Wednesday, September 07, 2011

our journey to becoming debt-free {part two}

if you’re just joining in on the story, you can read part one here

After almost five years of being in debt, we were excited to get started on Dave Ramsey’s list of baby steps to becoming debt-free.

The first baby step was to build an emergency fund. We had a fairly good income, so this was just a matter of more carefully watching our money. It took us a while to build it up, but it was very exciting to see money actually accumulate in our account!

We slowly started on step two- the debt snowball, which is basically using all of your free money each month to put toward paying off your lowest balance. We stopped contributing to our 401k and used that money for our snowball. We started praying in earnest that God might be merciful, even though we had been in the wrong, and provide us with ways to make additional income to put on our snowball.

Amazingly, God provided in miraculous ways. We started with $40k in debt {between a school loan, a car, and credit cards}, and 19.5 months later, on a middle class income, we had zero debt other than our mortgage. We sold our nice car at a huge loss and paid for a used nine-year-old van with cash, and God provided as many side jobs as my husband could do in his free hours.

During that time, we also had our third baby, and by another miracle of God, three days before she was born, we were given employee health insurance that saved us thousands of dollars.

It was not an easy 19 months- we worked hard and lived on a tight budget. I carefully watched every dollar that came in and went out. I went to my first garage sale, bought and sold things on eBay, and used Craigslist to buy almost everything we needed. We ate at restaurants a lot less, though we still allowed ourselves to eat out on occasion since it's one thing we loved to do as a family. I played the drugstore game at CVS, saving a ton of money each month on toiletries. Oh, all that and I practically never saw my husband during that year and a half; I listened to Dave Ramsey's podcast and blogged at night when he was away working!

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Within a few months, we started to see our balances drop rapidly with addition of the side income and the money from our car payment. We paid off balance after balance, and with great joy called each credit card company and cancelled our account. The reps were a little more than confused when we started to tell them about Dave over the phone!

I’d have to say the sweetest moment in the whole process was writing the check to pay off our last consumer debt- a school loan. It was an amazing feeling, like a huge weight was lifted off of our shoulders. It was freedom, and there's just no feeling in the world like it!

Right now, there is still one last check we have left to write- the one to pay off our home. And that will be even more exciting!

Being debt-free has allowed us the freedom to buy our foreclosed home, allowed us to take sweet vacations, and even take a pay cut last year without worry of the future.

I definitely wish we hadn't made the mistakes that we did- we'd be so far ahead of where we are now. But even with all of those hard years, I'm not sure I'd take it back, because through our experience I can say this with certainty: financial freedom is even sweeter when it's fought for.

hawaii[22]

Are you working on the “baby steps,” or have you recently become debt-free? I’d love to hear your story! Please tell! :)

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