We’re debt-free. Finally!
The glimmer of light at the end of the tunnel is now a bright sunny day, and we still can’t believe we made it.
It’s been a long train ride and we’re ready to get off and check out the sites in that glorious city I call Debt-Freeville.
The Back Story
We started getting serious about paying off debt as soon as Brian and I got married. Okay, to be more precise, it was Brian who quickly became serious about paying off our debt. If it were up to me, I’d still be scraping by making the minimum payments to this very day. What’s worse is that I came into the marriage with 3x as much debt as Brian.
Yep. I had triple the amount of debt compared to Brian. But at the time, I didn’t know I had that much. I thought I owed around $20,000 in student loans.
The original balance of my student loans totaled $34,000. Add interest to that and I owed more than $40,000. I was so financially ignorant and kept such sloppy records, I had no clue I owed that much money. It wasn’t until Brian checked my credit report that we both found out the real amount.
I think I wanted to keep my head in the sand regarding the whole thing. The thing is though, it’s not just sand. It’s more like green quick sand, sucking you deeper and deeper into its suffocating money pit. Brian is the one who reached out his hand and saved me, and for that I am forever thankful.
So enough with the mushy stuff. Here’s the details of how
we Brian got us out of debt.
We got married in April 2009 and at that time, we each owed the following:
That Stuff Really Works
Shortly after we married, Brian was laid off and took a contracting job a few states away. We had just bought a house and had a baby. I stayed home alone with our little girl and Brian drove home every weekend to see us.
But not all was lost.
It was at that lousy contracting job where Brian saw a coworker reading The Total Money Makeover by Dave Ramsey, and after someone walked by and said “that stuff really works,” did he become interested. His mom mailed him the book and he devoured it in 2 days.
Brian had always had an interest in finance but it wasn’t until he read The Total Money Makeover, was he given a structured plan to get out of debt. The Total Money Makeover consists of “baby steps” that walk you through to financial freedom. The first baby step is to save $1000 for an emergency fund. We already had that so we immediately moved onto the next (and hardest) step, pay off all debt using the “Debt Snowball Plan.”
The Debt Snowball Plan
The Debt Snowball Plan works like this. Let’s say you have 5 consumer debts- three credit cards, one auto loan and one student loan.
List all of your debts from the smallest to the largest and start paying off the smallest amount first. When the smallest is paid off, you take that money and start paying off the next largest debt. This creates a “snowball” effect with your money, rolling all your previous payments into the next largest debt payment and so on.
But before you start paying your third largest debt, you take the money that was going to the first two and buy yourself something real nice with it. Like a new laptop or hardwood floors.
You DO NOT buy crap or “reward” yourself until ALL your debt is paid. You work hard, go without and sell everything that is nailed down. After that, you sell whatever it is that the other stuff is nailed down to (in our case, it was the house).
There really is no easy way out, unless you have some awesome inheritance coming your way and in that case I’m really
envious of happy for you.
The Debt Snowball Plan gave us a proven method for paying down our debt but it wasn’t doing us any good because so much of our money was getting lost through the cracks. We were spending what little money we had and not enough of it was getting “snowballed.” We needed help with our budget and spending habits big time.
The Envelope System and Zero Based Budget
This is where the Envelope System and Zero Based Budget come in. You can do the Envelope System and not the Zero Based Budget, or you can follow the Zero Based Budget and not adhere to the Envelope System. They are individual systems but when combined with the Debt Snowball Plan, you have the complete enchilada of personal finance methods at your fingertips. You can check out the details of how they work in this video tutorial.
The Mental Challenge
For me, the hardest part of getting out of debt wasn’t changing the way I felt about it (I knew it was bad), it was changing my behavior to reflect my beliefs. It’s one thing to hate giving banks all your money every month but quite another to sell your car and buy a beater. In the beginning, I was not “on board” and had a hard time learning to live within my means. Getting out of debt is 90% behavior and 10% knowledge. It doesn’t matter how much you know about finance, if you don’t change your habits, you’ll never make it.
Brian on other hand, had different challenges. He’s been the sole breadwinner this entire time and took every opportunity to work over time and cash-in his vacations. The hardest part for him was receiving a big, fat paycheck full of overtime hours and turning right around and giving it ALL to the bank. Many a times, I saw him sit at his computer after paying the bills thoroughly disgusted. That, in turn, made me feel horrible.
Many times, we felt like giving in but knew we couldn’t. In all, getting out of debt has been one huge lesson in delayed gratification, patience, and maturity, and to be honest, I believe we are better people because of it.
Are You In Debt?
If you or someone you know is in debt and doesn’t want to be, please check out our current giveaway. 10 winners will receive Dave Ramsey’s The Total Money Makeover and one grand prize winner will win Dave Ramsey’s Starter Bundle! Hurry, enter here.
Photo Credit: Rhys Asplundh