this time next year, you'll be a completely different place and you'll be so glad you didn't give in to this temptation! What do you say we take a break, get away from the commercialism for a while? Let's take the kids sliding and then come back to our place for cocoa? We can talk about how you're doing and set you on track for your next goal."
"Sounds good to me - how's two o'clock?"
"Great!"
After a few hours outdoor, everyone was tired but happy. The kids enjoyed some cocoa then retreated to the playroom while the adults stayed in the kitchen to talk. Jane invited them to stay for supper and started a big batch of spaghetti for everyone while chatting with Jill. The men took their coffee to the table.
"So, Jane tells me you've got reason to celebrate!" Richard sat back with his coffee and looked at Jack expectantly.
"Absolutely!" Jack nodded. "We got that appliance loan paid off just in the nick of time! Now we're ready to press forward... once Christmas is over, of course."
"What do you mean?" Richard leaned forward.
"Well, you know... Christmas is expensive and all... seems unrealistic to try to keep up like this through December... don't you think?" Jack hesitated.
"Absolutely - if you're still stuck in the old thought patterns. Sure, it would be easy to grab a card or two and take care of Christmas the way you want to, but what would the long-term effect of that be? Don't you think financial freedom is a better gift to yourselves and your kids?"
"Well.... yeah.... of course..." Jack knew his friend was right, but he was conflicted. After all, he wanted Jill to enjoy her Christmas morning, and the kids needed nice gifts too, didn't they? Just then, Jill came over.
"Is there an echo in here? Jane and I were having the same conversation just a few hours ago!" She laughed softly and shook her head. "It really is easy to lose track, isn't it? Just like falling off the wagon."
Jack looked up at her. "But... Jill, how will we pay for Christmas if we keep up like this? I know we agreed to keep it simple, but... " He pulled out his wallet. "I've only got $60 in here. That's not going to go very far."
Jill smiled. "It turns out that we planned for this. Even I didn't realize it at the time, but we did! Jane and I were just chatting and she showed me something - when she set up our budget and debt plan, Jane didn't assign my 'baby cheque' income to anything, and we've been so focused on keeping the budget that I haven't needed to spend it. That, combined with little savings here and there over the past months, gives us more than enough for Christmas. We've actually got cash available!"
Jack looked incredulous for a moment, then grinned. "No way. Really? That's unbelievable! We've never paid cash for Christmas before!"
Richard laughed. "Welcome to freedom, my friends! Now, are you ready to take the next step?" They both nodded eagerly. "Great - let's have a look at where we are now." Jack pulled out the sheet with their budget and handed it to Richard, who made a few changes. "Here's your plan of attack for January - you'll follow this until April when the MasterCard is paid off and then revise it again. And again. And again, until all your debts are paid off."
| Food | $ 500.00 |
| Mortgage | $ 827.00 |
| Property Tax | $ 150.00 |
| House Insurance | $ 100.00 |
| Utilities (Heat, Electricity) | $ 100.00 |
| Other Bills (Phone, Internet, Cable, Cellular) | $ 200.00 |
| Clothing | $ 40.00 |
| Automobile Costs (Gas, Repair, Licenses) | $ 100.00 |
| Car Payment | $ 280.00 |
| Health/Dental Care | $ 140.00 |
| Recreation/Hobbies/Entertainment | $ 100.00 |
| Household (including furniture, supplies, repairs, lawn care, etc) | $ 100.00 |
| Miscellaneous | $ 40.00 |
| Gifts | $ 40.00 |
| Payroll Deductions (Tax, EI, CPP) | $ 1,168.59 |
| Debt Payments | |
| Line of Credit | $ 270.00 |
| MasterCard | $ 662.00 |
| Visa | $ 90.00 |
| Student Loan | $ 155.00 |
| Jill's Allowance | $ 20.00 |
| Jack's Allowance | $ 40.00 |
| Charitable Giving | $ 393.14 |
| $ 5,515.73 |
"That will be so incredible," Jill said. "I can't wait!"
"Me, either," agreed Jack. "I have plans for that extra cash!!" He looked at Richard. "Er, I mean... what are our plans for that cash?" They all laughed.
