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The Dave Ramsey we survived!

>> Tuesday, January 24, 2012

Just about 1 year ago, we became debt free except for our mortgage.  It was such an exciting thing for us and totally a life-changer, so I thought I would share our journey with you.

It all started almost 10 years ago.  Steve and I met, fell in love, got married and within a couple months went out and bought a brand new car.  Steve had already purchased a house shortly before we met, so we already had a mortgage (a small one, because the house was tiny!)...what a better way to start out our marriage than by getting into debt?  Of course we got an awesome deal of around $18,000 for a CAR...but it was at 0% interest rate and the payments were affordable.  Then, I bought our wonderful Kirby sweeper. Now, I do love the thing and it works great, but it was like $1200 and we put it on financing...we had the cash, but it was at 0% interest for like 9 months, so we paid it off right before the first payment was due.  And then, we bought a washer and dryer...and you guessed it, 0% interest for a short period and we took advantage of the great offer and financed it again.

Then we decided we needed a bigger house.  Ok, so it was more me that Steve.  Because he had purchased the house on his own, it wasn't in a location I would have chosen, it wasn't the style of house I would have chosen, and we could afford more of a house, so why not?!  It took us almost 2 years to sell the stupid thing, but we finally got out and just about broke even.  I think we maybe made $500, which we put to paying the bill for storing our stuff while we looked for our bigger and better house.  We finally decided to pay a little more than we initially wanted to get a bigger, better house than we originally thought.  So, we stretched ourselves a little, but not too much because we were both working.  Our payment was about 25% of our take-home pay, so definitely still in the conservative category.

We had some cash savings, but instead of using that for a down payment we got creative with our financing and financed the entire house and used our savings for a fence for the yard, new appliances (and not the cheap ones, either), some new furniture to fill up the new house, you get the picture.  About a year after we moved in, we decided we also needed a newer vehicle.  Mine was literally falling apart and was still my car that I had from high school.  But, we decided we needed an SUV and we also needed a car payment to make it happen.

Everything we did from the time we were married (even before) to about 2007 was just living the normal American lifestyle.  It wasn't until we were pregnant with our first child that we really thought about what we were doing with our money.

My mom was (and still is!) a stay-at-home mom.  I am the oldest, and my youngest sister is still in high school.  I'm grateful that my mom was able to stay at home and care for us, but I always thought I would be bored and didn't ever want to stay at home full-time.  I thought that I would like to work at least part-time so I could keep my sanity.  But then I got pregnant and everything started to change.  I couldn't imagine leaving my precious baby with someone else all day or even part of the day.  But there was a problem.  We had too many expenses each month for the amount of money my husband brought home.  Almost enough, but not quite.  The difference?  The stupid $315 car payment for our lovely SUV.  I wasn't going to let that come between me staying home or working, so we promptly started chucking $1000 payments towards the thing.  I was able to stay home with my son for the entire 12 week leave that I was allowed to take (but it wasn't all paid!) but then I had to go back to work for 6 months until we could get the vehicle paid off and I didn't have to work anymore.  We paid the car off on a Friday and I turned in my 2 weeks notice that Monday.  I loved my job, but with having kids, suddenly priorities shifted.

As I said, my husband could now cover all of the expenses with his income.  Except that our house payment was about 50% of our income now.  My income was just slightly under 50% of our household income, so while we could do it, there was no breathing room at all.  Finally, in 2009 after reading about this Dave Ramsey guy on a lot of the blogs I followed, I decided my new year's goal was to find out more about him and do the Financial Peace University course.  Because we had baby #2 on the way and I was scared.

So, early in 2009, we had a chance to do the FPU course for the first time at our church and it was a life-changer.  While we lived within our means before and had only once carried a credit card balance (our first Christmas together), we realized that we didn't have a plan.  And without a plan, it seemed like our bank account was always teetering towards $0 and that we would never get ahead.

So, during the course, we got our act together, wrote everything down in a budget, and made a plan for the future.  Our debt snowball was pretty easy...only one item that we put on it.  The 20% portion of our mortgage (which wasn't exactly 20%, but it was what the loan officer told us to do).  Technically it was over 50% of our annual income, so it should have been put in Baby Step #6 (mortgage) instead of #2 (debt snowball), but we didn't have any breathing room and needed to knock it out in order to make it.

So we ATTACKED it with a vengeance as Dave Ramsey likes to say.  From around April 2009 - January 2011, we had baby #2 and we paid off our 2nd mortgage!  WE'RE DEBT FREE!  It was amazing how much extra money we found in our budget when we wrote everything down, stopped making those small impulse purchases that added up to hundreds of dollars, and cut our lifestyle for that time in order to get ahead.  I mean, we didn't make any extra money during that 20 month stretch (Steve didn't get any raises) but yet we were able to find extra thousands of dollars to chuck directly towards the principal on the mortgage.  It.was.awesome.  It was also a lot of hard work, sacrifice and tears, but totally all worth it.

So, from now on, whenever our house buys a new car, takes a vacation, or buys Christmas presents, you can be sure that we paid cash for it :)  Because we will never again be "slave to the lender."  We  do have our main mortgage still, but we chuck extra money at that every month and have a goal of paying it off in 8-10 years max. Because being debt-free is worth it.

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