Dave Ramsey

 

Dave Says - May 26, 2015

I recently applied for life insurance for the first time with a child rider. The insurance company denied my request ...

Debt free in 20 months

I was left with nearly $50,000 in debt after my ex-wife and I separated. The debt was a combination store credit, an HVAC that I was still paying for despite the sale of my house (for a loss) and a settlement to my ex-wife. Along the way, "Murphy" showed up in the form of an IRS bill and a used truck to replace mine which died.

I had no idea or expectation that I would ever be out of debt. I just figured I would be paying for everything for the rest of my life as I accumulated new debt along the way.

One night I was driving out of town, and I heard a guy on the radio talking about living with no debt, using only cash and living like no one else. While I was listening he had several guests that told their story and gave a "debt-free scream".

After listening, I started to think that if they can do it, maybe I can. I wasn't completely convinced but I figured an imperfect plan was better than no plan. At the very worst, if it didn't work, at least I would have less debt which couldn't be a bad thing.

The next day I bought "Financial Makeover" and read it in one sitting. I made the decision right then that I would be out of debt. I've never been scared of hard work and I didn't necessarily have an income problem, I had a control problem.

I was lucky enough to already have the $1000 starting Emergency Fund, so I jumped right into the debt snowball. I'm also lucky enough to have a job that allows me frequent overtime opportunities and related part time work if you wanted to take advantage of it.

For the next 20 months, I worked many 20 hour workdays and 21 day work weeks. Not only did my income jump, the amount of time I was free to spend dropped. I cut my budget to the minimum and I knocked out my first debt, a $600 power bill that was due after I sold my house. A couple months later I paid off and closed the Home Depot account.

Then my truck died and I had to replace it. I probably went too expensive (rationalization follows) but I have always kept my vehicles till the wheels fell off. So I bought a used pickup for $17000 (sorry Dave).

Then along the way I got hit with a $6000 tax bill, so I put that at the top of the snowball and knocked it out in a couple months.

The "Snowball" started slow at first but really picked up steam until I was paying $2500-$4000 per month at the end.

There were many mornings when my alarm was going off after 2-3 hours of sleep to start another double shift, that I wanted to feel sorry for myself. Instead I told myself "Live like no one else" and I reminded myself that I was lucky enough to be in a position that I was able to work these many hours. There are certainly people that wish they had that opportunity. So I drank and extra cup of coffee and went to work.

I just made my last payment this week, (on the truck which I paid off in 12 months).

After 20 months, I paid off $50,000 and am completely debt free. I currently rent, will have my Emergency Fund in place in a few months and will be looking for a house.

I read and re-read Dave's books, listened to his podcast and more recently his show on-line to stay motivated. Every time someone came on the show to give a "debt-free scream" it inspired me to keep going. I knew that I would be in that position one day soon and now I am.

I owe it to Dave's consistent and simple advice. I followed his steps, admittedly with a hiccup or two, and now find myself with an inner peace I haven't know my entire adult life.

I'm so thankful that I heard that voice in the dark. Thank you Dave, you have changed my life.

Debt-free on "Big Game" Sunday 2015

Right before we stepped out the door on football's "Big Game" Sunday, we sent off our final debt repayment check. Man, it feels good!

I was introduced to FPU by my previous employer, an army school district. They wisely decided to provide the class for district employees one spring and I knew we had to do something to straighten out our finances. We had some major life events hit during the class (miscarriage, sold the house, moved to a new state), and it was another year and a half before we got serious about tackling our debt, but we had solid information to guide us.

We started with just shy of $60K in debt (school loans for me and my husband, vehicle loan, and a loan from each mother) and paid it all off in 19 months on a variable hourly income ranging from $3400-$4K/month, which God increased after we got our act together.

To make this happen, we had to make a lot of major changes in our lives: my husband took a contract job, I quit my school position to take care of kids and run our household better, moved our family of 5 and 2 dogs in with parents in exchange for taking care of cooking/ cleaning/ errands, sack lunches of leftovers, planning the menu for 2 weeks at a time, increased familiarity with dressing and cooking whole animals, cooking from scratch, dropping phone insurance (why did this cost more than my life insurance each month???), selling and donating a bunch of junk, odd jobs, and generally cutting expenses so they were between $1100 and $2500/month. Also, we had to throw a good amount of humor and grace in there for each other because this takes a lot of work!

It was pretty rough at times and it is a relief to be on the other side of that experience. Here are the monthly budget categories that we generally used while snowballing:

charitable gifts
renter's insurance
groceries
restaurant/date night (this is how we maintained a semblance of sanity in our relationship while snowballing)
loan minimum payment
gas
vehicle maintenance/registration
vehicle insurance
clothing
health insurance
co-pays
life insurance
children's activities/education
pets
blow
entertainment ($8.23 for Netflix!)
debt principal/bonus payments

Things we had to sort through and may be helpful for others:
- Phone insurance cost $21.37/month and my life insurance cost $11.25/month. There's something wrong here.
- Major props to my parents who saw that there was a plan and a purpose in place and invited us to live with them until a permanent job offer came in. It is astounding what God puts in front of people at just the right time.
- We adjusted insurance payment dates after a while to make sure they would fall consistently on the same side of the end of the month. That consistency made tracking easier.
- We put our budget into a phone app so that we would always know what was left in the envelopes and we could each log expenses paid on the spot. We primarily used debit, but have now moved more to cash envelopes for some budget categories. Having actual cash makes a big difference.
- Menu planning made a major difference in our grocery budget. With making a menu and only buying groceries to fit that, we cut our grocery budget in half.
- Thrift stores have just about everything in them. Have you been in one lately? Why pay retail?
- Old paintbrushes, a cup of water, and a clear sidewalk is all my kids wanted in the way of toys. So much stuff that I thought they would miss was gladly gotten gone.
- Going on one income was a big change, but it freed up the other person to manage our family and finances way better than the extra paycheck would have.
- Grandma's hoarding of reclosable Cool Whip containers suddenly became our way of life. Other old-school behaviors are starting to kick in, too.

We led our first round of FPU at our church this spring with 6 families and have seen them make some amazing changes, too, by changing habits and making big decisions. One family of seven paid off enough debt that they are not in dire straights since full-time work dropped to part-time during the class. Another family has newfound confidence that they have the means to buy the basics and money to travel to family, and even some pocket money left over. A third couple whipped their budget into shape and is working together as a couple to get to retirement. We are so inspired by them all.

We are now working on our full emergency fund and then a down payment for buying a home in a year and a half, Lord willing. It will be fantastic to rebuild our family's future the proper way this time around.
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