Happy New Year, everyone! And welcome to my new (and, hopefully soon, improved) website! I decided to actually take the plunge on the first of the year and buy my domain name. (Don’t worry, I budgeted for it!!) It is hard to believe that another year has passed and we are getting closer and closer to 2020! I feel like it was just yesterday that the world was preparing for Y2K while in a full-blown panic that the end of our existence was coming. I can still remember whose New Year’s Eve party we were at that night and waiting to see what happened at midnight. In hindsight, it still makes me laugh that I was actually afraid the world might end, but hey, if it did, we never would have been in all of the debt that we were.
All kidding aside, I am so happy that we have started off this new year debt free!!! I don’t think it has fully hit us yet that we no longer have any payments going toward debt. Truth be told, I don’t know that this month we will feel that change, either. While we have been visiting my family in New Jersey, we have had a couple expected and unexpected expenses pop up. When I visited in September for a week, my parents kindly pointed out that the tires on our Equinox were just about bald. I (not so subtly) continued to remind my husband that we really needed to get new tires before our trip east for Christmas, but, you know, life happened and it didn’t get done. He promised me that while we were in New Jersey, we would get new tires on the car. Luckily, we did not hit any bad weather on the trip out so the old tires made it. Last week, we made the purchase for the new tires, and although we had a few hiccups getting them installed, they are now ready for some Michigan snow. Theoretically, they were purchased in December, but the transaction did not come through until this month, so it is coming out of January’s budget.
In addition to having to purchase new tires this month, we will also be purchasing a new furnace. When we moved into the house, we knew there was an issue with the furnace, but my father-in-law checked it out and it seemed everything was working well enough to get us through this winter. Well, in Michigan, weather is insanely unpredictable. We can easily experience a 50-60 degree temperature swing in just 24 hours; sometimes less. We have an Ecobee so Corbin checked the temperature at home on the app since he had set it low and it was down to 46 degrees in the house! It turns out that furnace couldn’t make it through the winter. Luckily, we have been working toward our fully funded emergency fund and we will be able to take the hit without going into debt! We will get back to Michigan on Saturday and the new furnace will be installed on Sunday. Hopefully we will be able to stay warm in those frigid Michigan temperatures for one night. We may have to have all four of us in one bed to do it, though. Added bonus will be extra kidlet snuggles if that happens!
When I think about these expenses that have popped up, it makes me even more grateful to have had that conversation 23 months ago that got us to where we are today. That harrowing discovery of being $72k in debt truly got us to where we are today. Once we added up all the debt, it was time to make a plan to get out. For months, Corbin had been listening to this guy, Dave Ramsey, on a podcast. He would turn it on in the kitchen while cooking dinner and I would ask him to turn it off. I thought the dude was annoying and I would honestly rather listen to silence than him. What made things worse was that I would hear Corbin answering the callers’ questions before Dave. I thought he had lost his mind listening to a finance podcast while trying to sell me on it! Well, seeing those numbers finally broke me down. I actually asked about Dave Ramsey and these “baby steps” he kept talking about. (Full disclosure: that podcast now automatically downloads to my phone and I listen to it religiously and answer callers’ questions before he does as well!)
In Dave’s book, The Total Money Makeover, he breaks down his 7 Baby Steps to Financial Peace.
Step 1: $1000 cash in a beginner emergency fund
Step 2: Use the debt snowball to pay off all debt except the house
Step 3: A fully funded emergency fund of 3-6 months of expenses
Step 4: Invest 15% of your household income to retirement
Step 5: Start saving for college for your children
Step 6: Pay off your home early
Step 7: Build wealth and give generously
Steps 1, 2 and 3 are done one after the other. Steps 4, 5 and 6 are done concurrently. At first, when Corbin was trying to explain the debt snowball, I wasn’t following. Why wouldn’t we pay off the debts with the highest interest rates first? Well, with the debt snowball, there is a lot of psychology behind it which was perfect for me, but I didn’t understand that until I began reading The Total Money Makeover. Once I did that, I finally understood that and SO much more!
The first step for us was to list all of our debts from smallest to largest. We had that done on the white board so it would smack us square in the face every. single. day. We started saving for our emergency fund like mad while still paying the minimum on all of our debts. The biggest part of saving the emergency fund for us was to get on a budget and stick to it. Again, we had a loose budget on the white board so we were really able to pay attention to it. We saved the emergency fund fairly quickly when we cut out some of that extra spending.
Once we had that $1k set aside, it was time to attack the debt. Now, I would love to say we jumped in with both feet, but for me, the water was a little cold and I needed to ease into it one toe at a time. Dave recommends that when you start your debt free journey, you cut up your credit cards. Now, I hadn’t used credit cards prior to that Christmas when we could barely afford gifts, but I was afraid to get rid of them. That’s one of the ways they get you, folks! I fought tooth and nail to hold on to them, but in the end, Corbin’s logic won out. “But, what if there is an emergency?” “That’s what the emergency fund is for, Christine.” Touche. There wasn’t really any way to argue with that. The credit cards were cut up and we got to work.
Like I said before, the debt snowball is psychological. When you pay off that first debt, it is a weight lifted. When you apply the previous debt’s payment to the next smallest and see that debt quickly going down? Well, you get excited. It’s kind of an adrenaline rush. For a competitive person like myself, it was a challenge. We would pay off a debt and I would want to do the next one faster and faster even though those dollar amounts were getting higher and higher. Corbin seriously created an animal! In the Dave Ramsey community, that animal is a gazelle. They are crazy fast and will evade their predators at every cost. Now, I wish I had become a gazelle, but I was still working on some old, bad habits; we both were. I would say I was more like a hippo; I had quick bursts of speed, but had to rest shortly thereafter. I also liked to eat.
Seeing our plan starting to work made me want it even more. I wanted to create a different life for us where we weren’t living paycheck to paycheck. I wanted to give us a little room to breathe. It took a few months, but finally, I had gotten on board with the entire plan and we were able to continue working toward our goal together. Being able to have financial conversations and meetings instead of ignoring them improved our relationship immensely. Oddly enough, it has been such a blessing to have buried ourselves in that metaphorical hole because we were able to shovel ourselves out together and gain more financial and marriage stability. It wasn’t easy, but it was definitely worth it.
Next week, I will share how we started living on a budget, the trials and tribulations we faced with it, the slip ups, and the triumphs. There are definitely some tips and tricks I have learned along the way so I will make sure to highlight them.