Updated January 4, 2020
In 2006, we got serious about our long-standing debt and decided to tackle it intentionally. We owed approximately $150,000, including our mortgage. At the time, we were a family of 5 with an annual income of $40,000.
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How we got into debt
Other than our mortgage, the bulk of our debt came from school loans, although some came from my own stupidity…
In 2005, I had an idea for a business and somehow persuaded my husband to let me “invest” $5000 on our credit card. That’s a fancy way of saying “debt.” The business never got off the ground but the debt stuck with us.
The first steps
I resisted tackling our debt for a long time. This was me: I know what they’re going to tell us, “Get rid of cable, eat out less, cancel your gym membership, blah, blah, blah.“
We’d already done those things.
We were living frugally but we were in a holding pattern. And we weren’t really looking for anything different. We were resigned to a slow crawl.
I was absolutely shocked when somehow, in the first month, we “found” an extra $1000 for a baby emergency fund (Baby Step 1). We didn’t make any huge adjustments by increasing our income or cutting large expenses. We just paid attention. And it was relatively painless.
I was hooked.
You mean we can speed this process up?
In Baby Step 2 (the debt snowball, or, all debt but the house), we paid off $25,000 in less than 2 years. This was the most intense part of the journey. Not only was our income tight, I was going through a very difficult time personally.
The first $15,000 was paid off a penny at a time on one modest income. It meant a lot of sacrifice and intentionality. My personal struggle eventually led us to sell our home. The amount we made on the sale of that house (about $10,000) got us over the last hump. Baby Step 2 was done.
After selling our home, moving across the country and settling in Texas, we bought a modest home. We didn’t want to get in over our heads again.
Changes over our 10-year journey
For much of our debt-free journey we lived on one income ranging between $40,000 and $50,000.
We also added another child to the mix and became a family of 6.
In 2010, I turned my hobby blog into a money-making blog. Over time, my online business increased our income substantially, accelerating our debt journey.
Where we are today
We are 100% debt free. We paid off our house on June 16, 2016. Dave Ramsey’s Baby Steps work.
Now we’ve shifted our focus to the FIRE movement (Financial Independence, Retire Early). We don’t plan to retire, so our goal is just FI (Financial Independence).
Our general money principles & tips
- Live generously. An attitude of giving instead of getting changes everything. And it’s fun!
- Planning is key. Without a plan, money tends to come in and go out unnoticed. I honestly thought I had a great handle on things. Then we started writing things down. Turns out I was wrong.
- Understand the 10/90 Rule. 10% of our financial success is due to our wise choices, 90% is due to grace. Our job is to obey, trust and pray. His job is to make ends meet.
Call me cheesy or too religious, but I will talk about the benefits of giving (tithing) until I die.
First, in my opinion, too many people quote Malachi 3:10 and use it in a weird way. They tithe because it’ll get them something (i.e. opened floodgates with blessings crashing through). This makes me a little crazy.
To me, tithing is about connecting and simple obedience (He said do it so we do). It’s “putting my money where my mouth is,” a physical reminder I’m gettin’ on God’s bus. Not my own bus. Not someone else’s bus. God’s bus. And He’s drivin’.
Once I got over letting go of driving my own bus, I could enjoy the ride. The actual money part of it became secondary. The best part was being on God’s bus. He’s a great driver y’all. Because He knows places no one else does.
We give at least 10% of our gross income every month, even when it doesn’t make sense on paper. (Believe me, there were times when it didn’t make sense on paper.) I don’t really know how it works, but God fills in the gaps every time. Try it, you’ll see.
2. Read The Total Money Makeover
I don’t agree with everything in it, but The Total Money Makeover by Dave Ramsey was a huge motivator for us. It’s a quick read and the stories of real people are inspiring.
3. Write and stick to a budget
4. Use the envelope system
Each month, dole out your money to different budget category envelopes. Once the money in an envelope is gone, you’re done spending in that category.
I’m a computer geek so I must have tried every digital envelope budgeting system available. I found software called Budget and used it for years. As of 2019, we use YNAB (You Need a Budget). Highly recommended.
5. Follow financially like-minded people
6. Splurge on purpose
Build some breathing room into your budget for feasible luxuries and the well-being of your soul. Total deprivation today leads to excess spending later. My luxury? A slightly higher setting on the furnace.
7. Think upside down
Instead of asking the question, “How much can we afford?” ask “How little can we reasonably get by with?”
8. Model well for your children
Instead of saying, “We can’t afford it,” say, “We’re choosing to spend our money on something else.” The former breeds a victim mentality, the latter, responsibility and freedom of choice.
9. Purge and organize your stuff
First, get rid of stuff regularly. It costs time, money & energy to store it, maintain it and move it. Then, keep it organized so you won’t buy stuff you already own. (Clothes and food in the pantry/freezer are big potential pitfalls here.)
10. Don’t assume
Buying in bulk is not always more economical. Generic brands are not always cheaper than name brands. Eating out is not always more expensive than eating in. Figure out costs per unit or per person to make the better choice.
There are far more spectacular becoming-debt-free stories for sure. But it’s all relative I suppose.
When we started, we were barely scraping by and financial freedom felt like a dream. We discovered it’s not just a dream. With a little sacrifice and creative thinking, it can be a reality. Here’s my point: just start, then press on.