We are debt free. WE ARE DEBT FREE!!! This is a momentous occasion. It has been a long, hard journey, but we are, finally, here. For the last 32 months we have been busting our behinds, taking extra shifts (Erik), and living on way less than we make to pay off (drum roll please)...$120,023.75! This was my undergraduate and law school student loans, a small nursing school loan for Erik, and my Honda. It feels AMAZING, like a huge burden has been lifted off our shoulders.
We wanted to share our story so that everyone knows literally anyone can do this. Before we started, we were overwhelmed. The grace periods on my loans were up, we were on a single income because Erik was in nursing school, and it felt like we were barely making ends meet. On top of all that, Elliot was on the way and we knew I would be taking maternity leave soon with no guarantee Erik would have a job by then. I was tired of working so hard and making zero traction financially. Then I remembered our friends, Matt and Hailey, had told us about how they had gotten out of debt by following the Dave Ramsey plan (thanks guys!). I reminded Erik, and he was completely resistant. He said Dave Ramsey was a right-wing nut and it sounded like nonsense (without actually knowing what the plan was). I convinced him to attend the Financial Peace class, and from there he was hooked. (For the record: Dave is a Christian and he happens to be conservative, whereas we are Christian and tend to lean more liberal in some areas, yet our differences of opinion had no bearing on applying the principles taught in the class. In other words, the program is not political in any sense. It does, however, have a basis in Biblical scripture, but will work no matter your religious preferences.)
Here is the nutshell version of how it works (this gets detailed and if you are not interested skip down :) ):
1. Get on a written budget. This was BY FAR the most important step for us. We literally have a budget meeting every month where we decide where every dollar goes for the entire month before we spend it. Sound daunting? It totally was for the first few months. But then we got used to it and found our groove, just needing to make minor tweaks each month.
2. Stop using credit cards. Like ever. Not even "for emergencies."
3. Create and use an envelope system, where each envelope has a label, like "groceries" or "restaurant", and each envelope has the amount of cash you agreed on in the written budget. Use until the money is gone or the month is over, whichever comes first.
4. Follow the Baby Steps:
$1000 emergency fund in the bank.
Pay off debt following the "Debt Snowball" method: You list your debts smallest to largest, pay minimum payments on all except the smallest, to which you apply all the money you have designated on your written budget. Once that one is paid you go to the next smallest, applying the minimum payment PLUS everything you were using to pay the previous debt. Continue to apply this concept until all debts are gone. It works. I promise.
Get an emergency fund in place of 3-6 months of expenses. This is also the place Dave suggests saving for a down payment on a house if you do not already have a house. This is where we are now!
Save for kids' college.
Save for retirement.
Pay off house early.
Steps 4-6 are done simultaneously. For a much better and more detailed explanation of how it works check out the website here:
http://www.daveramsey.com/home/ and click on "Financial Peace University."
Guys, I cannot say enough good things about this. Not only did it give us a framework for how to get out of debt, it has also provided us with information for how to thrive financially, how to ensure we have enough money to retire with dignity, and how to teach our children to handle money so that they are never in the situation we were in.
Now, let me pause here to brag on my husband a little bit. Although he was initially resistant, once he got on board he was the best partner. This was primarily my school debt. But his attitude from the start was that we both benefit from my degrees and when you get married there is no "mine" there is only "ours." I cannot emphasize enough how good this was for our marriage. Not that it was rocky or anything before we did this, but there was always a tenseness about money. Since we started this journey we have not had a single fight about money. Not even a disagreement. Keep in mind, for this to work you have to have complete trust in your partner that they will stick to the budget. My trust in Erik never waivered. You also have to approach it with grace. If your partner wants to make adjustments mid-budget to make special purchases possible, accommodations should be made whenever possible and practical. We extended grace to each other probably almost every month. I am so proud to be married to my mature, goal-oriented, man. Rolling up our sleeves and digging ourselves out of this mess together is one of the most powerful things we have experienced.
So here we are, cheers-ing to the future (Martinelli's Sparkling Cider, of course ;)). It has never looked so bright!
