Our Debt Free Journey
Four years ago my husband and I decided to change our relationship with money.
We were living from paycheck to paycheck, overstressed and resenting each other every time a single purchase was made. Money makes people funny, or so the saying goes, and it’s true. And in a marriage, differences with money handling may lead to fights with severe consequences.
Everything from different spending habits and financial goals to one spouse making considerably more money than the other, can cause a power struggle that can strain a marriage to the breaking point.
My husband was working and going to college and I was at home. After two years hunting, I have found a job and my income’s purpose was to take us out of this situation. We had $79,000 in debt.
Michael always told me about Dave Ramsey and how cool he was, but I never had paid much attention, until I found one of his books in the hotel library. It was in Spanish and I had a blast. The book is called Total Money Makeover. It is simple to read and very touching, as it contains real life stories of people, like you and me and their relationship with money.
I decided to give it a try.*
*spoiler alert: it is NOT easy. But it WORKS.
Ramsey recommends the following baby steps toward financial peace:
- Baby Step 1 – $1,000 to start an Emergency Fund
- Baby Step 2 – Pay off all debt using the Debt Snowball
- Baby Step 3 – Accumulate 3 to 6 months of expenses in savings
- Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Baby Step 5 – Secure/save college funding for children
- Baby Step 6 – Pay off your home early
- Baby Step 7 – Build wealth and give!
It took us exactly four years to pay off our debt. Discipline paid off literally! Now we are working on Baby Step 3. It was a bit daunting. Suddenly you have this money kinda “floating” in the bank account. Every dollar must have a purpose in your plan. No matter how much money you make, if you don’t know how to use it, it will never be enough.
Our goal is to save enough to go to Brazil.
Set goals, assign every dollar and work. Keep the eyes on the prize! I can’t tell you how easy is to be generous in donations, or to be calm if something in the house breaks, or new tires for the truck are needed. I urge you to try and work on having a healthy relationship with money. It is worth every penny (look at me making jokes haha).
So, this is HOW we made it happen!
1. Start with a budget.
I know, this is not fun, but keep track of how much you make and where this money goes. If you are paid every other week, it makes your budget simpler. There are lots of free apps if you are technologically inclined. I prefer to write. What helped my husband the most was our bank account statement. I color-coded all Walmart trips and showed the receipts to give him an example (yes, I keep all receipts). Some purchases were necessary, but most were not. We impulse buy a lot, so having a real statement with numbers may give the reality check you need.
2. Use the envelope system.
When you go to the store and you have only $50, it triggers that side of the brain that loves math. You become resourceful and make smarter choices! I deactivated our Amazon account temporarily, cut the cable as we don’t watch a lot of TV, shifted to a cheaper internet provider and went to the library for movies and books. We also went to a lot of free events downtown. You can replace activities and still have fun!
3. Cut the small meaningless purchases.
That coffee at Starbucks, the 35th pair of flats, the $1 games for the little one… don’t fall for expressions like “clearance” and “Black Friday.” I also cooked my own meals at home, avoiding the “need” to eat out. That saved A LOT of money and we lost weight. Win-win! Focus on the big prize!
4. List your debts on a place you can see. Every. Day.
Compare how much you make a year to how much debt you have. Then think in terms of how many hours of your life you will need to invest to get rid of these chains. It is painful. It also gave us the energy to move on faster.
5. Have an accountability partner.
Don’t try to do it alone. First isolation makes it more difficult, second because you really don’t need to do it all by yourself. Call a friend you trust, talk to your bank or credit union manager, involve your significant other on the process. Explain why this is important, and they will support you!
6. Start an emergency fund.
A good rule is $1,000 if your income is $20,000 and above a year. Below $20,000, $500 is good to start. A new couch is not an emergency. You get the point.
7. Start your Debt Snowball.
This is where the fun starts. List your debts from the smallest to the biggest. Pay the minimum on the big and go full force on the small ones. This technique will give you the boost you need to persevere. You can also list the debt with highest interest rate and pay them first. Be creative!
8. Cut the credit cards.
Don’t cry. You won’t need them. Cash is king.
9. Don’t fall for “I work hard, I deserve a new car!”
Don’t add to the debt if it is not a real emergency. Treat yourself with some ice cream. Celebrate walking around the block, play with your dogs! You will thank me later.
10. If you get pregnant, stop the snow ball.
Yes, that happened. After three years trying, I got pregnant. We stopped for 12 months to be able to buy all necessities for Emma and pay for hospital bills, room furniture, extra tests and all. Second-hand clothes (thank you military wives!) and creativity and we were able to save a lot of money. When my maternity leave was over, we resumed our activities. And that’s why it took four years to reach the goal.
See you next time!
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