Let’s face it, we all have our own version of what broke is. For some, it’s literally not having enough money to buy groceries or pay the bills. For others, it’s living off ramen noodles and not going out with your friends because you can’t afford to.
Or maybe you make more than all of us combined but yet you still end up in the hole every single month.. because you are spending more than you make, so you’re broke.
We have experienced all of those situations over the course of the past ten years. But I think the hardest pill to swallow was when we were finally making money, doing things right, but we didn’t have anything to show for it.
We physically couldn’t make ends meet, somehow we were spending hundreds of dollars over what we made each month. How is that even possible! How can we overspend buy a few hundred dollars, sometimes more, each month?
That was a huge turning point for us. I’d like to say the rest is history and we magically saved all this money out of pure luck or inherited it but that’s not the case.
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Our Debt Was About To Break Us
I honestly couldn’t tell you how much debt we, once upon a time – long ago, were in.
Let’s just say I was a career student for 9 years before I graduated.. yes NINE years, and no I’m not a doctor. Far from it! It kind of cracks me up thinking about it because my degree has done nothing for me.
Our debt consisted of:
- Car loan
- Truck Loan
- Credit Card
- Student Loans
I’m sure this sounds familiar. I was once told you we would always have debt, whether it’s a car payment or a mortgage, there is no escaping it.
We’re going to prove them wrong!
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How We Pay Off Debt – Create A Plan For Your Money
When we finally started to get serious about fixing our finances we knew we had to create a plan. That plan started with setting goals. Without goals, we had nothing to work towards.
If you are in the same situation we were in, set some goals to work towards. When you have something to work towards, you can focus a lot easier on the plan.
Our goal was to be debt free. In order to get there, we had to know what debt we had. If you have ever read Dave Ramsey’s book The Total Money Makeover, he tells you to pay off the smallest debt first.
Well, at that time we hadn’t read the book yet. We listed all the debt we had and definitely didn’t choose the smallest one to tackle first. We chose the car loans.
In hindsight, it makes more sense to knock out the smallest debt first. I highly recommend taking that approach instead of randomly selecting which debt to pay off.
Pay Off The Cars
Our first goal was to pay off both our vehicles. At the time we had about $31,000 in vehicle loans.
We decided that every month we would put a set amount of money down on the vehicles no matter what. Now keep in mind, this is way before we even knew what budgeting was. Little did we know, this was the first step to us getting serious about budgeting and saving money.
It took us 2 years to pay off both vehicles. That’s right, we paid off both vehicles or $31,ooo in debt in just 2 years. How did we do it, we cut back on everything!
To pay off that much debt that quickly we cut our spending dramatically. We didn’t go out to eat, we ate a lot of really cheap meals at home, and we definitely didn’t go shopping.
One bad money habit that we used to have was impulse buying. If you want to start saving money, you should definitely focus on cutting out impulse buying. When we cut out that bad money habit we really started seeing extra money that could be spent on paying off the cars.
Pay Off Those Credit Cards
Earlier I mentioned Dave Ramsey’s book The Total Money Makeover and how he recommends to pay off your smallest debt first. Well, it turns out there is some logic behind that idea so it would be smart to follow it. The method is called the debt snowball.
Essentially the debt snowball tells you to pay off your smallest debt first. Once that one is paid off, use that extra money to pay on the next smallest debt. Continue this until you are debt free!
It took us two years to pay off the cars but it didn’t take us very long to pay off the credit cards. If I remember correctly, we had about $4,000 on our credit cards. We took the money that we had been paying on the cars and put that towards the credit cards…see how we used the debt snowball without knowing it.
We paid the credit cards off in under a year. If you have credit card debt, please start paying that off ASAP.
In just 3 years time we had knocked out the majority of our debt. We still had those pesky student loans though.
Changing The Course Of Our Future
Let me start by saying we’re not perfect with our finances or money management. After we paid off the cars and credit cards we let off the gas. We had been going strong on paying off debt and we lost focus on the student loans.
Instead of paying off the school loans we started saving our money. We started saving so we could do some traveling and start our retirement accounts.
Our bank hooked us up with a financial advisor and that’s when we discovered mutual funds. I can’t even begin to describe how happy I am that we started investing in our retirement when we did.
Don’t wait to start saving for retirement. Our mutual funds were the key to us being able to save over $100,000 in 5 years and all before we were even 28 years old.
Starting our mutual funds was the jolt we needed to get out of the rut we had fallen into. After we started investing and seeing the accounts grow, we decided it was time to tackle the student loans.
We were making a little more money at that point and I started getting an annual bonus at work. My bonuses and any extra money we had gone towards the student loans.
We ended up paying off the student loans a week before Cassie finished her degree! It was an amazing feeling to be totally debt free! We didn’t have car payment, credit card bills, and the student loans were gone.
We started dumping money into retirement accounts and hit our first $100,000 by the age of 27!
Our Tips For Saving Money and Pay Off Debt
Now that you know what our journey to debt free living looks like, what should you take away from all of it? Here is our advice to you.
Use the Debt Snowball: The Debt Snowball is talked about a lot by Dave Ramsey in his book The Total Money Makeover and for a good reason… Because it works. Seriously, we might have done it a little backward but the idea behind how it works is legit.
Create a Budget: You will never hear me tell someone they don’t need to budget their money…ever! Budgeting our money is what has allowed us to travel the world, by our first house, save for the kid’s college, and be on track to retire by age 50. Seriously, start budgeting today. If you need help, join our 5 day Organize Your Finances Challenge to get your budget started.
Pay Off Credit Cards: Get rid of credit card debt. They generally have higher interest rates so get rid of that debt
Cars, you don’t need a flashy one: Back when we first bought our Ford Explorer and Mazda 3 they were both used. The Explore had 50K miles on it and the Mazda had ~30k. They weren’t flashy but they were solid vehicles. Guess what, they still are solid vehicles because we took care of them. We didn’t go out and by new ones as soon as we paid them off, we like not having car payments. Drive your cars until they die, your bank account will thank you.
Retirement Planning: Start planning for retirement as early as you can. The sooner you start the happier you will be later in life. Compounding interest is amazing!
Well, you’ve heard our journey towards financial freedom, what’s your story? We’d love to hear what you are doing to reach your goals!!
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