Debt Freedom

When Gina told me about her new snowball budget a few years ago I thought it was ambitious but a little extreme.  I’ve never had credit card debt; therefore, it was easy to consider it bad debt.  Student loans and car loans on the other hand seemed perfectly fine.  I needed those things and couldn’t have afforded them any other way.  Gina’s plan was admirable but not for me.

After a while I did think it might be for Danny.  I ordered both Suze Orman and Dave Ramsey books in an attempt to learn more about money and inspire him to be more responsible. My boyfriend Danny had some serious money problems.  At first he would overdraft his accounts – I quickly nipped that in the bud.  His extravagant spending habits and zero regard for savings were slow to improve.  He had over ten thousand dollars in credit debt and zero savings – all while living at home rent free! It was painful for me to watch and I often tried to show him the light.  It didn’t go over well.  When he moved out, couldn’t afford his rent and needed me to move in I started to demand a change.

I knew Danny was the one for me but I could never marry someone with these kind of financial issues.  They were tolerable to me because he had no student loans. When he won money at the casino he used it for a down payment for a brand new car.  It pained me to watch him buy something that immediately depreciated in value. Watching his money mistakes forced me to re-evaluate my own financial philosophy and suddenly the Ramsey plan didn’t seem too bad.

Because miracles do happen, Danny read The Total Money Makeover and didn’t hate it.  One night he tried to figure out a way to sell his car and buy a clunker.  I admired his attempt but the car ship had sailed and we’d have to ride it out.  We set out a plan to tackle his debt.  It wasn’t a seamless experience.  Honestly, it was really painful because it wasn’t easy for Danny to change his lifestyle and there were set-backs.

Nevertheless, we were able to start our life together without credit card debt by using all of our wedding money and savings to pay it off and foregoing a honeymoon.

Creating a workable budget and compatible financial philosophy was extremely painful.  I understand why money is the number one cause for divorce and the first year is notably difficult because figuring out how we would handle money year one was VERY hard.

Now it’s not.  We’re not perfect with our finances.  We enjoy ourselves and don’t pinch pennies in our daily life but we’re careful with big purchases.  Danny has learned he doesn’t need every videogame and embracing minimalism stops me from buying things I think are cute but don’t really need.

We set financial goals that we both agree on.  A big one was being debt free, now we are and t feels amazing!  Now we can focus on saving money for a house. It’s the Ramsey step 3.5 between the six month expenses in savings and investing 15% into retirement. Admittedly we defer from the Ramsey plan here.  We always make contributions to retirement but not at that level – yet. Our goal is to buy a house in 2016 and have it paid off by 2031.  To have no mortgage before I’m 45 would be incredible.

Living on a budget, paying down debt and saving money isn’t easy but it’s totally worth it.  We spent a couple years doing a financial assessment form each month.  It was a good way to hold ourselves accountable in general but not the best for tracking trends.  Starting January I’m experimenting with a new plan.  The general concept is the same but this will allow us to more readily assess our progress month to month.  I created a public template with a sample budget that can be used by anyone.  I would also suggest reading Dave Ramsey’s book.

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