Three Phases of JAM

The JAM program is broken down into 3 Phases.  Each phase is broken down into 3 simple steps.  The intensity level changes with each phase.

Red Level Intensity- We are going to run, not walk, out of debt.  Personally, my only regret with getting out of debt is that we didn’t do it faster.  You are not going to keep up the intensity level forever, but for a time, you are going to cut your expenses to the bone.  Do not let sleep to your eyes (Proverbs 6:4) 

When we were crushing our debt, I was working full time, cleaning part-time, and studying for my MBA.  It only lasted for 6 months, but this period changed the course of our finances. 

Red intensity means cutting your all of your frivolous expenses.  Yes, I mean some phone features, your dining out, and yes, your extended cable TV (Gasp!)   You can resume these when you get to Phase 2 if you’d like. 

If you are a beer drinker, this is your Keystone Light/Natural Light phase.  If you are a shoe shopper, this is your Payless/Rack Room Shoes phase.  Like I said, we’ve been there, and this won’t last forever.  If you are thinking to yourself, “There is no way I am going to live like this” go back and reread the motivation and ‘enough is enough’ post. 

The more intense you are in this phase, the quicker you will get out and start drinking better beer and wearing better shoes. 

Yellow Level Intensity- Whew, you are now out of the red storm.  Yellow intensity looks a lot better.  All of the money you have been wringing out of your budget to knock out debt in phase 1 is now going to roll into your Phase 2 steps. 

Note: If you are coming out of Phase 1.  Celebrate!  Do something special.  But not so special that it knocks you back into Phase 1.  Steak tastes much better when you haven’t eaten it for a while. 

Yellow intensity means that you take the spending discipline that you have developed in the red zone, but ease up a little bit.  Go out to eat once in a while (make sure your ‘once in a while’ isn’t 5 times a week.)  Use an Entertainment Book for your dining.  We typically spend $20-$25 after tip (and I tip well, 25-30%) when we go out with our Entertainment book (that’s two entrees and two drinks.)   We are not eating steak, but still enjoy ourselves out and about.  We eat out 1 time a week, on average.  Another night, we get pizza or Subway for dinner. 

Your beer can upgrade now to Bud/Miller Products with an occasional Samuel Adams, if it’s drastically on sale.  You can now get your shoes at DSW (if it’s on sale or in the clearance rack) and overstock.com (if your feet are not picky). (NOTE from Bryan’s Wife: Bryan is so frugal that he doesn’t realize that the ”D” in DSW means discount and Overstock.com is also discounted, so all items are technically on sale.) 

Green Level Intensity- Congratulations.  You are now starting to live the good life.  You have been living in the red and yellow intensity zones for a while now (“yes, Stewie, a WH-ile”), so don’t completely forsake the habits that you’ve created.

The challenge in this phase is that the money that you have been rolling into each new step is now parked in Phase 2, Steps 2 &3.   With 25% of your income locked in retirement and savings, you will need to come up with extra money to roll into Phase 3. 

The key to this phase is to increase your earnings while maintaining a moderate lifestyle.  This will create your extra margin to place into paying your house off early, paying for your kid’s college, and your investing/giving. 

You now have an emergency fund and you are paying yourself first with 15% going to retirement and 10% going to savings, an extra portion will go to your phase 3 step.  The degree to which you budget after this is up to you and your situation, as long as you only spend what you have, i.e. do not borrow from your 15% or 10% or, God forbid, borrow on a credit card (I just felt my blood pressure rise.)  

With your leftover money, you can now budget for premium German Hefe Weizen and buy whatever shoes you want (hopefully, within reason…they are only shoes.)