I started writing this post months ago to give me motivation. Today we reached our milestone so I can finally post it. This morning we paid off our last loan and are officially debt free.
This post has two parallel stories: the story of our marriage and the story of finding “Financial Peace.” I’ve mentioned Dave Ramsey several times in my last two and a half years of blogging, but I’d like to take a post to talk about my small family’s journey to Financial Peace to explain why I am such a fan. This post is very personal to me; our marriage is stronger because of our collective goal to become debt free. I teach financial literacy to my students and candidly discuss my family’s finances; it is considered so taboo in America to talk about money, but most of my students don’t know the difference between $500, $5,000 or $50,000 when they sign up for student loans because the don’t have any idea what it costs to be an adult. I don’t write to brag, but paying off the last of our debt is a big milestone for our little family and an achievement we’ve been pushing for since we seriously started attacking it almost two years ago.
When we first got engaged in January of 2010, my future in-laws gave us an intro kit to Financial Peace University, which included a copy of one of Dave Ramsey’s books and audio CDs of his class. As my then-fiance and I made the driving trip between Harvard and West Point and Indiana, we listened to the CDs, and gradually gained an understanding of the program. It basically served as our premarital counseling – during the multiple trips to and from school, we discussed our short- and long-term goals with money, and found ourselves to be in general agreement.
When we got married, we joined our finances absolutely and without conflict. The fact that we married right out of college meant there were no assets to worry about (Hubster would joke about needed a prenup to protect his precious 1989 Pontiac Firebird…I assured him in case of a split he could keep it). We married with a few thousand dollars in credit card debt, mostly my wedding ring (which got stolen the day of the wedding – I’ll write a post about that some time), and a $35,000 loan that juniors at the military academies have the option to take out from Navy Federal or USAA; they get a 0.5% interest rate and a five-year payment plan in return for banking with that institution. Most cadets take it; it’s hard to flash thirty-five grand at a 21-year-old and not get him to bite, especially when he doesn’t have to start paying until several months after graduation.
We moved to Fort Benning, Georgia, for the Basic Officer Leader Course (BOLC); we lived there nine months. I was part of a group of other unemployed, childless lieutenant wives who spent our days having book clubs, shopping, going to coffee, and volunteering on post. It was a blast, though I didn’t add any tangible income outside of the occasional babysitting job. We survived well on one income in our little one-bedroom apartment, but while we did a bit of a budget every month, we didn’t really work to pay down debt or save. We had our baby step one $1000 emergency fund, but that was about it. We paid off our credit cards with our first tax return, and thought we were doing pretty well. We were paying $594.71 a month toward the West Point loan, which was nearly a quarter of Hubster’s monthly income at the time, but it seemed more like a tax; money we never saw, so we didn’t miss it…
Fast forward a year to our move to Texas and my first salaried job as a teacher. Hubster and I made a deal: I could retire my 1995 Eagle Vision and use my first paycheck for a down payment on a nicer, newer car; he would put his trusty-but-expensive-to-operate Firebird up for sale and purchase something more reliable with better gas mileage with the money. But we rationalized that if he sold his car before I got paid, then he wouldn’t have a car to get to work, so he started shopping Craigslist. We ended up taking out a $13,000 loan for a mint condition 2005 Mazda RX-8 Shinka with 23,000 miles on it. It was a stick shift, which I am still not comfortable with, so this became Hubster’s car. We now owned three cars, one on a loan. I kept driving my faithful Eagle, not willing yet to give up the faithful car that had been in my family since the late 1990s.
In January I hit a deer in my Eagle. It still started but was missing a headlight and chunk of the hood, so I sold it for $300 in a Craiglist ad titled “C’mon folks, don’t let the deer win! ’95 Eagle Vision 193K”! Since it was probably only worth about $800 in good condition and $250 scrapped, this was a small win for a totaled car. I drove the 1989 Pontiac Firebird for about another month until it got rear-ended in traffic and totaled. In a bind, we financed a 2006 Mercury Mariner for another $13,800…we now had two cars, two car loans, with the West Point loan still at about $25,000. Not very Dave Ramsey-like.
In the summer of 2013, we started discussing the possibility of starting a family, but one thing kept looming: that $45,000+ debt that we had managed to accrue and not make serious headway paying down…so in August we officially enrolled in Dave Ramsey’s Financial Peace University, nailed down our budget, and got to work. In November we found out we were expecting, and that ramped up our “gazelle intensity” as Dave puts it. We realized we couldn’t be completely debt free before baby, but we could have the cars paid off, so that was our new goal. I made a bar graph of our three debts – two cars and the West Point loan – and posted it on our fridge.
