January 21, 2012

New Family Budget & Bad Credit

I am very excited to begin a new family budget! I sound crazy, right? Who wants to have a budget and have to stick to it? But the truth is - we have debt. My debt is mostly medical bills or closed credit cards that I used when I was 18 and lost my job. Nathan's credit is well... caused by young stupidity :) Honestly we weren't sure everything that would be affecting our credit, so we used AnnualCreditReport.com (the only one approved by the Gov't) to get a free copy of our credit reports (this does *not* include your credit score - however, TransUnion allows you to sign up for a service for $16.95 to monitor your credit score & activity, and I used the free 7-day trial to find out my credit score. It's not pretty.)

I may be young, but I have a family and plan on being in my chosen career in the next few years, and buying a home. Not to mention, I'd just like to work towards repairing the mistakes I made at age 18. I am kind of annoyed about one thing: all of the utilities are in my name, but none have been reported to my credit! What is up with that?! Meanwhile, everytime we finance furniture through Farmer's Furniture (our sectional, recliner, dining table, and washer & dryer), it reports positively to Nathan's credit. No fair. Back to the point, I plan on paying off all of my debt by the end of 2012; and 2013 will be dedicated to paying off Nathan's debt; and then we'll work on repairing our credit and raising our scores. In the meanwhile, we needed to reign in our spending! Especially Nathan - he has a terrible habit of buying lunch everyday, which can be costly. So we've implemented the following budget:

  • Personal, to spend on whatever we want: $50 each/week
  • Recreation, spent together (dinner, movie, etc): $75/week
  • Car (gas): $35/week (Nathan works 1 mile from our home, so this is easy!)
  • Groceries: $150/week
We also have budgeted amounts for our utilities, rent, car payment, etc but I didn't list them since they are things that we pay every month, are not always a fixed amount (electricity, water) and are necessities that we can't budge one. How am I going to make this work? CASH. We are terrible about swiping the debit card (isn't everyone?) So the easiest way to make this work is that on Friday (the beginning of our "week") I withdraw $50 for each of us, and the debit card gets stashed away at home. If we decide to go out, we'll withdraw $75 for that day's activities, and leftovers will be stashed away or redeposited in our account. We will fill up the car on Friday, not to exceed $35. Say we go out for dinner and a movie, and need to get gas to drive an hour - that money will come out of the Recreation budget, since it's being used to do recreational things, see what I mean?

Anything left over at the end of the pay period (biweekly) will be deposited to Savings. At the end of the month when all the bills are paid and if we are in the clear (not behind on a bill or short for the next month) that money will go towards paying off debts!

I know this post is long so I'll cut it here. I am so excited to be handling our debt and working towards our future!

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