YNAB BLOG

How to Pay off $26,000 of Debt in 18 Months on a $35,000 per Year Income

magnifying glassYesterday I featured Jenny and Aaron’s, well, debt. Today I’m covering their budget and showing them how they can be debt free in 18 months thanks to a debt snowball, work bonuses, and tax refunds.

This budget is based on two $1,350 paychecks per month. Health insurance and retirement contributions are withheld from paychecks, so don’t appear in the budget. 401k loan payments are also withheld from paychecks.

You’ll notice a lot of $0 categories. That’s a reflection of the change in lifestyle Jenny and Aaron will experience by committing to getting out of debt. Paying off the balances will allow them to start funding those categories again.

Category Budgeted Notes
Charity
Tithing $270
Other Charitable $30
Charity Total $300
Monthly Bills
Mortgage $877.59
Water/Garbage $50
Electric $70
Natural Gas $60
Cell Phones $50
Car Insurance $42.46
Netflix $7.99
Hulu $7.99
Home Security $0
Pest Control $0
HOA $10
Monthly Bills Total $1,176.03
Everyday Expenses
Groceries $270
Fuel $135
Household Goods $50
His spending money $30
Her spending money $20
Restaurants $25
Other Medical $10
Misc $0
Cash $0
Everyday Expenses Total $540
Rainy Day Funds
Savings/Buffer $0
Emergency Fund $0
Car Maintenance $20
Home Maintenance $25
Preparedness/Storage $0
Birthdays $0
Parties $0
Anniversary $0
Christmas $0
Other Holidays $0
Halloween Costumes $0
Date Night $0
Landscaping $0
Furniture $0
Clothing $20
Haircuts $10
Movies $0
Electronics $0
Swimming $0
Baby Stuff $0
Wedding/Baby/Grad Gifts $0
Church Stuff $0
Preschool $0
Rainy Day Funds Total $75
Savings Goals
Vacation $0
Flight Lessons/Plane $0
Weekend Fun $10
Anniversary Trip $0
House/Moving $0
Car Replacement $0
Back to School $0
Change $0
Savings Goals Total $10
Debt Payments
Car Loan $235.17
Credit Card A $140
Credit Card B $100
Credit Card C $100
Debt Payments Total $575.17
Budget Total $2,676.18

Jenny tells me Aaron’s annual work bonuses are very consistent (he works for a very large, growing company whose commercials you see every day). Although they’re expecting a raise before year-end, it won’t be huge and their tax refunds should be close to what they’ve been in the past.

It’s also worth noting that this snowball doesn’t include the two “extra” paychecks per year Aaron gets (because he’s paid bi-weekly), and it also leaves out the raise I just mentioned (which has already been approved).

In other words, as long as Jenny and Aaron live within their means, they can be debt free in a very reasonable amount of time. The snowball kicks off using $5,000 from the savings they’ve set aside for their two kids’ future. Although it’s emotional, they agree that they need to solidify their own finances before they can hope to help their kids.

Here’s the plan:

1. Use savings to pay off Credit Cards 1 and 2 completely. ($500 + $3,050 = $3,550)

2. Take another $1,450 from savings and, combined with payments from Credit Cards 1, 2, and 3, pay down as much of Credit Card 3 as possible. ($1,450 + $140 + $100 + $100 = $1,790)

3. This leaves Credit Card 3 with a balance of around $2,650. Make payments of $340 per month (combined payments from Credit Cards 1, 2, 3) from October to January (4 payments). Allowing for some interest, this drops the balance on CC 3 to ~$1,500.

4. In February, use first portion of annual work bonus to pay off Credit Card 3. ($1,500)

5. Combine remaining portion of work bonus with snowball payment ($340) and normal car payment ($235), and throw it all at the car loan. ($1,500 + $340 + $235 = $2,075). Because you’ll have made four more car payments between now and then, the car loan balance should be around $8,500, and the $2,075 payment will drop it to around $6,400.

6. Put your entire tax refund toward the car loan. If you get your taxes done quickly and get the refund in February, that drops your car loan balance to $1,400. ($6,400 – $5,000 = $1,400).

7. Using your new $575 snowball payment ($340 from paying off credit cards + $235 from car payment), your car loan will be paid off in three months. Which means credit cards and car will be paid off in May of 2014.

8. Apply the whole snowball to 401k Loan 1. You’ll pay it off in around four months. ($575 x 4 = $2,300). The loan will be gone around September of 2014.

