One night while trying to fall asleep, something disturbing popped into my mind – my oldest son is 14 and he’ll be going to college in a short 4 years…and we are not ready to take on the cost of college. There’s more. Three years after he enters college, I will have 3 more sons entering college. Needless to say, that was a wake up call for me.
As we near the end of 2008, I’ve been brainstorming ways my family can get serious about reducing our debt. I like fresh starts, so the beginning of a year is a great time to make changes. The problem my family faces is we already live frugal lives, so any changes will need to be radical changes.
As I pondered ways to cut down even more on spending, there were some serious questions that came to mind:
- Is it possible to save for college if I start now?
- Can my family take radical measures to cut down on spending?
- Are we willing to take radical measures?
- Am I willing to ask my children to get radical with not spending?
- If we continue to live frugally (and not get radical), will it be enough?
What my husband and I have decided to do is Dave Ramsey’s Total Money Makeover. I’ve had this book for years, and have half-heartedly applied the principles to our lives. But now it is time to get serious. If you aren’t familiar with the book, it is based on baby steps.
- Save $1000.00 for an emergency fund. This is a true emergency fund and shouldn’t be used for things like clothes for the kids, or groceries. The reasoning is because those aren’t true emergencies – we know those things will be coming up, and we should plan ahead for them.
- Pay off all debt using the Debt Snowball.
- Set aside 3 to 6 months of expenses in your savings account.
- Invest 15% of household income into Roth IRAs and pre-tax retirement.
- College funding for children.
- Pay off home early.
- Build wealth and give! Invest in mutual funds and real estate.
I’d love to hear your plans for reducing debt in 2009! Tell me in the comments.