"Well, like I asked you before, is a thousand dollars in the bank enough? Will that see you through if you get sick and need to take a month off work, or if there is a family emergency that you have to take care of, or if something major goes wrong with the car? How long will that little fund last you if you have a real emergency?" Richard looked at Jack intently.
"Hmm. Not very long. That wouldn't even cover our mortgage and food for a month."
"Exactly. So your next step is to create a financial safety net for yourselves. But for now, you focus on getting these debts paid off. Say, have you given any thought to your tax refund in the spring?"
"Actually, yes - it should be about $3,800 - and we've already decided that we'll take the whole thing and pay it on our debts." Jack nodded.
"Awesome - do you know what kind of impact that will have?" Richard pulled up his computer and opened up a spreadsheet. He changed a few numbers, then turned back with a grin. "You just saved yourselves another four months of payments, not to mention saving even more interest."
As the months passed, Jack and Jill stuck with the plan with increasing commitment. As each debt reached a zero balance, they continued to roll the payments onto the next debt until finally the day came in December 2012 when they paid the final installment on their line of credit. Christmas was simple again that year, then on New Year's Day they celebrated with a bonfire, toasting marshmallows and drinking cocoa while burning all their old statements.
"What a feeling. This is incredible!" Jill gushed. "I would have never, ever imagined we could manage this. We've paid off over $17,000 in just over a year. That's amazing!"
"You are doing great," Jane agreed. "Two more to go - and they will go so fast now! By the end of this year, you will be debt-free, without even a car payment!"
And so they were. October rolled around and with it the final payment on the car. Jack and Jill celebrated that night with a rare night out for the family, taking the kids for pizza and a movie. Since they didn't do these things very often anymore, it was a real treat for everyone.
The next day, they got together with Richard and Jane again.
"Can I just say, we are so proud of you guys." Richard opened the door and handed Jill a bouquet of flowers. He shook Jack's hand and directed them to the living room where Jane had some papers spread out on the coffee table.
"What's all this?" Jill asked.
"Just a refresher for you... a reminder of what could have been and what you made of it instead. Remember the minimum-payments scenario?"
"Ugh... absolutely. Thank you, both of you, for helping us avoid all of that!"
"No problem - it's what we do!" Jane smiled at her friend. "Now, are you ready for the next step?"
Jack sat down. "Lay it on us."
"All righty then...." Richard came in with some snacks and a fresh notebook. "Time to move forward!"
"The next thing we want to do is get your financial safety net in place. Generally speaking, this should be three to six months worth of expenses, in a bank account or investment that can be withdrawn on short notice without penalty, like a money market fund."
"Six months?? There's no way!" Jack shook his head. "How could we do that?"
"The same way you paid off your debt - with commitment, consistency, and intensity." Richard opened the notebook. "I've got it sketched out for you here. Take a look.
"You started out paying $957.00 each month on your debts. Then Jill added $500.00 to that by bringing in some extra money. That's $1457.00 that you have available, but that you're already used to paying out. What we do now is, take that payment and pay it to your savings instead of to debts."
"That makes sense. How long do we do it for?"
"Well, if we subtract your debt payments, and your payroll deductions, we're left needing $3050 per month for your current living expenses. So in a year you'll have six months' expenses banked." Richard handed over the notebook.
"Another year, eh? Well, we're doing all right now, so what's another year, right?" Jack threw up his hands in mock surrender. "Let's do it!"
Additional Reading:
Dave Ramsey's My Total Money Makeover
Get Rich Slowly : How and Why to Start an Emergency Fund
Build an Emergency Fund: Nine Tips for Saving Money
Books:
Financial Peace Revisited
The Money Answer Book
More than Enough: The Ten Keys to Changing Your Financial Destiny
How To Manage Your Money
Additional Reading:
Dave Ramsey's My Total Money Makeover
Get Rich Slowly : How and Why to Start an Emergency Fund
Build an Emergency Fund: Nine Tips for Saving Money
Books:
Financial Peace Revisited
The Money Answer Book
More than Enough: The Ten Keys to Changing Your Financial Destiny
How To Manage Your Money
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