9. Combine the monthly payment from 401k Loans 1 and 2 with your snowball payment and apply the entire amount to 401k Loan 2 for the four months between October 2014 and January 2015. ($6,500 loan – 4 x $650 = $3,900 remaining on 401k Loan 2)

10. Use $3,000 from 2015 work bonus and first $900 of 2015 tax refund to pay off remainder of 401k Loan 2. Game over. You win.

Jenny and Aaron – it’s going to be tight, but you can do it. Getting out of debt involves one big decision (“We’re through borrowing and we’ll do everything in our power to get out of debt.”) followed by small, daily decisions (“We’ll buy that DVD when we’re out of debt.”).

Work together and fight for your goals. When the snowball is done rolling, you’ll have freed up $600 per month – over 20% of your current take-home income, not to mention your annual bonus and any tax refunds. Life will be brilliant with no debt. Make it happen!

81 Responses to “How to Pay off $26,000 of Debt in 18 Months on a $35,000 per Year Income”

  1. Lisa

    My first thought after reading through the plan is that they probably won’t get to 2015 having only spent 300 in car maintenance and 375 in home maintenance.
    Same thoughts with the zero on things like xmas/birthdays for so long. For awhile? Sure.. but it would be very, very hard to go through two years of xmases and at least one birthday each with no spending.
    I think it can be more helpful to put in some small amount, even if it slows things down a little. Otherwise, it would be all too easy to spend at xmas, and since there isn’t a number to spend, overspending by a little or a lot.
    Overall, it’s a good plan, though. They should definitely hold onto the ideas of the snowball and cutting extra spending. I just think that to get through to 2015, it’s too restrictive to maintain.

    Reply
    • Julie Hart Davis

      I agree Lisa. That was my first thought as well. I would love for them to be out of debt as fast as possible, but maybe put $10/month in the Christmas category, and then stick to that $120! it will be a difficult 18 months for them, but it will be over in no time and they will look back on it with pride!

      Reply
    • Charlie

      I sorta agree. I kinda see paying off debt like living healthy. The best way is to eat totally lean meats, lots of veggies, deprive themselves of anything bad for you and spend hours at the gym each day. But most people can’t do that and if they try will fail and end up eating at McDonald’s every day again (or fall back into bad habits). If you set a budget that is too restrictive you are being set up for failure. Some people can do it, most can’t, and those who can, more power to you.

      Reply
      • Micro

        I agree with you. Going cold turkey is an extremely hard for the majority of people. I realize some might object to stepping down their spending because it lengthens the time they are in debt. That cost is a lot better if they can stick to the plan than if they quit altogether and go back to their old ways.

        Reply
    • Melissa Ferguson

      I am wondering where they must life that their mortgage for a home is only $875/mo, HOA dues $10/mo and they have 2 kids but only spend $10/mo over the next 2 years on haircuts?

      I firmly believe in tightening the budget to get out of debt, but I also believe the best budget is a budget you can stick to… and I wonder how things will turn out for Jenny and Aaron trying to stick to this for the next 2 years.

      Reply
      • Minda

        If you have a trimmer boys and husband’s haircuts can cost $0. You don’t even have to be good to use those things

        Reply
      • MrMcLargeHuge

        A decent home can be had for that much money pretty much anywhere in the Midwest.

        Reply
        • Jodie

          Certain pockets of the northeast, too, are around there. My mortgage (including taxes and homeowner insurance) is $820.

          Reply
        • Melissa Ferguson

          I must admit, I live in the midwest, and at least in more sub/urban areas, I just don’t see it. At least, not without another budget category for homeowner’s insurance at the very least, mortgage insurance if necessary, etc. No matter, they very well could have been extremely fortunate in finding a home that was below average in cost and/or had significant equity from their previous home to reduce how much they needed to borrow.

          My larger point is that in my past unsuccessful attempts at budgeting to get out of debt I find myself making no headway because I haven’t account for hidden costs (i.e. that $60 natural gas bill spiking up to $120 in the cold midwestern winter even with the thermostat turned down to 67, or the unplanned copay that forces them over the now-reduced allowable FSA cap, the field trip fees and supply lists requested at school, etc). They can add up quickly.

          I’m all for being extremely frugal. I work very hard to live within my means, if that means I make everything from scratch including laundry and dishwasher detergent and garden and preserve. I still just don’t see this being a realistically SUSTAINABLE budget for a family of 4. And I’m thankfully not alone in that.

          Reply
          • wisekris

            Its all what your comfortable with. This is line for line the budget my wife and I have. Our food budget is lower and so is our mortgage. We don’t have HOA. We don’t have natural Gas or clothing budget but we do have some other categories. Also our food budget is lower but we cook from basic ingredients A LOT so its far cheaper then most people. Also we went from $20k debt to positive $10k with this budget.

