We've been debt free for just over a month now. Our journey started in January of 2019 when we decided to get serious about this thing together. We weren't living an extravagant lifestyle. We were just pretty normal. We had 2 car payments, student loans, a couple credit cards and a personal loan. We could make all our payments just fine, and even had a little left over at the end of the month. Which I think was a pretty dangerous place to be, feeling like seventy seven thousand dollars in debt was "totally fine".
Financial Peace University was being offered at our church and we got signed up. We learned about Dave Ramsey's Baby Steps. Step 1: Get $1000 in an emergency fund
Step 2: The Debt Snowball - Pay off all debt except the house, listing them in order from smallest to largest (regardless of the interest rate)
Step 3: Increase emergency fund to 3-6 months of living expenses
Step 4: Save 15% of household income to retirement
Step 5: Save for kid's college
Step 6: Pay off the house early
Step 7: Live and give like no one else!
Only seven baby steps? Easy peasy! We already had our emergency fund of $1000 in our savings account, so we moved right on to Baby Step 2. What we had above that $1000 got our debt snowball rolling to pay toward our smallest debt. This part is important. List your debts in order from smallest to largest, regardless of the interest rate. Here's why. This is a mental game, not a math game. If it were a math game, we wouldn't have debt. Continue to pay minimum payments on all debts, and any additional money left over gets applied to the smallest debt. When that balance is paid, the minimum payment plus the extra payments now get moved on to the next debt. When you start to see your debts being eliminated, it gives you the motivation you need to keep going! Our car payments were the highest balance and the last of our debts to be paid off. If we had started with those, it would have taken forever to see any progress. That's a sure way to get burnt out pretty quickly. Back to having "additional money" to throw at your debt. This is where Dave talks about getting gazelle intense. You might not have any extra money to save $1000, never mind start your debt snowball. Now is the time to get creative. If you don't have a budget, make one. If you have a budget, review it. See where you can reduce expenses, but keep in mind your budget still needs to be realistic. Figure out how you can increase your income. Pick up a side hustle, sell some stuff, if you have a skill, use it. I picked up a side hustle by watching a baby at my house a few days a week and I barter hair color services with a friend because we're both licensed cosmetologists. Dave says you shouldn't see the inside of a restaurant unless you're working in it.
On to Baby Step 3. I have mixed emotions about this one. Don't get me wrong, it's important. I'll be the first one to say that I feel secure having money in the bank. But so much sacrifice, discipline and hard work went into becoming debt free. Nobody prepared me for the anti-climax of trudging along into building our savings to 6 months of living expenses. It doesn't feel much different than Baby Step 2 in the fact that we're still gazelle intense, and will be for the rest of the year. The difference now is that we're seeing our savings grow every month, which is so exciting! See, mixed emotions.
If you plan to jump on the Dave Ramsey bandwagon, or if you're already on it, the greatest thing you can do to stay the course is to DREAM! Why are you doing this? What things will be made possible when you have no payments? What have you always wanted to do, but money has held you back? How can you change your legacy by the example that you're living?
For us, it's the future of this farm. We have so many plans for this place, but money has held us back. We have hope for our future here because we're not being held back anymore.
Now you tell me yours...