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Debt! It’s something almost everyone has one way or another. Neither my husband nor I were super smart with our money even after we got married. I knew what we had coming in and what our bills were, but my husband, being an accountant, looked at the bank account more than I did. I know this is bad. We didn’t spend extravagantly, but we also weren’t doing what we should’ve been doing to save what we could and be smart about it. Once we bought our first house, we knew we could afford the payments and all that came with it.
We also had a lot of monthly payments for things like furniture, credit cards, car payments, and student loans. So we definitely weren’t saving to the future like we should’ve been. It wasn’t until we found out we were expecting and the impending time off I would have from work. We survived it and did what we needed, but it was really tight during that time. I was off over the holidays. So we budgeted and really didn’t spend a lot on Christmas that year. It was a light year, but having our little guy made the holidays perfect, even with minimal sleep.
A Decision Made
Finally, it was about 3 months after I went back to work that we realized we added another payment to the list with the medical bills from having our little one. It was a wake-up call. My husband was listening to the Dave Ramsey podcast, The Ramsey Show, and he understood the importance of paying off our debt. It seemed like it was such a feat to accomplish. I also started listening to the podcast and was getting excited about finally being out of debt. So we decided that we could do it ourselves and pay off all our debt.
Create Your Budget
He created a budget by writing down what our take-home pay was each month. He calculated on the smaller side so we would make sure we didn’t budget over our income. Then, he listed out all our payments that came out each month. This was a big wake-up call to look at everything that was coming out of our account each month, it helped us take stock of what we could cancel or reduce. He also listed out the amount of each debt we had from smallest to largest, credit cards, furniture payments, car payments, student loans, etc.
Once we could see the amount that was left on each one, we realized that there were some we could pay off quickly or right away. We got rid of cable and only had internet. We stopped eating out and saved it for once every 2 weeks. My husband also created a safety net in our daily budget so that we had an extra $25 each day in case one of us had to purchase something. If it wasn’t used, it went towards debt. It is a good idea to make sure that every dollar has an assignment so you aren’t leaving money without a job. Whether that is to go towards debt, bills, groceries, or saving for something. Now that we had the budget, it was time to start the Baby Steps.
Baby Step #1 Save $1,000 Emergency Fund
We already had this in our account, so this was easy to do, but for some, it may take a couple of months to get it saved up. Having an emergency fund in place is important, so if something major happens, you are prepared. That money is not touched unless it’s for an emergency. Not during the debt payoff time or after. Once you build it to a bigger fund after debt is paid off, it is there to have in case something happens, like a job loss or major house repair.
Baby Step #2 Pay Off Debt
This took almost a year for us to do. It is an effort. We understood that if we wanted to live comfortably and be able to do things like vacations and such, then we needed to hunker down and pay off our debt. We made the agreement to have the debt, so it was up to us to pay it off. And as quickly as we could, that interest is BS!
We started with the smallest debt we had and put our extra money towards that to get it paid off. Then we took the money we would’ve used to pay that first one off and put it towards the second until it was gone. And so on. This is called a “Debt Snowball “. When it came time to pay off the medical bills for having our little one, I called the hospital and asked if I could pay the lump sum. I asked if I could get a discount instead of paying per month. They agreed to discount it by 10% to pay it all off. It took us 11 months to pay off all our debt. You can speed up the process somewhat by temporarily cutting things like going out to eat, cutting streaming services, cutting your grocery budget, or getting a side hustle. These will help you have more in your monthly budget to pay off the snowball quicker.
My husband’s student loans were our largest and final debt to pay off, and we did it in March of 2020. We did it the day before we left for Florida for my dad’s wedding. It was such an exciting feeling to know that other than our house, we were debt-free!!
Baby Step #3 3-6 Month Emergency Fund
After we finished paying off all our debt, minus the house, we started to save for a larger emergency fund. We kept on the same track that we were going. Instead of having debt to put the money towards, we saved the money until we had enough to cover 6 months of our expenses. It feels great to know we have the safety net in case anything happens.
Baby Steps #4,5 &6
We are currently living baby steps 4, 5 & 6. These will be going on for years. We save for our son’s future and our own future. Also, focus on paying off our house.
Living Debt Free
When I say debt-free, I mean all but the house. We do still use a credit card, which is against Dave Ramsey teachings. But we only have 1. It’s a Costco Credit Card, and we get money back each year from the points from using it. We like to use it on big purchases so we can get the money back, and the card is always paid off the same month. We never put anything on the credit card unless we have the money to pay it off right away.
While we still stick to a budget, we are able to spend on things that we enjoy and have experiences with our little guy. When big issues arise with the house, like when our water heater was leaking and we needed a new one, we didn’t have to worry about the money to fix it. If we know that we have a big purchase we would like to make then we work it into our budget so we are able to save up for it.
Conclusion
Paying off our debt was something we decided to do to give our little guy the life we wanted to and for us to save for our future. It allowed us to purchase a new house in a neighborhood we love, a great school district, and a great community around us. We paid for my new-to-me car in cash, and it has been wonderful not to have to worry about debt. There are still some of our routines from when we were paying off debt that we follow. Like packing lunches and having a grocery budget. We were able to be where we are today because we sacrificed for a year by being “boring”. This process takes dedication, and it is not about being perfect in it all the time. It is about making progress, even if it takes years to accomplish. You can do it too.
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