            Reply
    • wisekris

      She prob is implementing the budget and maybe he works more hours? Maybe its her debt and she wants to give him a “thanks for helping” but still stay within their means? Just a thought. This budget is almost line for line like our budget.

      Reply
  2. KH

    This plan doesn’t include the 2 extra paychecks per year from the bi-weekly pay, so there will actually be at least $2700 (plus the raise amount) for house and car maintenance and xmas/birthdays for at least one of the years

    Reply
  3. Roger

    This is a great summary! I’m glad to see an example of a budget with this kind of income because this is in my ballpark, and I’m sure so many others’ as well. Too many times I hear budgeting examples where the income is double that or over 100k and it is difficult to try to scale that to make it practical for most of the rest of us. My monthly budget is similar and this is a great help to see how others can work through it.

    Reply
    • Monique G.

      Exactly what I was thinking. It’s a little discouraging to see those huge amounts when they don’t even come close to applying to your financial situation. I am so happy to see these numbers. It makes it feel doable for our family as well.

      Reply
  4. bob

    They could get out of debt in 15 months if they didn’t tithe. *dodges tomatoes*

    Reply
    • MrMcLargeHuge

      Everyone, please ignore “bob.” He doesn’t even try to understand, and just comes off sounding like a broken record.

      There’s no need for this to turn into a big discussion again. The discussion has happened, more than once, and we all need to move on.

      Reply
      • bob

        It’s okay, I was making light. No-one else need reply to this. I’ve just decided I’m not going to bother posting any more on any blog with tithing or giving that involves large debt or a large savings goal. There’s already enough pro-church propaganda around that I don’t want to see it on a financial blog………….

        Reply
        • wisekris

          Tithing isn’t always to the church. Somtimes its good to give even when it hurts because its keeps you humble and you never know when you’ll be on the receiving end.

          Reply
  5. Renee

    I just don’t know how they are going to get through that length of time without going to the doctor … do they have a copay? Or the dentist? And with $0 in their emergency fund, it worries me that they’ll have to use their cc’s again if something comes up. In my experience, something usually comes up each year.

    Reply
    • Roger

      I’m sure they could do it. I haven’t needed to go to a doctor in years. I’m sure there are lots of people in the same boat as me. (not bragging for sure, just saying that being as intense as this is – as they may need to be – if they can hold of on doc visits, that’s great)

      Reply
      • Jamie

        I’d like to bet that having children, they more than likely will need a dr. visit or 2 within that period of time. Personally, since I have a pre-existing condition, there’s no way we could get away with spending only $10/mo of doctor’s bills. One prescription is 3times that for me.

        Reply
    • wisekris

      This is almost line for line our budget and situation. $20k+ in debt, paycheck to paycheck, $30k salary. Paid off in first year of our marriage with YNAB and a bit of savings my wife had. We some in savings till the end as a FPU Emergency Fund / YNAB Buffer but when we had more savings then debt we totally just used it all… Best night of our marriage as we danced around the living room. Answering your question…. we were young and didn’t really need the doctor. Its been another year and we’ve been to the doctor like 2 times I think?

      Reply
  6. Jodie

    Do they already have kids? A family of four getting by on $10/month haircuts? And no copays? No preschool/baby stuff? Only $20 for car maintenance–do they get free oil changes and inspections, etc.? It just seems REALLY restrictive, to the point where it might be too difficult to follow for that length of time without hitting a CC or worse, giving up altogether.

    Reply
    • MrMcLargeHuge

      Haircuts and basic car maintenance (oil changes, brakes) can be done at home, so the former becomes free and the latter they must pay only for parts. If neither of them know how to do that maintenance, now is a good time to learn (I, myself, recently did). Find a family member or friend who is able to teach, and just do it. If necessary, confide in that person that the goal is to get out of debt. I find that that’s a noble goal that many will help support.

      Reply
      • Jodie

        Ha, two things I would never attempt to do by myself-cut my own hair or fix my own car. (Nor do I have a desire to learn how to do it. With no garage and a northeastern climate, it would be difficult come February.) But if you do your own repairs, you still have to buy the parts. Brakes aren’t cheap! That’s partly my concern for them and only $20 per month.

        Reply
        • wisekris

          Oil Changes are every 3 months (more if you really read your car manual). $60 is more then enough for an oil change if you find a good deal. Haircuts can go as little as $6.99 at a super cuts (we get a coupon ever 2 or 3 months) and I don’t mind having hair on my ears for a few weeks. As for car repair if they are just doing it for a year to pay off debt they could very well not have ANY car repair for 1 year and if they do thats an emergency fund issue.

