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Tentative budget rejigger; unsure if it will stick

August 11th, 2009 at 10:28 pm

So Frugal Dad (a good personal finance blog) posted an entry today about creating a dream budget: basically taking your existing budget, removing all debt payments as if you were debt-free, and playing around with what you'd use the extra money for. I went one better: I created a "Basic Dream Budget," which imagined we were debt-free except the mortgage, and an "Ultra Dream Budget," in which we no longer had even a mortgage debt.

It was exhilerating but also kind of bittersweet. I mean, we won't be there for many years, if we get there at all. But it did make me consider that maybe I should be knocking this $623 personal loan payment out before Baby #1 comes in March.

We currently owe $8860 on the personal loan, which means at my current accelerated rate (I recently bumped up my minimum payments to $200 more, paying about $750 in principal each month) I would pay it off in about 12 months, or July 2010.

I tried cutting back all savings through Dec. 15, besides my minimum required biweekly $25, plus $600 for Xmas. I also cut my remaining full-strength grocery line items (most have already been cut to pay tuition & fund furloughs) to $350. If I do that, assuming no financial hiccups, we could get the debt down to $4500 by mid-December. That would give us only 2.5 months to pay off the rest, or about $1800 per month.

Clearly that wouldn't happen on our current budget, but if there happened to be any windfalls--tax returns, bonuses, gifts--we might be able to come close.

So what would happen to the baby/emergency fund in the meantime, you ask? Well, the UK account would continue to run a 300-pound surplus each month. We may owe a bit in taxes, which could cut into that, but assuming we don't owe UK taxes, we would be at about $8000 by the time baby was born (depending on exchange rate). That would get us through a little over a month completely unpaid--if NT and I took turns with parental leave, we could get through two months unpaid. More if we made some cuts to our normal budget (easy).

If AS gets a job before then, we will have lots of extra money to throw at debt and EF. If she is still taking odd jobs from home, we can forgo some of that unpaid time because she'll be able to watch Baby during the day.

I don't know if I'll stick to this accelerated debt repayment, but it seems like there's an outside chance we could get that debt gone by the time Baby is ready for daycare--and that freed-up $623 could cover about half the monthly daycare costs! So it seems like something I should consider. I'm going to talk it over with the fam tonight and see what they think.

I welcome comments on both sides of the argument. To sum up all the above number crunching, I'm basically thinking about taking approximately $2000 that would go to the baby fund and putting it to debt instead.

1 Responses to “Tentative budget rejigger; unsure if it will stick”

  1. Mrs Says:


    The numbers do speak for themselves, don't they?

    In this seminar we attended, we created a budget showing how life would be if we sold our rental property and paid off our mortgage. It was a real eye opener for DH, and while the timing isn't exactly right for us to sell it now (given that our tenant is paying on time and the house next door to it has been on the market for over two years), it will be happening in the short-term future.

    Hope that you're feeling well these days! How soon til the first trimester is over?

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