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Failing to Plan = Planning to Fail

August 29, 2013

So over the past few days I laid out a fairly detailed analysis of our current financial position, budget and projected payoff plan for the next 10 months. According to the projections, we should be able to payoff the Honda and both of hubby’s student loans by June 2014 while also paying at least half of the interest that is accruing on my student loans while they are in deferment. As long as everything goes exactly to plan we’ll be in good shape. However, as everyone knows, things very rarely go according to plan and the best way to stay on course is to identify risks to the plan and a mitigation strategy to deal with it. So, I’ve outlined risks and mitigation strategies for the next four months. In December, we’ll check in with where we are as opposed to where we expected to be and make adjustments for the next quarter accordingly.

September

Risk 1 – Exceeding School Expense Budget:  Though we budgeted $75 for this, it’s not really a monthly expense. There tends to be a large upfront cost at the beginning of each mod (September and then again late October) and we usually end up spending $100+ depending on the classes I’m taking.

Mitigation Strategy: I’ve already checked out the required materials for my classes and so far, the total cost of course packs is right around $55. I’m still waiting on the required materials for my third class this mod, so depending on the requirements we might stay within budget. If we do go over budget, it shouldn’t be more than about $25, which easily will be compensated by the lack of school-related spending in November.

Risk 2 – Exceeding Kiddo Budget: So our little one is definitely going to need some fall/winter clothes in addition to his usual supply of pull-ups. This makes it a real possibility that we’ll exceed the $75 budget we set to spend on him by $50 – $100.

Mitigation Strategy: Luckily we won’t need to buy him a winter jacket (since the one from last year fits and is in great shape) and same goes for his fall jacket (We bought it slightly big last year for this reason). I also bought shoes that were super on clearance over the summer that will be perfect for the fall. That still leaves things like jeans, tops, sweaters, etc. By taking advantages of sales and coupons and by spreading the expenses over two months, I think we should be able to stay within $25 of our budget (the overage would come out of our misc. fund for the month).

October

Risk 1 – Exceeding Travel/Savings Budget: In October, we’re planning on going  to the engagement ceremony for one of my really good friends from undergrad. We’ve already paid for the plane tickets, but we still need to pay for a rental car, hotel, gift and food/drinks while we’re there.

Mitigation Strategy: October happens to be the month where we should get a reimbursement from our FSA for some of the childcare expenses we incurred. We budgeted that half of that reimbursement would go to savings, and while I don’t think we’ll need all of it (maybe an extra $100 at the most), it does give us a little wiggle room.

Risk 2 – Halloween: It’s kind of expensive to get costumes, candy, etc. for this festive option, but seeing as how our child is 2.5 and finally understands the concept, it’s not really an option to skip it. Last year we spent $50 on his costume, and probably close to that much on candy (and it was all gone!!).

Mitigation Strategy: It will take some creativity, but we should be able to spend about half as much on the kiddo’s costume and half on the candy. We’ll make sure to get the candy at Costco this time and for the little guy’s costume, we’ll try to find something we like sooner then check out eBay or Craigslist.

November

Risk 1 – Wisdom Teeth Removal: I have to have my wisdom teeth removed and I was planning on scheduling it for November.

Mitigation Strategy: Insurance/Savings: Our dental insurance is pretty good and should cover most of this expense. The rest will come out our savings line item for the month and out of our actual savings account, if necessary.

December

Risk 1 – Christmas: This is an obvious one. It’s the holidays and it usually means spending. There’s gifts for my family, for the hubby’s family, each other, friends and hostess gifts for all the parties that happen.

Risk 2 – Trip to Orlando: We’re going to Disneyworld! (no really, we are!). We planned a family trip with my parents and brothers for 5 days between Christmas and New Year’s.  While we’ve paid for our plane tickets and the hotels as well as breakfast at Cinderella’s Castle. We still have to pay for the rental car, admission to the parks (Sea World and Magic Kingdom), and food.

Risk 3 – New Year’s Eve: It’s our last NYE in our 20’s and hubby’s best friend’s bday is the day before.

Mitigation Strategy: For Christmas, hubby and I agreed not to do gifts this year and just do stockings instead. We’ll probably do the same for the kiddo and do Disney themed things to go along with the trip – I know between the grandparents and the rest of the family there will be no shortage of gifts for the little one to open (he had so many gifts last year, it took him a full week to open all of them!). I know that the rest of our family is also on a budget so we might try to do a secret santa or set a cap on what everyone spends for gifts (it’s supposed to be about spending time with people, not gifts!). And finally, a big part of our strategy this month is to dip into some of the savings we’ve accumulated over the past few months and just enjoy ourselves. Our vacation was planned to celebrate the end of bschool and we intend to do just that! With regards to NYE – we won’t do a crazy party but we might try and have some people over or go out to dinner with our friends, so that shouldn’t do too much damage to the budget.

Summary

As you can see, a big reason that we included a $300/month travel/savings line item is because we expected random things to pop up. We wanted to make sure we could roll with the punches. I also mentioned a while ago, that to me, there are certain things that are worth more to us than paying down our debt.  Those things include our health, our child, and our friends/family.  We are not going to let this quest to be debt free cause us to miss once-in-a-lifetime events of our friends and family. We will certainly be more frugal in other areas to compensate for this. However missing a monumental event in the lives of the people we care about to save several hundred or even a thousand dollars isn’t worth it.

Next Steps

There you have it! Our detailed plan for attacking our debt. Next time, my post will likely focus on the other two aspects of this blog: establishing a career and raising a family.

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