          Reply
  7. Timothy Paul Snyder

    If they are getting $5,000 back in taxes. Why wouldn’t you recommend they change their withholdings to get $415 more in their paycheck each month immediately instead of letting the government hold that money with no interest. They could use that money to help pay down debt faster.

    Reply
    • SQ

      Perhaps it’s a matter of whether he’ll stick to it or not if he only has $20? When my husband and I actually budgeted our spending money in, it was like that…I got $30 every two weeks and he got $20, because I was more likely to blow a $40/month line than he was. It may seem unfair, but a budget has to be realistic before it does any good.

      Reply
    • Megan K

      I was thinking this too. My only concern is whether they can be disciplined enough to put it all toward debt, and not have the ‘extra income’ spent on other stuff.

      Reply
  8. Carola

    It certainly made me re think what I consider a restrictive budget, this is way beyond anything I would have imagined…I don’t think is realistic a zero-social life, especially if you are in a new place, you can’t come new and say no to every invitation, or not in my book. It really has me thinking…it’s all about priorities…even groceries seem very low to me. I would love to hear an update in a couple of months just to have a sense how are they doing with all those 0 categories.

    Reply
    • Roger

      as for groceries, this is not unusual. my budget is even less than theirs for groceries family of 3 and income is close to the same. (a little higher)

      Reply
      • wisekris

        Same here. Ours is a lot lower. We are only 2 but even with 4 it would only increase our staples.

        Reply
  9. Mike B.

    Why are they getting such large tax refunds? They’re loaning money to the government interest-free and borrowing at interest to do it.

    They should adjust their withholding to target a few hundred back (or even owing a few hundred), and apply the additional take-home pay to the snowball.

    Reply
  10. Mechell

    Hi Mark,

    How do I contact you? Do you have a email that I can send a questions?

    Thanks for your time.
    Mechell

    Reply
  11. Molly

    I agree with previous posters that while this is a very aggressive debt payoff budget, its also a bit unrealistic. A lot of those zeros will be hard to live with unless they already have significant balances in those categories. Its the kind of budget that could make them easily fall of the wagon and completely call it quits. I’m all for being debt free and theirs is significant considering their income but still. So those would be my two biggest questions, do they already have significant balances in some of those categories and do they have children?

    Reply
    • wisekris

      Nope. I’ve used the EXACT budget. Its possible. We went from $20k in debt to debt free in a year and positive $10k the next year.

      Reply
      • Amanda

        While I am impressed that you actually used this budget Kris, you said in one of the 100 earlier comments about how you’ve used THIS EXACT BUDGET that it was during the first year of your marriage….you didn’t have any kids, you may not have even owned your own home at that time, etc. So your situation actually was very different. I could see myself more able to stick to a budget like this now when its just me or next year during my first year of marriage because my future husband and I can restrict ourselves if we really want/need to and it doesn’t effect anyone else, but not with 2 children. And you keep repeating that you have stuck to this as if to say that if you did it, then it should be for everyone. But everyone is different, so just because it worked for you doesn’t mean it would work for everyone. We all get the point… you and your wife are awesome and trust me we’re all jealous that you could stick to such a restrictive budget and pay off your debt….but some of us can’t do it. Like many other posters said, the best budget is one you can actually keep (and by “actually keep”, I don’t mean “possible to keep,” I mean “will keep”). Just a thought.

        Reply
        • Kris Wise

          We did/do have a house and while no we didn’t have 2 kids I know we could have been a lot more creative economical with our food budget. The only situation I can see where someone couldn’t possibly do this budget is if they live somewhere were the price index is different (more expensive food, fuel, homes) but if thats the case they would/should make proportionally more (unless they are working minimum wage). but I think what you’re implying is that its below your standards? Sorry but when you’re forced to live on a budget you make it work… if you think you NEED more… that’s not a financial issue that’s a personal one. All I’m saying is that this budget IS POSSIBLE physically/emotionally. It can be tough, no one is disputing that but it can be done and in the end its worth it.

          Reply
          • Monique G.

            I 100% agree with you, Kris. As they say desperate times call for desperate measures. If you can’t stick to this for 18 months of your life, you must not want the freedom that bad. And that’s fine but for those of us that do want it that bad this is totally doable. It’s hard but so is hoping and praying that you will have enough to cover your expenses and debt each month at least this way in a year and a half you will have financial freedom to budget for some of those extras you went without.

