December 31, 2009
Well everyone, It's official! we made our final student loan payment this morning and we are DEBT FREE!!! (well except that pesky mortgage). This is the story of the financial marathon we ran over the last 28 months paying off a grand total of $24,046.40!
In the summer of 2007 we were in a real pickle. That spring we had decided to replace some of the windows in our house and since we didn't quite have the money to pay for them we signed on for a 6 months same as cash loan. This was fine since we hadn't received our tax return yet and would easily have the money when it came due in September. Enter life happening. My husband's truck had some costly repairs that took a lot of the money. Then we made the stupid mistake of buying a laptop to work on a programming side job that when paid would easily cover it's cost. Well you can probably guess what happened, the deal fell through and he never finished the project because he never got paid. That summer we scrimped and saved every penny we could to put toward the looming window bill. I was not about to have a truck load of interest tacked on for not paying in full.
In July my best friend loaned me a book by Dave Ramsey called The Total Money Makeover. I being a financial geek absolutely devoured the book and was so ready to be done with borrowing money forever. This did not go over so well the hubs. He didn't see the point in not using our credit card to pay for everyday items and groceries because we payed off the bill every month and we got reward points for using it as well. He saw it as free money. I was tired of having no money left after the bill was paid. I found it very hard to control the budget and was always frustrated. Despite his misgivings about this new plan that I had for our future he went along with it. By September we had stopped using plastic and had the money to pay for our windows.
After we paid for the windows I couldn't wait to start attacking what remained of our car loan. We paid it off in May 2008, with the help of the stimulus check. By then I was expecting our second child and so we pushed pause on the snowball. Then in August when I was 6 months pregnant our air conditioner died. Fortunately, we were able to get a good deal on both a new AC and 2-stage furnace. Unfortunately, this cost $5100 and added 6 months to the process. In March of this year we finally were able to turn up the heat and attack our last debt- the dreaded student loan. When Jared graduated 6 years ago the balance was $13,750 and by March we had whittled it down to just under $9000. Our goal (well more my goal, hubs was just going with the flow but definitely more excited since we were closer) was to be debt free by Christmas. As you can see we missed that by a week. This is of course was because the events the end of April when our house flooded and we had another $1000 emergency called an insurance deductible.
I didn't think we'd make it by the end of the year until last week when we decided to sell my husband's truck. This was our last big sacrifice to become debt free and so for the time being we will be a one car family. But since hubs carpools and I stay home during the day most of the time, we'll manage just fine. The truck will get it's own blog entry later. But for now we are basking in the FREEDOM that comes from not having any payments except a mortgage.
In summary, the last 28 months were some of the most grueling and tedious of my life. I really do feel like we've run a marathon but it was worth every hard step of the way to have this feeling of peace! Now I don't have to worry about how much we'll be able to put towards debt. The fun begins in seeing the fruits of our labors appear in the form of the savings account balance.
***Here are some key tips if you are looking for a way out of debt***
1. Switch to a cash system and stop using credit or debt cards for everyday purchases. Studies have shown, and I have learned from personal experience, that you spend on average 15% more using plastic. This was the major turning point for us in this process. Plus it makes it so much easier to balance the checkbook. When the money runs out you must stop spending. We only have 3 categories- groceries, eating out and clothing. I'm a big believer that this method works because it has removed the guilt I felt by spending money buying clothes even though we needed them. One caution- be realistic in what you truly need. It'll take a few months to get it down.
2. Sacrifice to win! One of Dave's sayings is 'Live like no one else, so later you can live like no one else'. In other words, cut back on things now temporarily so later you can have the freedom to truly do what you want with your money, instead of paying it all to some bank.
3. Keep going when the going gets tough. This process is long and sometimes hard but when you keep going and push through the pain, you reap the benefits. Don't let yourself be distracted by the new toy your neighbor has or the great vacation your co-worker just got back from.
4. Get on the same page as your spouse. This method makes you face the financial skeletons in your closet. If you are already fighting about money with your spouse, you may need marriage counseling to work through the issues. But your marriage will be stronger as a result. Again, it's worth it!
Well, I applaud you if you actually have taken the time to read this entire post. As you can see, this is why I am a geek, because I love this stuff. And that is why my next step is to become a trained financial counselor to help others along their journey. Hopefully this will happen in April. For now I just have one more thing to add.
WE'RE DEBT FREE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!