Pronounced Freeeeeedoooommm!!! Screaming like William Wallace in Braveheart (you remember, before Mel went psycho off screen and tanked his reputation…).
Jaim and I have been wearing war paint for four years now. You don’t see it, unless you go shopping with us, or listen to us budget every month (and hold emergency budget meetings once a week or so), or listen to either one of us when the other (or one of the kids) comes up with some silly spending idea… We’re debt free today.
Yes, except for our home mortgage, we owe nothing. No more student loans, credit cards, car loans, or hospital bills. Not even any couches or TVs on “no payments or interest for 36 months!” Not one red cent owed to anyone. It took us four years on the Dave Ramsey plan, budgeting and saving and scrounging, and the last payment to XLS Student Loans went out of the bank today.
How much did we pay off? Well, I’m not at liberty to say yet. I’ll tell you it was many many tens of thousands. More than most houses cost here in our little village. Paying for college, a wedding, computers, cars, credit cards, furniture, building a new house when we couldn’t afford it, kids getting sick–it piled up out of control until it was crazy big and we didn’t even realize how big it had climbed.
Then one day in September, 2005, when our bank account was overdrawn, we had bills to pay, and no idea where the money went, we decided enough was enough. We tried to make a budget, and found the expenses kept outweighing the income. Then we started adding up all the money we owed–21 different debts in all. We were devastated and without a clue (and I was supposed to be the business dude!). Later that week, I happened to be switching through the radio channels in the car and landed on a talk show about money. It was love at first listen–I felt like Dave Ramsey was talking directly to me.
Dave’s message is about telling every penny what to do before it gets spent. On paper and on purpose. He outlined a plan called the “Baby Steps” that rely on focussed intensity and discipline to get debt-free and stay there. Forever. I bought Dave’s book and read the whole thing in one night, then Jaim and I started listening to his show on podcast and on the radio. Hearing folks just like us (and lots of people in a much bigger jam than us) call in every Friday and scream “We’re debt free!!!” became so inspiring for us. We’d talk about the show and share tips we each learned most nights.
So, I bought some personal money software to keep voracious track of our checkbook, bills and other accounts, and we promised each other we would stop borrowing money and commit to paying off our debt by following Dave’s plan. We cancelled and cut up every credit card and saved up $1000 for an emergency fund (that’s Baby Step 1), and we made a detailed budget with every penny for every month, one month at a time. The first few months really sucked, but then we got good at budgeting (and at making adjustments to the budget as things came up) and it became almost a game. We kept track of every single penny we spent, we began using cash instead of plastic for things like groceries and household stuff and our fun money (the little bit of cash we each take every month to just play with), and we really cut back on everything we could.
Once we had a thousand in the bank, and had some practice with our mad budgeting skills, we hit Baby Step 2 like Wallace and his kilted army charging over the hill. We temporarily stopped investing, switched to minimum payments on everything, and focussed all of our money and energy on knocking off one debt at a time. Once the smallest one was gone, we moved on to the next, then the next, until it all started to snowball for us.
Sometimes we felt like throwing in the towel. Much of our friends and family thought we were crazy for seriously thinking we could be without debt. We even took a few vacations–both real get-in-the-car-and-go-somewhere vacations and some “Dave Ramsey vacations.” That is, we took a month off in a way–we loosened up the strings and paid off less debt for a month here and there, so we could use cash to buy something or go somewhere. So, this took us longer than it could have. Four years is a long time to really buckle down. We’d see a light at the end of the tunnel, and then life would happen, and we’d owe $800 for the ER or $1200 to fix the car. But we stuck it out, and now it feels really good.
So what now? Well, we’ve promised each other we’ll never borrow money again and we’ll always keep a strict budget that we both agree on every month. That means we won’t have all the toys and new cars and “stuff” that a lot of people around us have. It means we’ll only buy things when we can actually save up and afford them. And we’ll pay with cash. It also means we’re moving on to Baby Step 3: boosting that emergency fund big enough to cover six months of expenses. Since the baby is coming in April, we’ll still be in major save up mode til then at least. After that, we start investing like we really mean it, and we stay smart on our spending. Then we’ll save up for the girls’ college, and work on paying off our house about 20 years early. Soon enough, we’ll be able to do fun things like give away lots of money. We celebrated our debt free milestone by writing a (big for us) check for $1000 to our local community foundation this week, and we’re going out for a celebration as a family this weekend.
If you think debt is just something that always has to be part of your life, no matter how much money yo make or how much debt you have, I promise you’re wrong. It’s all about changing your behavior–learning to pay less stupid tax. Check out Dave’s website, or find him on the radio. I’d offer to lend you our book, but we gave it away long ago. If you have any questions you think we could help with, shoot away.