            Reply
  12. Patty

    The big question is, how old are their kids? Do they not go to preschool? I have 2 toddlers and we spend on preschool, school supplies, uniforms, field trips, ice cream days, etc. We also have amazing insurance and our copays are still $20 each, and with 2 kids, you can bet we need to have some money in that category and for prescriptions. Also, most kids do extra curricular activities, there’s nothing in the budget for that.

    If they are planning for future kids they can get away with not filling up those categories so much, but they already budget for Kid’s Parties (based on yesterday’s post) so I assume kids already exist.

    As it is, I don’t believe this budget is sustainable. I have some ideas, but the reality is, it’s not enough income for all of their expenses.

    - Give up tithing temporarily. I know all the arguments about it being a sacred duty, it’s not their money (it’s God’s money). I participated in the discussion yesterday and respect the viewpoint of tithers, but honestly, something has to give. They can pay God back with interest later. They need to take care of their family first.

    - Leave the tithing but drop the Other Charity

    - Find a cheaper place to live.

    - Get a cheaper car.

    - Alternate using the car/public transportation to reduce Fuel costs.

    - Carpool to work/school.

    - There’s also no mention on whether Jenny works. Maybe she can get a job on the side (part time/work from home/something/babysitting).

    - Drop Hulu, Netflix, Fun Money, Restaurant Money.

    - Sell unused items and toys on eBay or Craigslist.

    - Donate Plasma

    All of this is in addition to dropping things like flight lessons, etc.

    Reply
    • Jameson King

      Patty, I think you have some great ideas! I don’t want to get into a religious debate, but simply share the believes of one who pays tithing. We (or I should say I, at least) believe that paying tithing first shows God that He comes first and that we have faith that we’ll watch over us and financially protect us. The blessings come in many ways, one of them being the ability to make good financial decisions. I believe that if we pay the Lord first, He’ll bless us WITH INTEREST.

      Once again, great ideas, just wanted to share a little about why someone would make it their number one priority to keep tithing in their budget, no matter how hard their circumstances.

      Reply
      • Roger

        Agree! I was about to type the same thing… I understand the desire or what some might consider the “need” to hold off on tithing, but put God first and have the faith to trust that He will bless us beyond ways we can bless ourselves.

        Reply
  13. azgirlStephanie

    If their tax refunds are consistent every year, they are having too much withheld from their paychecks. They should change their withholdings and they would have a little more each month to pay towards debt. Quit giving the government an interest free loan! It’s your money.

    Also, while paying off debt is important a small emergency fund is also important to have. They own a house and a car, both of which could need unforeseen repairs. They could just stop contributing to the emergency fund for now, still have a cash cushion, and have a little extra every month to pay off the debt.

    Reply
    • Monique G.

      Actually, our numbers look a lot like this budget and we don’t have anything come out of paychecks for federal taxes. But there are a lot of tax credits (not deductions) that we qualify for based on this income for the size of our family. Just wanted to let you know why their refund is probably so much because before we increased our withholding we would actually get back about 2500 dollars more than this.

      Reply
  14. Susan C.

    Things would have been very differently, and better, if the couple just had used that tax refund and bonus to get rid of the debt once and for all. Too many people get used to just living on credit, using so-called equity in their homes as an ATM machine. And, what is this business about the 401K loan? Some serious problems here if two people have had a steady income for a number of years, bonuses, and that huge tax refund (that should be addressed; smaller refund around a few hundred and the money is spread out into their income over the year. Some people say they like to have a big refund as a “forced savings plan” but I’ve rarely encountered that with taxpayers. (I also worked in the tax prepared business for CPAs and accounting offices for a number of years). Those big refunds go to trips, new toys, and larger TV screens. I would strongly advise when these big refunds and bonuses come around again in early 2014 to just pay off the debt with it, and then start anew with the YNAB categories on the income coming in at that time.

    Reply
  15. Jameson King

    I know that a few have already mentioned it would be hard to get through without ANY money for Christmas, birthdays, daycare, haircuts, very little home/car maintenance… and I agree! I guess the one thing I’d add, is in our birthday fund allocation, we account for gifts to others as well. So, even if they can go that long without giving themselves a birthday/christmas present, would they so focused on paying off their debt that they’d forget to offer kindness to others?

    I know that it is very helpful to go gung-ho to pay off debt, but I would say loosen up just a bit and extend it out another month or two. I know 18 months sounds great because it is a “round” number (1.5 yrs), but why couldn’t it be 19 or 20 months?

    From a positive note, I encourage all sacrifice to get debt free! I hope you can do it!

