It was very exciting to watch our debt free scream air on Dave on Friday (I'll post it here as soon as it's available on hulu). Despite how nervous we were, Dave was very easy to talk to during the interview. There was one question he asked both of us - "What was the key?" - so I thought that would be a good point of discussion for our first post as we begin Baby Step #3.
Communication: This was the point Tim emphasized. This was a lot harder (and a lot more critical) when we first got started tracking our expenses. We had a written budget that we maintained on Excel. We worked together before the month began to give every penny a name. Yes! We tracked down to the penny. When we first started we spent a little time every Sunday night to update our budget, go over our expenses for the week, etc. We even saved every receipt for the week to make sure it was all accounted for.
As time went on, we got more comfortable with things and would just touch base throughout the week instead of sitting down and reviewing every thing. We still accounted for every penny. I would get text messages in the middle of the day when ever Tim spent money on some thing. We also took the time to think out and discuss any "big" purchases. For us, that is any thing over $100 (Dave says it's $300 for Sharon and him). We always kept the question of whether it was a 'want' or a 'need' as the main focus to keep us grounded. The whole process not only helped our finances, it really helped our marriage too.
Plan ahead: This sort of came out during Tim's discussion of communication. There are a lot of expenses that we knew we were going to have in the near future, so we budgeted and saved for it. People often talk about how there are all theses "surprises" that pop up that get in the way or throw them for a loop. The only surprise about our annual car insurance bill was the fact that we've been paying it since we were 16 and still forget to save. Things are a lot more manageable when it is divided throughout the year too. The home owner dues don't seem as bad when we save $9 a month instead of scraping together $100 right after Christmas. The same can be said about all those other "surprises" - license plates, gifts (birthdays and Christmas), life insurance, car insurance, etc. But don't forget other potential "emergencies". If the tires on your car are almost bald and you live in a place plagued by ice and snow int he winter... plan ahead. Set aside $10-$25 a month so you are ready when the time comes. Even with that, we had to purchase 2 at a time and Tim got quotes from at least 5 places before we made our purchase.
Forget about the Jones's: This was my answer. We didn't eat rice and beans, but we did try to find a bargain where ever we could. The biggest money saver, though, was not trying to 'Keep up with the Jones's'. We really kept focused on delayed gratification. We have a free couch that is covered with slip covers I got 70% off at Linens-N-Things going out of business sale. Our dining room and kitchen tables are handed down from family members. Our bedroom set was purchased in cash from a coworker almost 10 years ago. It's falling apart and is no where near my 'style', but it serves it's function. Really, I'd LOVE to replace all our furniture, our carpet, our fixtures throughout the house, etc. And we will... just not now. We just kept telling ourselves, "When we're debt free!"
We have a long list of things on our wish list, actually. In the past we would have justified spending the money we knew we shouldn't have. "We need a new dining room table. The chairs are scuffing the floor." "These slip covers NEVER stay in place and drive me crazy. Lets go to the sale this weekend and get an 'affordable' couch." "There are several handles broken on this dresser and the bottom of the drawer is falling off. This set has outlived it's 15-20 year life span. We deserve a new one." It's always easy to talk yourself in to spending money. It's talking yourself out of it that is key. I haven't had a new pair of tennis shoes in over 2 years. The kids wear clothes from consignment or clearance racks. Tim and I make do with what we have. We repair instead of replace any thing we can. We watch sale ads and bargains.
In reality, it's probably only a short term sacrifice. So, every one else on the block has nicer stuff (and newer kitchens) than we do. At least when we make our purchases, we will be debt free and it will be paid for in cash. You really have to be willing to "Live like no one else today so you can live like no one else tomorrow." Other than food, utilities, and essential health care there aren't too many things that are actually NEEDS. I think too many Americans forget this. It's a daily battle for us too, but it gets easier with time (and progress - it's a lot easier to put things off when you see the power of your snowball). In order to keep us focuses, we continued to live on Tim's base salary. The vast majority of Tim's bonuses and my income went exclusively toward debt. If we can continue to do this, we will easily be able to cross of step #3 and even start saving for a lot of those things on our wish list very soon.
There are a lot of "keys" to success, but those are probably the top 3 for us. Have some thing that worked well for you... please share. We all could use reminders of what we should and could be doing every day.