How much debt did you start out with and what kind of debt was it?
We “started out” with debt from even before the beginning of our marriage. I brought debt into the relationship, and so did David. Between the two of us, right from the get-go there were student loans, personal loans, car loans, credit card debt, and a mortgage. I can see it all now in hindsight, but at the time, and for a long time to come, my head was a financial fog – and I kept it in the sand.
As the years went by, our debt would yo-yo up and down. For instance, we’d pay off a car loan but then take on more credit card debt in buying new furniture or taking a trip. David made the “smart” move of paying off Visa bills we couldn’t fully afford with a line of credit so that there wouldn’t be as much interest. So a line of credit was another type that we added to our variety of debts.
Early on in our marriage, we actually did make a plan to pay off our non-mortgage debts, which at that time amounted to just over $38,600. From 1994-1997, we paid off that amount. Our motive, however, was to make room for a big mortgage. In 1998, we maxed out and bought our “dream home”. Ugh!
Within months of buying our house, David was laid off. His company was failing, and while he was able to find another job, the high-tech bust was happening, and company after company went under. It was something that nobody saw coming, and we were among thousands of people in our city who were impacted by it. Blind-sided.
By 2003, David had had enough of the roller-coaster and decided to switch career paths. He just didn’t know to what. And for 6 years, we were treading water – just barely – almost entirely on my teaching income. It was a stressful, depressing time.
In 2009, David decided to launch into a line of work that he had started to do on the side, and he bought a franchise for a home business. Almost immediately, we knew it was going to work out. Yes! But it was at this point that our debts were at their highest – since a business loan of $90,000 was added to our debt load.
We “started out” in 2012 with consumer debts of over $20,000; a business loan, now down to just over $80,000; and a mortgage at just over $155,000. Our grand total was over $255,000.
What was the “eureka” moment when you knew things had to change?
We were happy to have things “back to normal”, and incredibly – considering what we’d gone through – we started living our old lifestyle. A bit of travel; more dining out; new car . . . But “normal” felt hazardous – despite our healthy income.
A friend of mine who had been aware of our financial stress came over one day to drop off a CD book that she thought I’d be interested in:
The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness
. I thanked her politely and then didn’t even look at the CD for weeks. Only an annoying sense of obligation made me pick it up one day in May 2012 as I left for work. I would listen to it on my commutes to and from work and be done with it.
With that kind of attitude, I started listening to Dave Ramsey – someone I’d never heard of. I was riveted. A light was shining in on the financial fog of my brain and offering a clarity I had never experienced before. David listened to the CD that night and was equally psyched. We had our eureka moment: We were in too much debt! And we were too old to be in too much debt. I was about to turn 49. David was 53. We had to get out of debt! NOW.
Recommended Reading: Love Your Life, Not Theirs: 7 Money Habits for Living the Life You Want
How long did it take you to pay off the debt?
We started in the summer of 2012 to take on the first of Dave Ramsey’s “Baby Steps”.
-
Save up a mini-emergency fund of $1,000.
-
Start paying off all non-mortgage debts, from smallest to largest.
-
Save up a big emergency fund – enough to pay expenses for 3-6 months in the case of loss of income.
We experienced bumps in the road – more or less constantly – and some months we were able to pay off more than others. But we kept our focus. In July of 2015, we paid off the last of our non-mortgage debt. Consumer debts and the business debt were gone. Now, as of November 2016, we have our emergency fund fully funded. All that’s left of our debts is our mortgage (just under $90,000), and we’re paying that down as aggressively as we can while ramping up our savings as per Ramsey’s plan. (Step 4 is to start saving 15% of gross income.)
What are the top five things you did to get the debt paid off and how did those five things help you to make permanent changes and stick with your plan?
-
Get head out of sand. I had to know our numbers. How much did we have to work with? What were our fixed monthly bills? What were our variable expenses? What were our debts? How much were we paying in interest. I had to face the basics of our finances and stop finding comfort in ignorance.
-
Communicate. Nobody gets married so that they can spend time together going over receipts and discussing/arguing over conflicting priorities. But that’s what we had to do. Hours and hours devoted to the picky details that make up our financial health. Romantic? No. But it’s done wonders for our marriage.
-
Budget. We started to decide in advance where our money was going to go each month.
-
Track. We follow up and verify where we come in under-budget and where we come in over-budget. We can then make adjustments to our next budget.
-
Hold steady and keep focus. There have been ups and downs on our journey to debt freedom. Work-related; family-related; finance-related . . . Life happens, and at any given time, we can only do our best – and that best is often far, far short of perfect. But fortunately, perfection isn’t necessary for progress. Our progress hasn’t always been stellar, but it has been and continues to be steady.
Recommended Reading: The Behavior Gap: Simple Ways to Stop Doing Dumb Things with Money
How is life different now that you’re debt free compared to when you were drowning in debt, both from an emotional standpoint and a financial standpoint?
