Operation "Debt Down"

BIG Goal #2 - Thin out debt.

Like most American families we have far too much debt and far too little savings. In fact, most of my savings have been cashed in over the past few years to pay bills. Why?

In 2004 my husband was laid off from a sales job. After 9 months out of work he took a seasonal position that turned out to be less than profitable when he was forced to pay for repairs to the pick-up that he borrowed to run a personal errand. He then moved directly into another seasonal position with snow removal. That winter there was very little snow and he requested a lay-off as it was costing us for him to work (childcare, transportation and I had to pay for his coffee on a 3-4 hour shift, which was all he was being offered). Everything seemed to be going well at his next job, but after his boss left on disability the acting manager turned out to be someone who wanted a job at that location - closer to his home. It took him around 2 months before my husband was let go. My husbands replacement once the manager returned - the former acting manager. A while later he took a job at a golf course - end of season - and then segwayed into a waiter position. He decided to return to the golf course the following summer (last year) and when the season ended found himself unemployed again this winter. The golf course did call him back - a week after he accepted a position locally at a plant. Wow - busy boy.

His current position will involve seasonal lay-offs; however, he will have summer OT to help with employment insurance payments and we can anticipate and plan for them a little better. Also, I work a fair bit of OT during the winter and have negotiated getting paid for it.

My career has involved some job changes during this time as well, but I have never been out of work except for 1 week between jobs that I chose to take for a break. Call it a vacation after over a year without one. I make a steady income - not stellar, but steady and could cover most of the required household expenses if needed. What I can't cover is our debt interest.

As you can imagine, we have used debt as a means of covering expenses during times of unexpected lay-offs or just unprepared lay-offs. Christmas, Easter, Birthdays, Vacations, Childcare, Gas, Oil, sometimes even groceries have ended up on the credit cards. Not stellar choices for someone who is supposed to understand money.

So, I have unleashed "Operation Debt Down". I will apply the same principles to this as I have to weight loss. Seek out information from people who have succeeded (MSN Money articles, web research, and my favourite "Total Money Makeover" and other Dave Ramesey articles - he also has an on-line support group, so I may even join that). Then journal progress, review when slips occur, correct, try new things, and move forward. This process has proven successful for dropping 39 lbs - a task that seemed overwhelming a year ago, so I have no reason to believe these principles will not work to make my finances look as attractive as my legs, LOL.

I have read a few things that are leading me towards my first action plans. Fortunately I am already working on my 'Emergency fund". I had started it as a Vacation and Health fund, and will continue the contributions based on money not spent on WW meetings and gym membership as well as $50/each of mine and hubby's pays and $400 from our tax refund. The plan is to build up to $1,000 then re-direct these funds towards principle pay down of the smallest credit card. We only have a few, but most of them are doozies. As each gets paid I will cancel it, except for the last one - our joint Visa - which I will keep for on-line purchases and reservations. I will reduce the limit on this as it gets paid down.

Well, this should take some time - like a couple of years - and then I want to start building a savings account for rainy days equivalent to the debt I have now. That will mean building on my emergency fund. Since I won't be fighting against interest, this stage shouldn't take as long. Oh, I'm sure there will be further stages, but for now, I will work on my $1,000 emergency fund (currently at $138) and that pesky HBC credit card - I think I owe less than $300 on that. This should take a month or so.

Action plan #1: Creat household budget. Be sure to leave wiggle room in the grocery department. I have started a 'loose' plan and will work on making this hubby friendly.

Action plan #2: Make minimum payments on all credit cards.

Action plan #3: Contribute as much as possible to emergency fund.

So, this week we each get a paycheque. I'll let you know next Tuesday how it goes.