Today our credit card debt alone totals over $11,000, but for the first time in a long time I fall asleep at night with hope rather than despair. I’ve tried for over 2 years to get out debt but truth is we never made a dent in it. It seems so obvious to me now why I’ve failed at getting our family debt.
One of the big reasons – I was unprepared and underfunded for the yearly bill/irregular bills when they came. The fact that I never properly budgeted for the sewer bill or the car registration/inspection meant using credit cards or spending any “emergency savings” we had built up. Basically back to square one.
Then I had an awesome idea that would revolutionize the personal finance world! I would take all the irregular yearly bills, add them up, divide by 24 (my husband is paid bi-monthly) and make that part of my monthly budget. I would call it our “Personal Escrow Account.” GENIUS!
While I won’t win any points for originality, this method has saved my budget and my sanity. Breaking down big irregular bills into smaller semi-monthly payments not only makes me feel prepared but provides breathing room in the budget.
EXPENSES YEARLY BILL NEED TO SAVE per PAYCHECK
Sewer bill $204 $8.50
PreSchool $2430 $101.25
Cars(approx) $400 $16.70
Propane $1400 $58.35
These “mini-escrows”(I’m patenting that) have helped alleviate the pressure that would come any time a non-recurring bill would come due. I round up the numbers to the nearest $5 and put them in designated ING accounts. To build up the proper amounts I needed to borrow from the “Emergency Fund”. I know, I know, YOU NEVER TOUCH the emergency fund but I would have had to either used the emergency fund to pay these bills or a credit card so what’s the difference?
I also add bi-monthly in sub ING accounts to the “Emergency Fund”, a “Christmas Fund” and a “Whatever Fund”.
When you NEED credit cards to pay bills you know you are in trouble. That is where we were. Hopefully, no more! Over $11,000 in credit card debt is no joke, and while the amount we owe is still there I feel the crutch they provided may be gone.