Over the past several months, David’s business has been slower than usual. Early on, that would have been highly stressful. Now, it’s not a big deal. Even if his business tanked, it wouldn’t be remotely devastating. We’re set up to be able to absorb negative possibilities, so they don’t hold much power over us.
Through our journey out of debt, we’ve come face-to-face with many compromising thought patterns, behavioral patterns, and relationship patterns that had kept us stuck in a cycle of indebtedness. We now have far greater clarity, a much more proactive attitude, and better relationships than we had in our debt-days.
What are some of the pivotal things you’ve been able to do now without debt that you could have never done while in debt?
Once we had saved up our emergency fund – which happened just at the time when our remaining mortgage went from 6 figures to 5 – David bought his dream guitar, and we decided to go ahead with my dream of self-publishing a children’s book. David’s guitar music fills the house for an hour or two every day now, and I’m eagerly awaiting the completion of illustrations for my book-to-be.
Debt suffocates our potential to live life to the full. Debt-freedom ushers in abundant living.
What message or words of encouragement do you have for those still struggling with debt who are overwhelmed/in denial regarding their situation?
. I thanked her politely and then didn’t even look at the CD for weeks. Only an annoying sense of obligation made me pick it up one day in May 2012 as I left for work. I would listen to it on my commutes to and from work and be done with it.
Phew, awesome story.
I can’t even remember the day when I paid off my debt. I do remember the feeling: FREE at last. It’s been better and better for my family ever since.
Thank you, Ramona : ) How wonderful that you and your family are living debt-free! Interesting that you remember the feeling and not the day. It really is about freedom gained!
This is wonderful! Congrats on making it through all of that, Ruth. 🙂
Mr. Picky Pincher and I both came into marriage with debt, which made it impossible to save money at the end of each month. We went through a lot of growing pains, but we’re finally getting the hang of it. Starting this month we’re paying off $65,000 of student loan debt in 18 months. I’m so excited to be done with it all!
Starting this month? Oh, that’s so exciting! I wish you both very, very well on your journey to debt-freedom. Thank you, Mrs. Picky Pincher. (That’s a really cute name : )
Thanks for sharing your story, Ruth! And I love how you mention that your shared goal and communication about money with your husband has “done wonders” for your marriage. I think those shared goals can improve any marriage. I know it definitely makes a positive impact on my own – I can’t imagine it any other way! 🙂
Thank you, Amanda. So often, the great experiences of life come from the mundane. Diaper-changing and nose-wiping are part of the great life experience of parenting. Budgeting and tracking are apparently part of the great life experience of romantic love. Who knew?
Hold steady and keep focus – is such an important tip. I am guilty of being impatient and can lose interest, especially when things don’t go smoothly. And when you’re paying down debt or accumulating wealth, stuff always happens, which makes it easy to quit or lose hope. Too often I see people make it sound so simple and effortless. The reality is that you gotta be tough because the steps may seem simple but the execution (and life) is rarely easy and pain-free. You need to be both mentally and financially prepared to deal with it. Congrats on living debt-free!
I remember Dave Ramsey saying about his steps to debt-freedom, “They’re simple – but not easy.” Like you, I’ve had to confront my impatience many times on this journey to debt-freedom. That’s where the “tough” part comes: facing that flawed person in the mirror and saying, “Don’t be so impatient! Wait. Stick to it.” I’m so glad that perfection is not required for progress : ) All the best on your progress, Tanya!
So awesome Ruth! Loved hearing more about your debt story and how you guys overcame it 🙂
Thank you, Mackenzie : )
Tip #1 is a really good one – you have to know what your situation is if you plan on making changes. For example, if you don’t know your total debt or interest rate on your debt, it’s going to be difficult to make positive changes that result in paying off that debt. Good tips!
It seems so obvious, doesn’t it? But a head in the sand can be in denial about all kinds of obvious things. Thanks, DC : )
I still remember when I paid off my mortgage in December 2012. At the time it was a good feeling but it really didn’t sink in until month’s later. Now that’s it gone I can’t imagine ever dealing with a mortgage again!!! Thanks for sharing your awesome story!!!
Thank you, Mustard Seed Money : ) I think we’ll be in shock mode for a few weeks anyway once that mortgage is all gone. It’s been our focus for so long. There will be a “What now?” sense, I think. You’ve had debt-freedom for as long as we’ve been trying to get out of debt. Enjoy!
Hearing Ruth’s story never gets old. It just shows you with team work, focus, and motivation you can overcome past mistakes. We were in a similar boat, and used Ramsey’s teaching as a spring board. Now we want everyone to know what we know.
I want everyone to know too, Brian! I always ask , “What would it have taken for the head-in-the-sand me to have paid attention to good advice about paying off debt?” – and go from there. Hopefully, someone is benefitting : )
Ruth, congrats on your progress. You realize that debt is bad and it is necessary to eliminate it at all costs!
After you pay down your mortgage, what are your plans? Do you intend to invest future savings in, say, real estate, equities, bonds, internet sites, etc? Are you going to figure that out when the time comes?
Looking forward to hearing about your success in the new year!
Erik