    Reply
  16. Zachary Reese (@thesimplicity)

    This seems sort of silly. Spending zero dollars on birthday presents, christmas presents, an emergency fund, “baby stuff”… 18 months is a long time. Something ALWAYS pops up. It seems like a better idea to pay back the debt slowly and allocate that money to an emergency fund rather than having unexpected costs pop up that put them further in debt.

    Reply
    • Roger

      That’s what Rule 3 is for: Roll with the punches. It’s better to be over-agressive against the debt and then slice a $10 bday gift off if needed. This puts priorities in the right place and makes one think hard about taking money away from the debt to apply towards other things. This is an important step mentally… gazelle intensity. :)

      Reply
      • wisekris

        ^THIS. Planning zero dollars in a category IS PLANNING. Its not saying things won’t pop up but its saying. This is still not as important as paying off debt. If it HAS to happen we’ll find a way to roll with the punches but birthday gifts can be made or more personal and certainly can be put on hold a year or two.

        Reply
  17. Jess_Esq

    If I am reading this correctly, this plan is essentially a Dave Ramsey Plan (snowball, smallest debt first, etc) but it lacks (from the numbers I see), even a baby emergency fund. I am echoing the other concerns here that with just a few bucks a month towards car maintenance, they are bound to need something fixed in 18 months that would benefit from even a baby emergency fund.

    Reply
  18. Jon_ad

    I don’t know where they live but a family of four cannot feed itself for 270 a month in any area that I know.

    Reply
    • Emily

      My family of four budgets $300 for “groceries.” That includes all food, consumable household items such as papergoods, and toiletries/cosmetics. With two small children, that also includes diapers and wipes. While we budget the $300, I regularly spend significantly less than that, often $30 less. I also do this without coupons.

      We live in the southeast, and while it is a challenge to maintain, it is possible to do.

      Just thought I’d reply :-)

      Reply
    • Jillian

      Ditto. As a family of four with one kiddo who is just now eating solids, we definitely couldn’t eat on only $270. What kind of food do you buy for only $270/month? Is it all processed?

      Reply
      • Emily

        No, actually, only a little is processed. We’ve reduced the amount of meat we eat and use rice and/or beans as filler to stretch the meat (Ex. instead of 1lb ground beef for tacos, I’ll do .5lb plus rice and black beans). I’ll buy a whole chicken to cook instead of precut chicken breasts, etc. We’ll eat soup or an all-veggie meal to cut out meat completely maybe 3 times a month. I make all of my own seasonings (such as taco seasoning) instead of buying the packets. For snack we eat crackers and fruit (really it’s only my two year old who wants an occasional snack) and we don’t regularly buy cookies or other dessert items. I shop sales and buy store brand and also shop the local “savings” grocery store.

        I also make my own cleaning products and my own laundry detergent. The homemade detergent alone I know has saved a significant amount.

        Reply
        • Emily

          I should also add that I really just do not enjoy cooking and to be honest, I’m just not good at it. My menu tends to be pretty basic and unvaried, so it’s easy to know what I will use when I find something for a good price. If I were more skilled in the culinary arts, then I would most likely find it hard to stick to this budget :-)

          Reply
        • Christina

          I do everything Emily has listed here and my totals are completely different. I have to assume that it is either the area I live in or the foods I am not willing for our family to eat. I even make my own bread and all of our snacks myself. It frustrates me to no end because I work so hard at the grocery budget and spending, but there is no way I could feed my family on this budget.

          Reply
        • wisekris

          haha this is pretty much what my wife does. She hasn’t made her own detergent (do you have a recipe?) but we pretty much cook from raw/basic ingredients and spices. its cheap and not as hard as you think. Chicken/Fish/Ground Turkey are our staple meats. Rice, beans, pasta our fillers. Always a green with her :) Green beans, Broccoli, Salad. We don’t buy much bread and she’s lactose intolerant so we get almond milk once in a while. ALDI is your best friend on a budget.

          Reply
          • Emily

            @wisekris Yes! I do have a recipe. The one I use now is the “economy size” recipe. I’ll post it first, but also tell you one with smaller amounts in case you want to test it first before committing.

            1 box Borax
            1 box Washing Soda (not baking)
            2 bars Ivory Soap
            2 containers of Oxiclean Crystals (dollar store brand)

            I microwave the ivory in small amounts to make it puffy and brittle, then use a food processor to mix it all up. It gets pretty dusty, so I do it outside or under a vent. I use 2 Tbsp per load. With this recipe, it came out to be just under 6 cents a load.

            For a smaller batch,

            1 cup Borax
            1 cup Washing Soda
            1/2 bar Ivory Soap
            1/2 of a container of Oxiclean.

