This summer Zach and I paid off all of our credit card debt.
I would certainly say that we are no experts. We are also living in a situation that allows us to make extra money and therefore pay off debt more quickly.
Zach and I discussed our debt before we married. We based everything we did on our goal to become debt free. Our church teaches to avoid debt as much as possible. And we both saw the errors in our ways prior to meeting. We both had credit cards with higher balances than we were even comfortable with.(I won’t tell you exactly how much but our credit card balances were higher than our car loan).
First thing we did was align our goals…not that we had a formal discussion but here are the topics we covered and the decisions we made accordingly:
*Q: Where do we want to be in five years? Ten years?
A: First and foremost we wanted to be homeowners. We wanted to be as debt free as possible. We want me to be able to cut back to part-time work with the option of me being able to stay home with our kids at some point. Zach and I agree that even if this doesn’t happen right away, it is just as important that the kids have someone home young as when they are school-aged. So we are not ever giving up on that goal, even if it happens later on.
So what did we decide: To buy a house well within our means. We qualified for our home on one income. We still need two incomes, but we figured that making such a large purchase on only one income would help us to be able to maintain bills that would be more attainable for us. Especially with Zach’s income sure to increase as he finishes school.
*Q: What are the most important things to us? What things have the most value? What is worth spending money on?
A: For us the things that we give the most value to are: memories, preparation, and meeting our needs.
When we were first married, we were nervous about how much money we would have “left over” at the end of each month (Zach made less money then and I had just received a pay cut due to economy). We decided to go a no-thrills route as we created our budget. We had internet (it was necessary for Zach’s schooling) we had phones…we thought the easiest thing to cut was cable tv (or satellite or whatever). We decided that that money could easily be put toward our credit card debt or maybe a date or two. We bought Netflix after Austin and Natasha gave us three months free. By then, we were comfortable with our budget and we knew we could comfortably cover those costs. We enjoy making memories: dinners, dates, traveling, etc…We made those things a priority over television. I honestly don’t miss it one bit, but that’s because I can still catch Army Wives on Lifetime and watch The Bachelor at my mom’s. Zach can catch a game at his grandpa’s, a friend’s house, or my parents’ house and he’s done all three.
It works for us and it might not work for some.
We also know that it’s important for us to have money for Zach to buy things for school (he bought a new computer in the spring) and we both believe in looking professional. So money for the occasional new dress shirt or pants was something we put as a priority.
In addition, preparation is important. Meaning when there’s a sale at the grocery store, we need to buy extra food for food storage. We also feel like preparing for the future is equally important. We both started additional retirement funds and are working on increasing our savings account–our weakest area right now.
*Who should do what? What are Zach’s strengths? My strengths? (HA!)
A: If there’s extra money, I tend to spend it. Not on extravagant things or even things for me–I would go crazy buying cans of chilli at $.88 at Winco even though we’ll never eat it all. So one of the things we decided was Zach was in charge of paying the credit card bills, that way, he would put the extra on them. I just put Zach in charge, when he got paid, he put the extra on the cards. One of my responsibilities was to maintain a grocery budget and stick to it when shopping so we didn’t need to dip into those “extra” funds.
So the big question: What did we do?
***Like I said, we are in a different situation than a lot of people. For example, I have an opportunity to work a second job right now and I did it last year, which helped me to counteract the cut in pay I received along with a little more. Zach graduated from school and immediately made more money. Our take home increased when Zach graduated and I started teaching the after-school program. We are blessed and fortunate and I don’t deny that. But the system we used is well-known and will work for anyone, no matter the circumstance.
We started with combining debts. I had two cards and Zach had two cards (gross! I know!!! Trust me, I know). So Zach had a 0% transfer rate on one of his cards (0% for 12 months) so he transferred all of the balances onto that card. That saved us a lot of time and a ton of extra money in interest. Which immediately made us feel better.
After that, we looked to the debt-snowball method. Which basically tells you to pay the bill with the highest interest rate first and only the minimum payments on everything else. Every bit of extra money goes to that one card/loan/etc.
At that time we didn’t have a car payment. Our only other debts were my student loans and our house…we wanted rid of the credit card.
So I took care of the big bills. We maintained a tight grocery/gas budget so that we would have a little extra income. We did use tax returns and the like to help us pay off the bill a little more quickly, I will admit.
Once I started the after school program and Zach started working his new job, we had more money. So rather than adding cable or buying more things, Zach tripled our payments on the credit card. From September to May Zach whittled our debt on that card down significantly. I took a job teaching summer school and we used that money to pay off the card for good.
We were so looking forward to a little extra flexibility in the money, but we’ve decided to tackle some of Zach’s school debt right now so we don’t have as much when he gets out–so that’s our current project. It’s only a small loan we’re paying right now, but it’s better than nothing, right?
We’ve certainly been blessed in our opportunities to get out of debt. I can testify that I’ve seen the hand of the Lord at work where this is concerned. He wants us to be self-reliant. He wants us to be prepared. He wants us where we need to be and if we’re willing to work, He will help us.
**And yes, I realize that we could’ve gotten out of debt more quickly if we hadn’t gone to Georgia for Christmas or to Hawaii in May. I realize if we hadn’t gone on dates or even paid for Netflix we would have had financial freedom that much sooner, but we made the decisions we did based on our situation. We had that flexibility and were both of the mind of balancing preparing for the future and enjoying the present. Some may disagree with our approach…like I said, it works for us! You may do something entirely different.
What have you done to gain financial freedom? (Something as simple as shopping on a budget, thrifting, side business, etc??)
We are working on building up a savings, any tips?
Isn’t debt the pits?