One of the smartest things my husband and I did was to avoid making additional expenditures based on raises or bonuses. For instance, at one time several years ago he landed a more lucrative job with another company. If memory serves me correctly, the increase in his salary was about $8,000.00 per year. The only thing we changed at the time, was how the rate at which we were paying down our debt.
Instead of continuing to pay the minimums and accumulate extra debt for "special purchases," we actually tightened the belt. We made a spreadsheet of each of our debts, the balance, the APR, and the minimum payments. We decided we would pay an extra $1,000.00 each month on debt and that we would stop using credit cards. We were now on a "no new debt" plan.
Listing the accounts that we owed was a startling experience. First, the total debt amount was unbelievable. Had we kept track of that all along, I'd like to think it would never have gotten so far out of hand. Second, the accounts that we might have paid extra on monthly were not necessarily the best decision. Instead of paying off the lowest balance first, we realized we would get more "bang for our buck" paying off the highest interest rates first. We would start with the first, and once that one was paid off, we would move on to the next in line, keeping our total monthly debt payment steady. So the second highest APR debt was paid off at an even greater rate. We had to be extremely self-disciplined, but it sure felt good to say goodbye to our monthly bills!
One thing that made that journey more palatable was our "allowance plan" whereby we each got a paycheck reward of "mad money" to spend however we wished from each and every paycheck. His paycheck or mine, we each got 10% (later lowered to 5%). As opposed to a fixed-amount allowance, this rewarded us personally for any overtime we worked or bonuses received, and prevented frivolous over-spending on the rare occasion that a paycheck was short. We also kept a nice "cushion" in our checking account to prevent overdrafts or cover unexpected expenses.
When the new job ended and he was able to return to his original profession, we adjusted our plan accordingly.
We were 2 years out from reaching our "debt-free by 2003" goal, we had unexpected changes in our family circumstances. We made some tough decisions that may have seemed penny-poor but were, at the time, family-wise. We didn't have a lot of cash on hand, but due to our debt reduction strategy, we had an incredibly high credit score! So yes, we again ended up being over our heads in debt. This is a far cry from being foreclosed upon and homeless which may very well have happened if it were not for our adherence to our self-imposed rules.
Hubby has remained with the same company for many years now and his loyalty has paid off nicely. We still struggle with spending issues and some debt, but what a relief to know that we CAN do it. Impulse control and planning are the keys to financial stability. I must continually remind myself of that!