How We Paid Off $32,000 in Debt in Under 3 Months
I hate Debt! Yes hate is a strong word, but it is an accurate expression of how I feel about giving away the money I work hard for everyday to someone else. Someone who not only takes the money I give them, but they want a little extra, a little interest.
Now to be fair, I can't blame it all on them. The problem is mostly my fault, my fault because the money I have to give away with interest is most likely the result of my need for instant gratification. A new purse (swipe) some new shoes (swipe) a new Starbucks Mug or tumbler (swipe). We live in a world where we want it and we want it now! Guess what, there is someone who will almost always give it to us now...with a cost!
So lets just say I have had my fair share of debt. I have lived the life of instant gratification and I have paid the price...literally. The bible says in Proverbs "The rich rule over the poor,and the borrower is slave to the lender" Proverbs 22:7. Well finally my husband and I both got tired of being a slave to the lender and we wanted to enjoy the money we work for.
Our first wake-up call happened when we attended Dave Ramsey's Financial Peace University at our church. This is an excellent class that I would suggest it to anyone that is ready to change their financial situation for good. Learn more about Dave Ramsey and his money principles here. We also downloaded his podcast and listen to it regularly. Some of his methods may seem extreme but they work.
So on to the debt payoff:
Our debt breakdown looked like this when we got serious about paying off the rest of our debt:
$20,516 Vehicle 1
$11,500 Vehicle 2
$9800 Credit Card 1
$829 Credit Card 2
*I realize this equals more than $32,000, but I'm keeping this post to a 3 month period (per the title) and we have around $8000 remaining on Vehicle 2.
We started by following the baby steps that Dave Ramsey teaches.
-First we saved $1000 for an emergency fund, not to be used except for real emergencies.
-Next we created a budget. Dave recommends a monthly budget, but I'm a little OCD with money now and I do it daily. I check my account daily, look over my bills daily because I never want to miss something on my accounts.
We wrote down our monthly income and all of our monthly bills. We made sure the basics were taken care of food, shelter, clothes, tithes and transportation (Yes we pay tithes, I'll write a separate post about this)
After the basics were taking care of we paid the other monthly bills. We cut out extra's like, we don't have cable. We only eat out 1-2 times a week max. We watch Netflix and Hulu. We have "spending money" allotted and when its gone it's gone. I use my spending money on coffee and green juice lol. All these things helped us to see our money better. Note that we are not as strict as some people who follow this plan, or even as strict as Dave Ramsey might want us to be lol, but this works for us.
-Then we followed Dave Ramsey's debt snowball plan as our debt pay off method. We listed all of our debts from least to greatest and paid extra on the lowest debt and minimum payments on the others until the lowest was paid off. Then took that money and put toward the next lowest debt along with its minimum payment until its was paid off and so forth so on.
Following the steps listed above we were able to pay off Credit Card 2, some of Credit Card 1 and some of vehicle 2. There were some smaller debts not listed above that we paid off using the snowball as well. Anytime we got any extra money we put it on the debt. No matter how tempting it was to spend it on something else, we put it on the debt.
The next thing we did to pay off most of our remaining debt, everyone may not be able to do. We ended up selling our town home and made a nice chunk of money in the sale. We used the money we received to pay off the rest of the debt except for $8000 on vehicle 2. We strayed from the debt snowball plan by paying off Vehicle 1 first. We did it because the payment was super high each month and we didn't want to pay that anymore. Even if you aren't able to move or sell a home, the other things I listed already will help I promise!
Currently we are paying extra each month on Car 2 and hope to be completely debt free except for our house by this time next year! Whoo hoo!!
Get started with the Dave Ramsey Plan and be on your way to financial freedom today. Get it here:
I hope this post has been helpful and please leave any questions you might have in the comments below.