After tightening our spending belts during the Great Recession, we overindulged once the economy started to recover. Some people call it "frugal fatigue." But whatever the term, we were tired of scrimping and saving. Like a dieter who comes off a strict diet, we rebelled by going on a spending spree. After the credit card and new car bills started to roll in, we had to go back to our budget and financial plan to figure out our personal financial recovery plan. Some of our purchases included a new car, furniture, a stainless steel refrigerator and clothes.
Assessing the damage
We first looked at how much money we ended up spending. Because we put off making any purchases for so long, we went a little crazy with our credit card. After adding it all up, I figured out we spent $3,500 with our credit card. Since we used some cash to purchase our car, our new car payment increases our monthly expenses by only $300 a month.
Balancing the budget
Our first step was to total up our new expenses and decide whether we could cover the costs with savings, our monthly income or with new income sources. My husband and I decided we don't have the time to take on any new work opportunities. In order to make up for our new $300 car bill, we refinanced our home at 2.75 percent. Our new mortgage payment is $300 less than it was before. In fact, the money we saved by refinancing to a lower rate was equal to the cost of a car or $26,000.
Finding money to pay off debt
Because we don't want to go back into credit card debt, we brainstormed ways we could pay off our credit card bill. We don't have an extra $3,500 from our paychecks, but we did end up finding unexpected sources of money. By refinancing our home at the end of the month, it turned out we didn't owe two mortgage payments. Since we used to pay $1,500 a month toward our mortgage, we took that $3,000 and applied it to our home. Also, as part of our refinance, we received a $500 gift certificate. We used the gift certificate instead of money from our checking account so we could pay the remaining $500 balance on our credit card.
Recommitting to a frugal lifestyle
When it came to paying off our debt quickly, we simply got lucky. After refinancing, paying off our credit card debt and getting used to a new monthly car payment bill, we recommitted to a more frugal lifestyle. Our commitment included saving $300 a month into a new car fund as well as $100 a month into a spending spree fund for the future.
Next time we go on a spending spree, we will use our cash slush fund instead of a credit card. We don't expect our country to slide into a new recession even with the escalating national debt. Still, we want to keep ourselves from backsliding into debt so we can weather inevitable higher taxes and lower social security benefits in the future.
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