That's right, ladies and gentlemen! Our quest to become debt-free has finally reached a reality and we are....well.....VERY excited. I used to blog every month about our debt-free journey when I had a Myspace page but I kind of fell of the posting bandwagon for a while and then got rid of my page completely so those of you who used to follow my life via Myspace blog posts are probably way behind.
Many people have asked to hear our story, so in order to make my life easier, I thought I would just share it here. :) I warn you now. This is VERY long.
Ok, now let me start at the beginning.....
*Envision the screen going blurry for just a second and then coming into focus on two college students*
My husband (then, fiance) and I were considering eloping rather than having a large wedding (or even a small one!). Our families had been warned that this was likely what would happen since neither or us really cared much for the whole wedding drama. Being the "wise" 18- and 19-year olds that we were, one of the areas we took into consideration was our finances. Neither of us had auto loans or credit cards. One of us had a student loan, but we had understood that that would be paid by a family member. So we figured we had a green light with our finances. We had no savings, but hey, we were still leaps and bounds ahead of most college students!
We married in November of 2003. In January, I got a $2500 loan for my school (which mainly ended up going toward our apartment). My husband graduated from technical college the following spring and through a series of unfortunate events, we quickly discovered that the $12,000 student loan that my husband had from school was actually going to be ours to pay. BIG bummer. But we were both working, so no biggie, right? We were living in a dirt cheap apartment. I was still in school. And we still had 6 months before we needed to start paying on his loan.
In May, we took a trip to Branson, MO for Memorial Day weekend. I spent the entire weekend in the hotel bed watching Law and Order reruns....and puking. Yep, I was pregnant. And despite me being VERY sick for a few months, we were elated.
That fall, we decided that we wanted to buy a home. After all, living in an apartment when you could be building equity in a home is just stupid.....right? So we shopped around. And by "shopped around", I mean we went out one day, found a house that we wanted to build in a good part of town, and signed our life away. Our house was to be ready in January, which lined up perfectly with my due date as well as our February end-of-lease at the apartment. We were stoked.
We waited and waited for the foundation to be laid for our new home. We drove past several times over the course of a few months and nothing was happening. Finally, I called the company. "We need you to come in so we can discuss a few things." Oh great.
To avoid an unnecessarily long story about WHY we couldn't build where we had originally planned, I'll just sum it up. We ended up building a home on the opposite side of town - about 50% bigger and for about the same price. We got a discount of around 20%. We could not believe how lucky we were.
Our house was finished in April of 2005 and we were so happy to finally move in with our newborn and each other. The house was crazy big for us at first but, as all Americans seem to have a knack for doing, we learned to fill it up pretty quickly. Mostly with kids. :)
I suppose by now you're wondering where the finances are going to reenter the scene, right? Well, just hang on. It's about to get good.
Because my parents hadn't had to pay for any part of a wedding, they had bought us a car instead. Granted, it was an old car. REALLY old. But it ran and we were grateful. When it finally kicked the bucket, we went to a dealership and got a nice '97 Buick. We got a loan for the $4000 it costed and paid it off as quickly as we could. After all, we hated debt. Or so we thought.
I get lost in the mumbo jumbo of all the numbers, but I think it was about a week after we had paid off the Buick that we wound up with a $3800 home water purifier system. Oh yeah, we got a DEEP discount and we were set to get some SWEET customer service with the setup, installation, extras, etc. Well.....not so much. The water purifier ended up working about a year before we had some minor problems with it. Then a short while later, it started leaking. So we did what any good homeowner who has two giant towers taking up their entire carpeted entryway closet would do and we turned it off. The system is fantastic and has a lifetime warranty! If only you could actually REACH the company. Oh yeah, it's a great story. You see, we actually purchased the water purifier from a marketing company (Note: NEVER do that!) who subsequently went out of business shortly thereafter. The actual company who makes the water purifier is located in FL and can only be contacted via email....to which they refuse to reply. Amazing, I know. But praise the Lord we were not still paying on it when it broke!
Ok, let's see....where are we? Oh yes.....
No significant purchases were made for a while and we were paying a little extra on our student loans each month, but not really enough to make too much of a difference. In the fall of 2006, our church offered a class on finances. The class was based on Larry Burkett's book More Than Finances. We enjoyed the class and were even more motivated to get out of debt and develop a plan for our life. The book really focused a lot on why it's a sin for Christians to intentionally be in debt when it isn't necessary. Well, okay....I don't remember if Larry used those exact words, but that was basically what he said. There are TONS of Scriptures on money - more than any other subject, in fact - yet for some reason, Christians are just as in debt as non-Christians. We were ready to kick some debt-butt! But the class left us lacking in one area. We still didn't really know HOW.
In March of 2007, I was introduced to Dave Ramsey. No, we didn't actually meet. But some way or another, I came across a copy of his book The Total Money Makeover. I had been exposed to him a little bit while working at the Christian bookstore, but had never really sat down and seriously read any of his works. I don't really remember what exactly inspired me to buy his book, but something did and the day I got it, I read the entire thing all the way through. I'm pretty sure the house was probably a disaster when my husband came home from work that night, but it didn't matter - I had a plan for our finances and I was ready to tell him all about it!
