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My husband and I consider ourselves VERY frugal people. We meal plan, buy second hand, coupon, and use rebates (See 7 Apps that Will Save You Money) to skimp and save where we can.
We still enjoy life. We take vacations and make memories with our children; we eat very well (and healthy), and are able to spoil our children just the right amount. We still enjoy life, we just prioritize where our money is spent.
I have always felt that one of our strengths as a couple is our money management skills. I’m not sure we have ever argued about money. Eleven years ago when we were starting out in the workforce as newlyweds we established goals for our life together, including what we called ‘Financial Rules’ that we choose to live by.
One of our ‘financial rules’ includes paying off our debt early. We did a lot of research early in our marriage regarding debt payoff and the name ‘Dave Ramsey’ always seemed to be a hot topic. He is a well-known author and financial expert who has helped so many reach financial peace by getting out of debt.
We studied Mr. Ramsey’s 7 Baby Steps but altered them to fit our situation and needs a bit better. Here is what we did:
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Baby Step #1 recommends a $1,000 starter emergency fund.
We increased our emergency fund. We were able to so we increased this to $5,000. We quickly learned during the first year of our marriage just how quickly you can burn through emergency funds (washer breaks and floods bathroom, heating element in vehicle needs replaced, etc).
Baby Step #2 recommends paying off all debt, except your mortgage, using the debt snowball method.
This means you pay off your smallest debt first, while still making the minimum payments on all your other loans. When you have paid off the smallest debt, you move to the next one and all the money for that first debt rolls onto the second debt.
We found two problems with this one: First, our smallest debt was a loan on my car, which actually would cost us more to pay off early. They call it, “loan payoff amount.” Gag. I wish we had been smarter before taking out this loan.
Second, our highest interest rate was our mortgage and almost HALF our monthly payment was INTEREST! Gag, again. So, we focused our attention on our home mortgage and began making as many extra principle payments as possible! The more principle we paid, the less interest we paid! It is a long term goal but we were vigilant and paid our mortgage off in just 7 years!
Baby step #3: Save 3-6 months of expenses in an emergency fund.
YES. Do this. We didn’t alter this one.
Baby step #4: Investing 15% in retirement after baby steps 1-3 have been accomplished.
Disagree! Invest EARLY! Realistically, it may take 10-15 years to be completely debt free, maybe more than that. The exponential growth of a 401K (pre-tax by the way) will be worth it!
Baby Step #5 is save for your child’s college fund and Baby Step #6: Pay off your home early.
So, we paid off our home before starting an active savings account for our four children. They have always had an account at the bank that we deposited birthday/holiday money that was gifted to them, and we would contribute in lieu of gifts, as well. But, we didn’t start working to save for college until after our house was paid off. Now, each month, the money that previously went towards our mortgage, is deposited into their own account. We don’t consider this our “emergency fund.” We live as if this doesn’t exist, in terms of bills and budgeting.
Baby Step #7: Build wealth and give.
We are always working on the building wealth, but we have been giving throughout our entire debt free journey. We give to our church, local charities, local families, and local organizations in need. We believe in giving what we can, so we always have.
Although we altered these quite a bit, I really believe the baby steps are a great way to start your debt free journey.
I recommend you sit down and list out your debts, your monthly expenses, and your monthly income. From there, download a free Excel budget worksheet or use one of THESE (#ad) to work on your budget.
If you want to read more about Dave Ramsey’s Baby Steps, I recommend The Total Money Makeover (#ad). You can also sign up for an Audible trial through Amazon and get the audio book for FREE.
Working to become debt free is not an easy road. It is stressful and frustrating, and we all make mistakes along the way. Work to stay motivated and focused.
You can do this!
