The Dog Days Are Over: Finance Friday Part II

Or, they're at least on their way out!  I am writing to you in a state of euphoria.  Ladies and gentleman, I got PAID!

Today I got a paycheck from each of the schools I teach at.  Sure, I got paid for the substitute teaching I did over the summer, but that money just helped us scrape by from week to week.  These paychecks will actually create PROGRESS.  Even better, I've continued to sub at the other school and have a few more dates lined up.

For the first time since we moved in here and we stopped paying an exorbitant rent plus utilities, I feel a sense of relief.  I just paid all my bills for the next two weeks.  As a matter of fact, I almost paid a little one off - one that we had to break out and use recently because times were getting tight. 

Normally, after I would pay the minimum towards the credit cards, we wouldn't have much left.  Now that I am a contributing money maker, I was actually able to put some in savings AND have a satisfying amount left over for expenses!

I am not trying to brag.  Remember, we are living with my husband's parents.  The whole point of this was to start over.  Now, it is clear that this might really work for us.

The plan remains the same: to aggressively pay off the smallest card first, then take the amount we were paying on that card and add it to the next card's payment.  This is called the "snowball effect".  Like a snowball rolling down a hill, the idea is to gather momentum.

Bruce and I made a difficult decision and took our debt-paying a step further.  I had a very small 401(k) from an old job.  We decided to pull out the funds in that 401(k) and use it towards our debt.  Now, I wouldn't recommend this as a general rule.  But for us, it made sense.  Even though we have to pay a fine for removing our retirement money before retirement age, it is in our best interest.  As one financial advisor put it, the money will make more of an impact on our lives now than it would when we retire.

We are young enough that we can recoup the money before retirement age.  It isn't that much.  Is IS enough, however, to pay off a couple of my credit cards.  And when we have those paid off, our overall debt-to-income ratio will be decreased.  Our monthly payments will be less.  That means the money we were paying towards interest and principle on those cards can go elsewhere.

Everyone we consulted, from our personal banker to other financial advisors, have all said it was the right thing to do.  Bruce used to be a personal banker and he said the same.  And yet I'm not proud.  I guess when we get our debt paid off, have savings built up, and our retirement accounts are nicely padded, I'll look back and agree with them more confidently.

That's our goal; that's why we are making the hard choices, like living here.  When I am driving home after a long night class, simultaneously wired and exhausted, I remind myself.  The goal is not only to get back on our feet, but to stand tall.