WE’RE DEBT FREE!!!!!!!!!!!!!!!!!!!!
Let’s clarify what that means. Yes, I do still have a
mortgage but that. is. it.
No credit card debt
No car payments
No medical bills
And NO STINKING STUDENT LOANS
About three years ago, I visited my mom while she was living
in New Mexico and she told me about this guy named Dave Ramsey and offered to
let me borrow her copy of his book The
Total Money Makeover, so I borrowed the book and read half of it on the
plane ride home and finished the rest pretty quickly. Tim read it just as fast
and we were off! Nothing Dave says is really earth shattering or new but he
says it in a very “You can do this,” way and breaks the journey up into steps
he calls, “The baby steps.”
Baby Step 1: Save $1000 as quickly as possible. This is your
emergency fund and should NOT be touched except in the case of an EMERGENCY.
Tim and I finished this step in about a month, put the money in a savings
account, and we have not touched it since we put it there three years ago.
Baby Step 2: Pay off your debts, smallest to largest. This is a
little unique because you aren’t paying off the debt with the highest interest
rate first like you’d think you should do, rather he wants you to pay off the
smallest debt first so you can feel excited and gain some traction, after the
first debt is paid off then you go to the next one, using money you were
originally paying to the first debt and so forth. The first debt we paid off
was our van, then Tim’s student loan, and just a few days ago, my student loan.
Baby Step 3 : Save 3-6 months of living expenses. Add this
amount to your $1000 and don’t touch it unless it is an EMERGENCY. This is the
step we are going to be working on now.
The rest of the steps have to do with investing/saving for
retirement, college education for kids, paying off the house and so forth and
we’re planning on getting to and accomplishing every single one.
Okay, so that is the plan we chose to follow and it worked
for us, but here are some personal things I learned along the way:
Budget with your spouse.
It’s really important
to know where your money is going every month. I like to use Quicken but you
can use anything that suits your needs. The main thing is to plan and know how
much is coming in and how much is going out. I do the budget at our house and
Tim is okay with that but it is still important that we sit down together at least
once a month to talk about it.
Out of sight, out of mind.
Out of sight, out of mind.
I opened up a
secondary savings account specifically to put any extra income in and also to
put in the budgeted amount we were throwing at our debt (rather than paying my
student loan down each month, I saved the lump sum and paid it all off at once).
I created this other account because if money is in my checking account then it
gets counted and spent. By immediately taking that money out and putting it
into a separate spot it was like I was saying, “This is not money to spend. It
has a different purpose.” I plan on continuing this habit as we build our 3-6
months of savings. Also, it forces you to live on less than you make. Mind
games work, people :)
You can’t get out of a hole if you are still
digging it.
If you are trying to get out of debt then one of the biggest steps you can make, even before paying a cent off, is to STOP going into debt. This might mean cutting up the credit cards. If you can’t afford it, then you can’t have it until you’ve saved up the money. This made our journey to get out of debt take longer. We cash flowed Zach and all his medical bills, we paid cash for our kitchen remodel, my wedding band, and Tim’s car. Any vacations we took were saved up and paid for without debt. Notice that NONE of those things were emergencies and we didn’t touch our $1000. We did stop our debt snowball to save up for things but as soon as those things were purchased, we went right back to throwing money at the debt.
If you are trying to get out of debt then one of the biggest steps you can make, even before paying a cent off, is to STOP going into debt. This might mean cutting up the credit cards. If you can’t afford it, then you can’t have it until you’ve saved up the money. This made our journey to get out of debt take longer. We cash flowed Zach and all his medical bills, we paid cash for our kitchen remodel, my wedding band, and Tim’s car. Any vacations we took were saved up and paid for without debt. Notice that NONE of those things were emergencies and we didn’t touch our $1000. We did stop our debt snowball to save up for things but as soon as those things were purchased, we went right back to throwing money at the debt.
More money doesn't mean more spending.
Dave talks a lot about being Gazelle intense and living on rice and beans and while I agree that living that way would have gotten us out of debt a whole lot quicker, it would have made us miserable in the meantime. I think the way we best followed his advice though was to never increase our lifestyle to any raises in income. Yes, during the time we were attacking our debt we did get some raises but we didn’t look at the extra money as a chance to buy something new or to go to some exotic location, we continued to live on the same amount we had before the income increase and put all the extra money towards the debt.
