Our year has taken off at a beautiful pace, and it is about time for our debt journey update. As some of you may remember Yvan and I are ‘going against the grain’, in more ways than one. We have made it our mission to humbly and assertively chase total freedom from DEBT.
Last year we laid the foundation in preparation for INTENSE focus starting January 2021. This is not our first attempt, but it is most assuredly our last. Our children, our marriage and our homestead dreams matter too much to us to allow debt to consume our lives another year without doing something pro-active about it.
5 Things That Are Helping Us Gain Traction with Debt RIGHT NOW:
- BUDGET TOGETHER as a couple.
- Dream Together
- Meal Plan
- Pay off Debt Smallest to Largest
- Be Creative- Refinance to a Lower Term
We Were Financially Lost
I remember shortly after getting married Yvan handed me his first check with a smile and went back to whatever he was occupied with. I never expected my husband to implicitly trust me with the household finances, and it flabbergasted me. We had discussed finances briefly in pre-marital counselling, but we did not have a real “plan” for how to handle it.
Yvan had full confidence I would do a good job handling the paperwork at home. I deeply appreciated his BELIEF in me.
But the problem, was, I did NOT always do a good job. Yvan was soon working three or four jobs and it just made the most sense for me to take care of it. However, I had not had any real experience with handling money WELL.
I fumbled so clumsily through creating a budget each month. I would seek advice continuously from friends who seemed to be crushing it with money goals. But I was often met with, “I don’t really pay attention, my husband handles the money”, or “We don’t budget, we just don’t spend much”.
I couldn’t piece together what good budgeting should look like. I began reading books on finance and stumbled across Dave Ramsey’s, “Total Money Makeover”.
Budget As a Couple
One of the greatest gifts we ever gave our marriage, was getting on the same page financially together.
For years I just paid our bills and Yvan worked tirelessly with no real plan for the future in sight. But once we began ‘budgeting as a couple’ we saw a clear picture of the mess we had made.
Our weekly “Budget meetings” were wildly disorganized. Yvan sat there after a fourteen hour shift, exhausted and trying to stay awake, while I rambled off a random list of bills and he nodded. It took us time to figure out how to work together.
As time went on, we realized a KEY aspect our finances were missing was DREAMING together. We cannot plan if we do not know what we want to accomplish.
Most healthy couples do this. It may sound pretty basic, or it may be a strain for your couple. But dreaming together is a KEY component we soon discovered in our budgeting.
I have heard many couples tell me over the years that they want to “retire early”, or “Go on a Cruise for their 20th Wedding Anniversary”. These are beautiful dreams. Yours may look starkly different. But what are you doing, as a couple, on a daily basis to work BACKWARDS from that point in the future to now?
Yv and I have had many “Dream Dates”, whether over coffee at 4am or our ‘at home’ dates once the kids are in bed. We are blessed to share the same vision for the future. But we also have to consciously work towards those goals if we WANT to see them become a reality.
Hence, our DEBT FREE journey. This plan (Dave Ramsey’s Baby Steps) has given us VERY practical tools to work with each time we come together. It helps us evaluate if we are sticking to our goals or if we need to ‘re-adjust’ because of an unexpected event. But we have learned the importance of jumping right back on track.
Find the LEAK
If you are not careful with your finances, every budget has a “leak” somewhere. There were several “leaks” in ours and you might discover the same. Some main ones were online “Subscriptions” we were not getting enough use out of, random Amazon Prime purchases, and our FOOD BUDGET.
You can evaluate where your leaks are, by writing down EVERY ITEM spent for the next month, keeping careful track of both cash and debit/credit purchases. If you are not laser focused on your budget, or if you do not have a plan, your will likely uncover a few “Leaks”.
Food is a major topic in our house. We discuss it, learn about it, and devour it with joy. It is also an area of our budget we never restricted. One being we have a LOT of mouths here and we LOVE to eat.
Another reason is that it I can be a headache to meal plan and I love the freedom of walking in a grocery store and throwing whatever I feel like in the cart. This often resulted in more than $3000 a month shelled out to basic groceries. I thought we were crazy until I talked to a family with three kids, whose mom said she spent a whopping $2800 a month just in LUNCHES for her kids.
Turns out we still were kind of crazy, but that we were not alone. We eat very healthy, nutrition dense foods in our household and I am ALL FOR spending whatever it costs on that, within reason. But I also avoided Meal Planning for so long that we ended up with “waste” throughout the month.