Come tax-time we discovered we screwed up our federal withholding and owed nearly $4000 in taxes, which put us behind on our debt snowball plan…We paid off the Mazda in February; in June I got T-boned and my beautiful Mariner got totaled. We still owed about $4000 on it; the insurance check was just over $8000. We paid off the loan, and Spartacus was born in July. We pushed pause on our debt snowball and saved up a few thousand dollars to put with the remainder of our insurance check and paid cash for a 2001 Mercedes E-Class for me. It was an older car, but safe and had been well-maintained. Plus it felt amazing writing a check for a Mercedes…We continued to put nearly half of our monthly income toward debt…until finally…
…on March 12, 2015, we made a payment of $2,177.74 to pay off the West Point loan, making us completely debt free. I told my first period class this morning, who had taken my financial literacy unit in the fall, and they clapped for me. It felt amazing. We now can start Baby Step Three, the 3-6 month emergency fund. We should have that done by the end of the school year, and work to cash flow Hubster’s seminary master’s degree. We can restart saving for retirement and put money into Spartacus’ 529 plan for college. I’m the saver of the two of us, and I am inordinately pumped to start saving for the first time ever.
The Baby Steps
Dave Ramsey calls his common-sense method the “Baby Steps.” Millions of people follow his Baby Steps method, so I won’t dissect all the details – you can read about them on his website. The seven baby steps are taught through the nine-week Financial Peace University class in churches across the country:
1. Save $1000 in a baby emergency fund
2. Pay off all debts with the “debt snowball” method
3. Save up 3-6 months of expenses in an emergency fund
[3b. Save up for a down payment on a house]
4. Invest 15% of your income into retirement
5. Save for your children’s college
6. Pay off the home early [steps 4, 5, and 6 happen simultaneously]
7. Build wealth and give oodles of money away
I started writing this post back in November when we had finished leading our second FPU class at our church. I was inspired by our attendees’ responses. Of the ten families in the class, we had paid off $84,623 in debt during the 9 weeks. One couple said it had saved their marriage. A new member to our church shared an awesome God story: her husband was transitioning out of the military; she was looking for a job in real estate. Another woman in the class was a Realtor and her company happened to have one more position available. Because they met in our class, this woman found her dream job and a new friend, and her first paycheck would literally come the week her husband officially stopped getting his. Two other couples assured us they would have their college-bound children take the class the next time we offered it, and a third couple said they would give it as wedding gifts from now on. It was so awesome to see how these principals affected so many other areas of life besides money. When I talk about money management with my students, they often ask, “Who is supposed to teach us this stuff? It’s actually important.“
Debt Free Scream
Sometime this spring or summer we’d like to go to Nashville, where Dave Ramsey has the studio for his radio show. People come from far and wide to do their Debt Free Scream live on the air. He asks them a bunch of standard questions. Hubster and my dialogue with Dave will probably sound something like this:
Dave: We’ve got T and Lizzy here from down south. I assume you’re here to do your debt free scream?
Us: Yes sir! We paid off $61,849 in three and a half years…but $45,000 in last 20 months.
Dave: Wow! Way to go, guys! What kind of debt was the $62,000?
Us: Two cars and a student loan.
Dave: So you were “normal?”
Us: Pretty much.
Dave: What made you get serious about getting out of debt twenty months ago?
Us: We realized we were DINKS – double income, no kids – and didn’t seem to have any money to have fun with. We were also were interested in starting a family but realized we had nearly $50,000 in debt at the time.
Dave: What was the hardest part of getting out of debt?
Us: We did fall off the wagon a few times and confused our needs and wants… We “needed” a gun safe. We “needed” a new PlayStation to play the Blu-Rays we got for Christmas…but we did manage to cash flow an expensive tax bill, a car, and a new baby in the middle of our debt snowball.
Dave: And who is your little one?
Us: Spartacus. He’s eight months old. He was part of our inspiration; we wanted to be debt free before having children, but we did manage to be car debt free at least.
Dave: Well done, you guys. Excellent. We’ve got T and Lizzy who paid off $62,000 in debt in three and a half years – $45,000 in the last twenty months. Count it down you guys!
Us: Three – two – one…WE’RE DEBT FREE!!