It’s November 1st. You know what that means? We are debt FREEEEEEEE!!!! (I am doing the debt free scream a la Dave Ramsey there) We made our final student loan payment on Monday and it cleared on Wednesday. That is one of the best feelings ever!
A little over two years ago Matt and I both read the book The Total Money Makeover by Dave Ramsey. It was serious. It was a little crazy. It also made a whole lot of sense to me.
Why should we be buried in debt when we can do something about it? The steps were simple enough and easy to follow if you really set your mind (and your wallet) to it. Then we did the scary thing. We looked at our total debt. This includes everything. It includes student loans, car loans, and credit card debt. The only thing left out in the beginning is your mortgage. Our total came to around $84k. It was mostly student loans and also two car loans and some credit card debt. That is a big, huge, scary number that instantly deflated me. It was totally overwhelming to me in the beginning. Thankfully I have a husband who can think clearly when his wife is being emotional. We sat down, made a budget, and stuck to it.
The Dave Ramsey plan follows 7 baby steps. You start by saving $1,000 for an emergency fund. You will add to this fund again after you finish baby step two.
Baby step 2 is your debt snowball. Normally you hear about paying your debt off in the order of interest. The bigger the interest the higher on the priority list it goes. According to Dave Ramsey you should start with your smallest debt. Our smallest was a credit card, I think. You make all your regular payments and then you throw every extra penny you have at the chosen debt. Before you know it, that debt is paid off. The theory here is that by starting with the smaller debt you can actually pay something off. It is easier mentally at this point to build momentum that way and I have to say that it totally worked for me. Once we got that first one paid off I knew we could do it. I knew we could be debt free. After that you build your “debt snowball” Every time you pay something off then you have more money to throw at the next debt on your list. Your snowball gets bigger and bigger. Towards the end you can put a lot of money towards that final and largest debt which pays that one off even faster. You can find the rest of the baby steps here.
It certainly hasn’t been easy. We have lived on a pretty tight budget. We haven’t gone out to bars and restaurants whenever we wanted to because we were on a budget. We would occasionally but it was always included in the budget. That is something specific about the Dave Ramsey plan as well. Every penny has a place where it will go. Something that made sense to me that Dave Ramsey says is to tell your money where to go instead of wondering where it went. Somehow it seemed like we could stretch our dollar a little farther when we actually paid attention to where it was going. At the beginning of every month we would calculate our income for the month and then put it in the budget. We used a website called Mint. It was super easy to adjust the budget when necessary this way. If you want a budget tool and a way to see all of your accounts in one place then I definitely recommend this site.
It took us a total of 26 months. 26 months of budgeting. 26 months of selling random things that we didn’t need so that we could make a little extra money. 26 months of working extra hours and doing side jobs. 26 months of coupon clipping, clearance shopping, and free activity searching. We did it. We are 100%, completely and totally debt free and I have got to say it is a great feeling.
While you do need to make some sacrifices you are also able to live your life. Over the 26 months we went on our honeymoon, went to Las Vegas and LA for my sister’s wedding, and went to Spokane for another sister’s wedding. We went out to eat on occasion (somewhere cheap or with a coupon), we bought new clothes when we needed them (needed, not wanted), and we still were able to go on dates or visit with friends. We just had to be extra frugal while doing these things in order to make it happen.
We have gotten a lot of positive feedback from people who found out what we did. At the same time we have gotten some negative feedback as well. It is totally normal these days to live with debt. I have decided that I don’t want to live that way. I am not normal in this regard. I want to live a life where I am not a slave to money. It is about priorities and being willing to make some sacrifices now so that you can breathe a little easier later.
If you are interested, I recommend you check out DaveRamsey.com or read his book Total Money Makeover. He puts it in a way that makes sense and makes it seem like this is something that you can actually do. Be weird with me!