Little picture comments (not face-punchy):
the [debt] hit list
Other have mentioned that your mortgage interest rate is low enough that it's better to leave it around than pay it off, and idea which you seem pretty receptive to. Your student loans are more or less free money, so if you're not too debt-averse, it would be better to keep them around and invest the difference as well. That said, if you'd rather get rid of them, it's a little worse mathematically than investing, but it also frees up some cashflow and would help you sleep at night. Your HELOC should be gotten rid of. The rate is pretty low, but as you note it could increase at any time. Moreover, if you can pay it down, you'll have enough home equity that you can afford to use it as a
cash cushion, and then you won't need to keep an emergency fund in cash (though you may want to keep some money in cash nonetheless to help smooth out your jerky freelance income). That way, you'll have more employees working for you.
If I were you, I would throw every penny you make at your credit card debt and not worry about any other savings vehicles until then. It's the same as an investment that'll earn a guaranteed 24%! What could be better? (As gooki notes, you can also see about a balance transfer or other financial instrument to help with that problem.)
I feel like an idiot for not having my finances a little more together. Nobody seems to get mean here, but you all know a lot more about this than I do and I'm a little embarrassed (insert red-faced emoticon here)
A big mantra of
Your Money or Your Life, the great granddaddy of all financial independence writers, is "No Shame, No Blame". You seem to have an okay grasp of that. Yes, you made some mistakes. You can't unmake those choices, and you can't unbuy your house at the top of the bubble. You're here and hopefully learning a lot, and that's what matters. No need to be embarassed.
Now, let's look at the budget.
150- eating out occasionally, renting movies here and there ( we spent $400 on this category last month, so I am getting better)
If you'd like to cut this number, there are a few ways to do it. Do all your movie watching on Netflix, and supplement with movies from Redbox and Blockbuster Express that you return promptly. That'll get it under $20 a month. Challenge yourself to eat out only once a week, or even less. If you like being waited on, become regulars at the corner burger or pizza joint (one of the best tips I've seen around here). If you like the food itself, learn how to cook a dead-on clone of Applebees, Cinnabon, or Mall-food Chinese. If you like meeting friends, have them over for dinner (bonus cheapness if it's a potluck!).
Groceries: $1,200
Holy god that's a lot of money. Start a price book. Read MMM's articles
1 and
2, and hang out in
this thread for tips about stocking up, cooking cheaply, and rotating between stores. You can really save a ton in this category.
200- clothing, pet food, father's day, my mom's birthday etc (shopping)
Knowledge will set you free. This is a pretty broad category, so if you want to cut it I'd argue you should track it. If you use cash, try the envelope system. If you like plastic, sign up for Mint. The little leaks from your budget disappear when you zero in on them.
125 cell phones (2 smart phones)
You can pay less for the same service you're getting now.200 car insurance
$2400 a year for car insurance when only one of you drives much? I would shop around and see if you can do better elsewhere with the coverage you're getting now, or if that's good for your area. You may also have coverage you don't need... as you start driving less and owning less vehicle inventory (concept explained
here), you'll be able to cut this further.