Work hard.
Dave talks a lot about being Gazelle intense and living on rice and beans and while I agree that living that way would have gotten us out of debt a whole lot quicker, it would have made us miserable in the meantime. I think the way we best followed his advice though was to never increase our lifestyle to any raises in income. Yes, during the time we were attacking our debt we did get some raises but we didn’t look at the extra money as a chance to buy something new or to go to some exotic location, we continued to live on the same amount we had before the income increase and put all the extra money towards the debt.
Work hard.
I am blessed to be married to a man
who works really hard to support our family. He makes a good income at his job
but he still took on another job to help us accomplish our goals more quickly.
He taught an online accounting class from home. Every penny that came in from
that job went to the debt and now it will go to building our 3-6 months of
savings. Then he’s quitting because the job will have served its purpose. See?
That extra job doesn’t need to be forever, just until you can get where you
want to be.
STOP making excuses.
I think this is the hardest one. A person can find a million ways to justify why they can’t get out of debt or why they must go into more debt. You know why? Because getting out of debt is really hard and takes patience. It can be super frustrating. It means you can’t have all the nice things you want when you want them. It means you have to sell things and work extra jobs. It means you have to tell yourself and others –even the people you love-“No.” and that can be really really hard.
I think this is the hardest one. A person can find a million ways to justify why they can’t get out of debt or why they must go into more debt. You know why? Because getting out of debt is really hard and takes patience. It can be super frustrating. It means you can’t have all the nice things you want when you want them. It means you have to sell things and work extra jobs. It means you have to tell yourself and others –even the people you love-“No.” and that can be really really hard.
Pay and Pray.
As members of the LDS church, we believe in paying a tithe on everything we earn. We pay 10% of everything that comes in but have also tried to give to the other funds like temples, missionary, perpetual education etc.because one of the biggest lessons we've learned is that nothing is really ours. All we have is God’s and He is sharing it with us. We need to be good stewards. We really made this whole journey a matter of prayer and we really believe that we have been blessed. We have been encouraged by prophets and church leaders to get out of debt for a long time and we feel that once you start really making the effort to get out of debt, Heavenly Father will help. Maybe some extra money will show up, or a job opportunity, or your property taxes with go down, or you’ll find out you can switch insurance providers and save some money—all of those things happened to us and we know that was our Heavenly Father blessing us.
As members of the LDS church, we believe in paying a tithe on everything we earn. We pay 10% of everything that comes in but have also tried to give to the other funds like temples, missionary, perpetual education etc.because one of the biggest lessons we've learned is that nothing is really ours. All we have is God’s and He is sharing it with us. We need to be good stewards. We really made this whole journey a matter of prayer and we really believe that we have been blessed. We have been encouraged by prophets and church leaders to get out of debt for a long time and we feel that once you start really making the effort to get out of debt, Heavenly Father will help. Maybe some extra money will show up, or a job opportunity, or your property taxes with go down, or you’ll find out you can switch insurance providers and save some money—all of those things happened to us and we know that was our Heavenly Father blessing us.
I share all these things because this journey has been a big part of our lives and is therefore blog worthy but I also share because I hope it can be encouraging to those who are in the middle of paying off debt and feel like it will never be gone and they will never be free. I felt like that, too. Lots of times. Just remember that when it comes to paying off debt even just not digging any deeper is better than nothing and sometimes digging deeper is not in our control, but most of the time I believe it is.
So, Mr. Dave Ramsey, this scream is
for you . . .
3, 2, 1
WE’RE DEBT
FREE!!!!!!!!!!!!!!!!!!!!!!
3 comments:
Congratulations!!! Now that we are gainfully employed homeowners I'm beyond thrilled about paying off all our wretched student loans. You are so rad and so motivating!
Congrats!! That Is a Huge accomplishment!!! We love Dave Ramsey... one day we'll get there, I cant wait.. thanks for the motivation!!!
That's big news! congrats, you are an inspiration!
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