            An internet search will give you various options with regards to hard water etc. There are many different recipes. Some like to add scent crystals to keep a “clean laundry” smell since this is odorless after washing.

            Reply
          • SugarHigh

            As a diabetic all those rice and bean dishes would send my glucose levels sky high. Same with potatoes and most fillers. Even a lot of fruit isn’t recommended.

            Reply
  19. AO

    I wanted to offer up some suggestions for those who are concerned about their lack of budget for presents. We were on a very tight budget while I finished up grad school and we have a large family that loves gift-giving. Around the holidays I would take old clothes to consignment stores, baby stuff to consignment stores, sell old presents we never used on Craigslist, sell old furniture, etc. It wasn’t much, but we could easily get $50 or so for the holidays that we were able to divide up amongst creative gifts for family members. I enjoyed doing that so much, I continue to do that now, even though financial things are better for us. The kids could sell items at craft fairs, too, for gift spending money. I did that when I was a kid and I loved it!

    Reply
    • Roger

      This is a great idea! I know of lots of people (including my family) that does this too. Kindness and giving doesn’t have to only be expensive things. Its the thought that is put into the gift that makes it that much extra special.

      Reply
  20. backpackers4cures

    I am blown away at how low your costs are for general living expenses. For example Mortgage + Taxes or Rent in New England is at a minimum triple the cost of your mortgage; same for basic utilities.

    Where are you living or how have you reduced your costs to these numbers?

    Reply
    • Jo

      I live in the Midwest in a 4 bedroom 2 bath house in a A rated school district. My house payment including taxes and insurance is less than 750.00 a month.

      Reply
  21. Carrie

    I am happy to see a budget for us common folks! I have lived on a similar income with eight kids at home and don’t ever remember carrying a credit card balance. It’s true that we sacrificed a lot of things like lessons, fancy gifts, electronics, and expensive vacations, but our kids learned that if they wanted something, they worked for it. Our daughter even paid for most of her trumpet lessons in high school. They learned delayed gratification and treasured what they did get. Our Christmas budget was $200 for the whole family.

    I am a stay-at-home mom, so every year or so I’d tell them that if I went back to work, they could have these things. EVERY time, no matter the age, they all voted for me to stay at home. It was worth the sacrifice for them as well as for me! Now four are out of the house and they never regret not having “stuff”, but they remember the fun times we had. Some feel sorry for our kids, but they don’t feel sorry for themselves. My motto, “We’re not poor. We are making choices.” Good luck to Jenny and Aaron! You CAN make it!

    Reply
  22. KJUU

    As someone who has struggled with debting behavior (and worked very hard with very little to pay it off), this budget is too restrictive, imho. Mark, if you have NOT lived the life of a compulsive debtor — and I’m not saying that these folks are — then you don’t know that deprivation over a long period for whatever reason can set some people up to re-debt in massive proportions. I know it’s unthinkable to some, and hard to understand, but it happens and so often that I believe it’s a huge part of why we have such a debt problem in the first place.

    Self-care is extremely important. Balance is extremely important. Yes, getting out of debt is important too, but an all-or-nothing attitude can create such anxiety and resentment (if one isn’t prepared for that and working to eliminate it) that something can push you over the edge and boom! You blow it.

    Jenny and Aaron can get out of debt. There’s no real reason to do it in 18 months, if that’s not in their best interest. Only they can say for sure.

    Reply
  23. tmb2

    I agree that this budget is draconian and most likely unsustainable for 18 months; however, Mark pointed out that there is an entire paycheck plus a predictable refund not in the budget. I would call this budget a worst case scenario to show the couple what is possible and work from there to fill in the other budget items. Even if it ends up taking 24 months, that’s probably still significantly shorter than what the couple originally envisioned.

    Reply
  24. Wendy

    I agree, it all looks pretty tight, I would like to see how much is built up in the categories they are no longer to contributing to (there could be enough surplus in there to cover christmas/birthdays for the next 18 months). However, you can always add things back into the budget and it might be a lot less than it was originally, just by keeping the debt forefront in their mind.

    I believe there are some great benefits to having a tracking spreadsheet or a chart on the wall, get the kids involved every week/month, they can learn about debt reduction choose the right colours to colour in how much closer they are to different things. Its a principal used by a lot of companies if it is visually tracked it is easier to maintain and boosts morale at keeping up the good work.

    Reply
    • wisekris

      Thats a really awesome idea about the chart for the kids!. Give them an opportunity to help out with the family debt too. They might really look back fondly at those years when they are in older and see how much their parents taught me.