Once we began meal planning and PREPARING meals for the month, we shaved $1500 off our food budget (Check out the Post About this Specifically HERE), without compromising abundance or nutrition. We also eliminated WASTE.
Now that we stopped up the LEAKS, and have been working together as a couple towards our financial betterment, we were ready to re-attack our debt once and for ALL. If you do not know why I said “Re-attack” you can check our our first attempt at getting out of debt HERE, the mistakes we made and lessons we learned.
Number one, we have CUT all ties to NEW debt. No OPEN CREDIT CARDS. GONE. This is an unbelievably critical step, and was one the great downfalls of our history with debt repayment (“Let’s just keep one open for ’emergencies’). Shut it down. Pay Cash or Debit.
Second, we have prepared to follow Dave Ramsey’s program to a tee. That means $1000 in Emergency Savings and EVERYTHING else gets thrown at your debt. What constitutes as an emergency? Well, if you had to choose between repairing a car to get to work versus upgrading your phone because the term was up…which is really an “emergency”?
Next we are paying off all debt smallest to largest. While this may not make sense on paper, it does make sense. In a perfect world, we would pay off the highest interest rate first because that’s what makes sense on paper. But in a perfect world there would be no one enslaved to their credit card statement.
As Dave Ramsey’s plan explains, if this was about ‘what looks accurate on paper’ we would not be in debt in the first place. THIS is a BEHAVIOUR problem. When you begin by paying off debts smallest to largest you gain ‘momentum’, which encourages you like CRAZY to keep that fire blazing.
This month we cleared our first nasty debt of the year and are already feeling CHARGED.
For those who are on plans to keep “upgrading” their cell phones, PAY FOR YOUR PHONE UPFRONT. Not paying for your phone in cash upfront is DEBT. We just shaved more than $200 off our monthly expenses by paying off both of our phones. That’s BANANAS y’all!
The Gift of Refinancing
I cannot remember the last time I felt as much giddy excitement as I did yesterday. Ok, I might get a little ‘geeky’ for a second but we refinanced our home from 20 years to 7!! The fact that that excites me, really says something about the stage of life I am in, I suppose. But who doesn’t feel relief from cutting ties to debt?
We purchased this home five years ago. But do you know how much we were paying towards the principle each month? About a third of our monthly payment actually hit the principle payment. Only a THIRD! Do you know what percentage we are attacking our house payment with now? 92%!!
Some of you may realize we said we wanted to pay down our house by forty, which is in less than five years…NOT seven. But we chose a seven year term because we are still attacking some other crappy credit card debt and loans that need cleaning up first. Then we will put an aggressive amounts down each year and try to clear it up before that five year mark.
Check out this video to learn more about what paying off your mortgage early could mean for you!
Interest Rates Are LOW
I encourage you to talk with your financial institution as soon as possible and see what the rates are currently. We were able to get a temporary promotion of only 1.99% by choosing a seven year mortgage. You may find something lower than that or perhaps you already have an interest rate that low. But I still would highly recommend refinancing for a shorter term, and here’s why:
Most of us know that paying off your mortgage early will result in paying less interest overall. But did you KNOW that by paying a mortgage of $250,000 over 20 years will result in you paying more than half MORE of the original loan amount? Yikes.
Often we are ‘well-intentioned’ to pay off our mortgage early, but the only way we are guaranteed to pay off our mortgage early is to take shorter term. I cannot tell you how freeing it is to know that regardless of how aggressive we are with debt in the next seven years, we will be mortgage free by the end.
Debt Matters to Our Homestead
Dreams are important. But we do not get anywhere with our hopes if we do not PRO-ACTIVELY chase them.
Yvan and I have big hopes and dreams to expand our homestead. That’s why getting rid of debt is going to change not only our ability to accomplish those goals but it also affects the legacy we leave to our kids.
We do not want our children drowning in debt. We want them exhilarated to show up at their jobs (whatever those are) and CRUSH their goals because their income is working FOR them and not against them. Even the most satisfying job loses its “glow” if you are drowning in debt. On the other hand, even the most stifling job can bare hope if you are ganging traction each month towards your dreams. You cannot gain traction by staying in debt forever.
No matter what your debt IS or what amount you have to conquer, there is ALWAYS a way out. It just takes a SOLID plan, focus and determination. And if you need support I highly recommend reading one of Dave Ramsey’s books, subscribing to his YOUTUBE channel to feel the excitement of the “Debt Free Screams”, and get on a written plan to conquer your own goals. If we can do it…anyone can, believe me.