I’ve outlined our months of budgeting to get rid of consumer debt, the tools we used to manage it all and some of the tricks we learned along the way. The last installment in the official budget series is the all-important “what now?”
While it’s nice not to have the big worries of our outstanding line of credit and unfiled taxes hanging over our heads, we are certainly not completely out of the proverbial financial woods.
We’ve now taken the amount we were putting toward the debt, and have reallocated it into a few different categories, henceforth referred to (and labeled in our spreadsheets) as: Fun, House/Dog/Taxes/Car, and OHSHIT!
Fun is pretty self-explanatory. That’s anything from fancy dinners out, clothing and IKEA trips to major purchases like a new TV to replace our aging tube set, vacations, and sailing lessons.
House/Dog/Taxes/Car is our non-life-altering emergency fund. We’ve figured out how much we need to save each month to pay for annual expenses like car insurance, the dog’s annual vet visit, home insurance, property tax, major car services. We know these things are all coming eventually, and we know approximately when. We’ve also added a bit extra to the savings goals for that account to cover things that are entirely likely to happen someday, like a major car repair, major dog repair, major house repair or insurance deductible.
The OHSHIT! account is for the big ones, and we hope we never have to spend it. Job loss. Limb loss. Life loss. Anything that would result in one or both of us losing our ability to earn income for any period of time. We’re also looking into disability insurance, to cover the gap between work insurance coverage/government assistance programs and our current salaries, so if the unthinkable does happen, we can focus on getting through the ordeal, without also worrying about things like losing the house or being able to buy gas or groceries.
Other than those, we’re continuing to contribute to our RRSPs and opening TFSAs.
When you add it all up, we…. don’t have much more money to spend on day-to-day frivolities than we did while we were paying down debt. I suppose those weekly dinners at Lumiere won’t be a reality after all.
The difference is, we’ll still be able to have and do fun things in the near and distant future (we have lofty dreams of buying a sailboat), without going back into debt for them. And if we’re able to stick to our plan, we should continue to be able to have them, even if other emergencies and the various obstacles life throws our way interfere. And then, whaddya know, we’re living within our means.
Frankly, even though day-to-day life is still pretty modest, it’s way more fun putting money into a bank account with a picture of a sailboat on it, than one with a picture of all the interest we were paying.
Of course I can’t suggest you go into debt or compromise your own financial plan to donate, but maybe find a way to forego a couple lattes or a new pair of party shoes and help the animals this month instead!
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