      Reply
  25. Simon

    Zero for Christmas and birthdays! I think that’s completely ridiculous Mark and to be honest quite niave of you to suggest that such a restrictive budget would even work.
    And all to do it in 18 months, why not round it up to 2 years and make a realistic budget?

    Reply
  26. wisekris

    Mark my wife and I have done this exact budget in nearly the same situation: $20k in debt, $30-35k job.
    FPU training and YNAB at the ready we did it! Email me if you want some feedback. We can send you some our real budgets… we didn’t have YNAB the whole time to some might be lost, or excel sheets.

    Reply
  27. Mikhaela Reid

    I’m puzzled as to why everyone thinks it is 100% necessary to spend a lot on birthday and Christmas gifts—there seem to be a number of comments pointing those out as the most unsustainable or unworkable parts of this budget.

    With a little creativity, it is totally possible to be really thoughtful at birthdays and holidays without spending any money at all: make gifts and cards from things you have around (I happen to have a huge stash of yarn and fabric from pre-YNAB oversplurges), regift items, use Freecycle, or even make agreements with your family to have a Christmas free of purchased gifts. Or give nontangible gifts of your time—one of the best gifts we got recently was an evening of babysitting that we later used to go out for a date on our anniversary.

    We stopped doing Christmas and Chanukah gifts for all adults in my family on mutual agreement (though most people do still tend to buy something for the little kids) and now we donate tribute gifts to charity instead through giving catalogs.

    Reply
    • Mikhaela Reid

      P.S. On the other hand, I’m as amazed as everyone else by that food budget for a family of four. We are a family of three, we only eat out 1x per month, we try to cook everything as much as possible from scratch, we eat a lot less meat than we used to and we buy grocery items in bulk on sale… and we struggle to get below $600/month.

      We do live in NYC, though (super high grocery prices), and we have a kid with lots of food alleriges, so that’s probably why. And I will admit to buying a lot of organic items (but in-season ones from farmer’s markets or through a CSA generally).

      Reply
  28. BT

    I, too, and flabbergasted at the low figure for food. I’m not at all saying they are unrealistic – I just wish I could figure out how to even come within a football field of that figure for 4 people. Admittedly, I don’t use coupons. But, I do eat most of our meals from scratch – All my meals are scratch because of health issues. Once I went on a restrictive diet (never ever eat out and never eat anyone else’s prepared food) and no longer ate out, my food bill sky-rocketed. I’d be overwhelmingly elated to get it down to $800! Seriously, I can’t eat anything but clean meats with no preservatives or antibiotics. I can’t eat any grains of any kind or potatoes. I can’t eat any legumes. Mostly veggies, nuts, meats, and fruit. I have started shopping on Amazon to find lower prices for everything I can, like nuts and even some meats – but we can’t seem to get the bills down. Vegetables and fruits and meats and nuts are expensive – and that’s what I have to eat. And, teenage boys are ALWAYS hungry. We won’t feed him junk or cheap just so he can have the problems I have later. But, seriously, I am trying to find every way I can to reduce the bills. We have no way to have a garden right now – hopefully later. We need a freezer so we can buy in bulk – and now that we are starting YNAB, we are going to look at that and the payback time and decide if we can afford it.

    I have to say, as far as their budget – that is what we did 22 years ago when I was in debt for school loans and no house. We were VERY tight – with EVERY penny. No entertainment. $9 for food per day. No gifts. Nothing. We did it. We weren’t in debt until there was no option but to buy a car because we couldn’t get to work without it. It can be done. We paid my school loans in 2 years and then bought a very cheap house and paid for it within 3 years because I was a penny hunter.

    But, after spending half our income on car repair bills this year – I can’t imagine not budgeting more for repairs. Still, at that point, if it’s an emergency, then you can change your budget. Later you can “plan” for that emergency like we have now.

    I still cut everyone’s hair – even though my teenager wants to go to someone just so she can. And, we don’t give presents even if it’s expected if we don’t have the money. I can understand if someone really can’t trust themselves – you have to be creative to figure out what you can do then. This budget is just saying it can be done. If you can’t, then you can do it differently. But, I know I did it this way – before food bills became an medical necessity.

    Reply
  29. Summer

    Fantastic post Mark! It’s all about the numbers and that it is possible to make them work in your favor. Now if I could only figure out how to apply it to tackle our private, grad school education x 2.

    Reply
  30. lisa

    $70 a month electric…. where do you find that?????? I am sure the kids would be just fine with no christmas presents. And no money for school supplies.

    Reply

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