The book laid out 7 proven steps to get out of debt, stay out of debt, build wealth and give. It wasn't a "get-rich-quick" book. It was logical. Realistic. A hard work, but worth it in the end sort of thinking. Dave's motto is "You have to live like no one else now, so you can live like no one else later!" meaning, of course, that you need to pay off your debt and live frugally NOW so later you will have money to spend and give when others are paying for their mistakes. So our plan included drastically cutting our spending and seriously throwing money at our debt. I had carefully looked over our checkbook and realized that we were spending around $300/month on going out to eat! $300! For two people! Ridiculous, I know. So that was an obvious reduction. We tweaked a few other things and I started doing things "Dave's way".
My husband argued with me quite a bit for the first several months, but I kept telling him, "No, Dave says...." and "His plan doesn't fail!" etc, etc. I'm sure he thought I was turning into a mini-Dave, but hey, at least I'm not one of those wives who racks up $60,000 in debt without her husband even being aware, OK?!
Anyway, Dave's first step was to have a $1000 baby emergency fund. No more, no less.
Why no more, you ask? Because all that money you have sitting around could be used to pay off debt. And all that debt you have sitting around, you're paying interest on! And there's a pretty good chance that you're paying a lot more interest than you're making with that savings account. Even if you're not, it's like saying "I'm going to take out a mortgage on my home so I can invest it." NOBODY in their right mind would do that! But we do it all the time with our debt vs. savings amounts.
Why no less? Because if you have an emergency, you NEED the money. Your credit cards are gone (if you had any) because that comes even before Step 1 in Dave's plan, so you need a fallback. And $1000 will cover most emergencies, at least for the short-term. You're not going to have only this $1000 in your bank account very long because you're attacking your debt with a vengeance now!
Ok, moving on. This $1000 EF thing was a really hard step for me. I felt very secure with our $2000 nest egg sitting in our practically non-existent interest-gaining savings account. But we went ahead and threw that other $1000 at my student loan. We (I say "we", but I really mean "I")also decided to put all of our extra money onto my student loan (yes, a $2500 loan still hanging out after almost 3 years) and got rid of that one pretty quickly.
Using the snowball effect, we took the amount of money we had been paying each month on my student loan and began applying it toward my husband's student loan.
Have I mentioned kids lately? We were expecting our 3rd child in September of 2007 and were sharing one fairly unreliable vehicle. But our debt was quickly fading and some months, with overtime, we were throwing over $1000 at that last remaining student loan! Debt-freedom was so close, I could almost taste it. But we knew there would have to be another vehicle soon. Yet rather than saving a little bit for that, we plugged on in paying off the loan. Right after Reagan (our 3rd) was born, my grandparents both got very sick. The situation didn't look fantastic and I knew I'd be needing to make a trip up to Wisconsin very soon to see them. We also now had a 3rd carseat to cram into the back of our 5-passenger vehicle. After much debating, we decided we would get a loan to pay for a used (but new enough to be reliable) van. I hated myself for it. HATED. I was SO ready to be out of debt, but we felt we had no other option.
I called our credit union and we were approved for the loan. I asked for a 1-yr loan but was informed that those don't exist. "Well, okay....give me a 2-yr then, I guess," I told the woman on the other end of the line. That night, we went to Carmax and purchased a $10,000 2003 Honda Odyssey. And it was a pretty good thing we did, because a few weeks later our little green Buick hit the dirt. We were back to one vehicle, but the kids and I had made it up to Wisconsin and my grandparents had both pulled through and were back at home. My husband decided that he would look at getting a car from the county auction. I was pretty skeptical, but I complied. After all, just a few short months after we got the van, we paid off our last student loan. A bit of joy in a sea of gloom. We could have been debt-free right about now. But anyway, the past was the past and we HAD needed a vehicle.
I can't quite remember, but I seem to recall that we might have gotten two vehicles at the auction, one a little earlier on and then one this past spring. My husband would remember for sure. At any rate, we paid cash for our $500 clunker (or both, if we got one before that) that was purchased just for my husband to make it to work and back. And our little red car has held up well. We've had it about a year now and while it's definitely not a spring chicken, it runs and has gotten my husband from point A to point B very well.
I think I skipped a few things.
1. Having babies costs money. Sure, you probably know this, but when you're aggressively paying off your debt, it seems like those hospital bills are just that much more irritating.
2. Our youngest had surgery. When Reagan was just 8 tiny months old, we wound up in the hospital with her for 5 days after she had some sort of cyst removed from her neck. An infected lymph node, they thought but were never really sure. Anyway, there went another $1000 deductible.
3. I started a business. Investing in the startup costs of a business is always tough, but it's even tougher when you JUST WANT TO GET OUT OF DEBT! We knew that every penny we spent on something unnecessary was just adding interest to our debt. The longer it took us to pay off our van, the more interest we would pay. Nevertheless, I did invest a small amount into my business. When we ran the numbers last spring, we figured that I would come out ahead before the time we expected to pay off the van so it would be worth it. And we DID come out ahead. And it WAS worth it. But it was a difficult decision to make.
Ok, back to present. While visiting my parents in Wisconsin last weekend, I make a trip to the good ole' Royal Credit Union, my trusty credit union that I love so much. I confidently walked up to the counter, matter-of-factly asked for the payoff amount for our loan (which, of course, I already knew) and pulled out my checkbook. I felt like the richest woman in the world! Of course, the check only read $712, but whatever!
I. Was. Psyched.
I almost jumped for joy that we were actually debt-free, but I thought the tellers might think there was something wrong and call the cops. You know how small towns are. So instead, I calmly walked out to the car, got in, and smiled from ear to ear. I'm sure I looked like the biggest geek of all time....just smiling and smiling as I drove back to the house. But I didn't care. I was so happy I could dance.
*********Coming next week: Plans and Goals for the Future**********