Getting out of Debt
Last week I wrote about how to start getting out of debt. This week I will make it a little more personal by telling you the story of our family’s Path to Freedom.
Almost two years ago we had some friends over after church. We talked about the usual stuff, kids, church, homeschool, and then the conversation turned to finances. They were getting rid of all their debt, the Dave Ramsey way. It sounded a little radical for us, I mean no credit cards, no car payments, no mortgage… that seemed crazy.
We listened politely as they told us what they were doing to reduce their debt and increase their income. We really felt we were doing financially okay. I mean the only debt we had was a car payment and some student loans. We used credit cards, but we always paid them off every month, plus we earned cash back. Some years it was a few hundred dollars. Of course we didn’t have any money saved, and didn’t really own anything. Our net worth was probably $1000.
We moved to another state and last summer, while walking with a neighbor, she mentioned something about this guy Dave Ramsey and how they were trying to use his plan to get ahead. After hearing her talk about him I figured I needed to find out more about this guy. I checked out his book from the library, and read it in two days. Then I asked my husband to read it. He read it and we were sold. Over the next month, we devised a plan to pay off the student loans (the car had been paid off earlier in the year) and start building our emergency fund. We both took our credit cards out of our wallets and stopped using them completely. We used cash for groceries, entertainment, household purchases, and our debit card for gas and any online purchases. In four months we managed to pay off over $10,000 in student loans! It was exciting. Our emergency fund was fully funded three months later.
How did we do it?
We made a budget. We took our total income every month and assigned every dollar to a category.
We stopped using our credit cards. We were one of those families that thought credit cards were fine if you used them responsibly. We had been paying ours off every month for years. What we didn’t realize is that our credit cards were enabling us to spend more than we needed to each month. There were months when our groceries topped over $1000. Trips to Target, eating out, online shopping, all these things were siphoning all of our extra money every month. Once we went to a cash budget, when the money was gone we stopped spending. It was amazing how much money we were able to put towards our debt in just a short period of time.
We stopped eating out, totally. Feeding a family of 8 is expensive even if you are going to the cheaper places. It is cheaper to eat at home, and healthier too.
I started cutting everyone’s hair. I had been doing this off and on for a while, but I determined to get good at it so that my husband, who needs a haircut at least once a month for his job, could get all his haircuts at home.
I hung our clothes out to dry. This saved money for two reasons. One, we used less electricity by not running the dryer. Second, our dryer was right by our thermostat, when the dryer was running it heated the area around the thermostat and the air would kick on, even if the house wasn’t warm.
We turned our air up. We opened the windows on cool mornings to cool the house off, and then closed them up when it became too warm. We also set our air on 78-80.
We bought a blanket for our hot water heater. We turned the heater off during the day, and then after the kids went to bed.
We switched to Vonage for our phone service. It is $30 a month for unlimited long distance as well as all the fun calling features on your phone, since we live far from family and many friend this was a great deal for us.
I bought almost all our kid’s Christmas gifts at yard sales. Most items were new and in the box. This was one of the best Christmas’s my kids had and I spent under $100 for 6 kids.
Those were just some of the things we did, and are still doing to help turn around our finances. I would love to hear what some of you all have done to turn your financial situation around. If you would like to share your story please email us at 3moms@happytobeathome.net. We would love to share your story with our readers.
For more Frugal Friday visit Crystal’s blog.
AUTHOR | Toni
Toni, one of the original 3 Moms, is a military wife and stay-at-home(schooling) mom of six, soon to be seven great kids. On her personal blog, The Happy Housewife, she writes about saving money, healthy eating, recycling, homeschooling, life as a mom, and crafting.
Thanks for posting this! It is really inspiring for us to start doing some of the same things.
I love Dave Ramsey’s plan. I used to like Mary Hunt, but found trying to save tons of money first, before paying debt off to be illogical. We are debt free (Dave’s plan) now for 14 months. Paid off while we lived in Ghana!
I am thankful for people talking about their debt and how they are turning it around. It gets you to think. Now I don’t hesitate to say good things about being out of debt.
It’s just grand being out of debt……here it comes…..
I’M DEBT FREEEEEEEEEEE!!!!!!!!!!!!!!!!!! =) =) =)
Last debt….kicked Sallie Mae to the curb….. I miss Dave’s show! Can’t wait to listen to it on the radio again. I know I could get it online, but can’t for time’s sake. Only 7 more weeks till we hit US soil again…
Shalom,
Loretta
I’m one of those frugal weirdos who just doesn’t spend money. Always have been. When I read Dave’s book I was so excited to report to my hubby that we are already on step 4. Paying interest on anything makes me ill, so we don’t do it… except for our home. We have a 15 year loan and fully intend to pay it off in 10 or fewer years. How do we do this on one $47,000 teacher/coach salary while raising 3 (so far) children? No cable, no eating out, living in a SMALL town, one pre-paid cell phone that costs less than $10 a month, no kids clothes (well, my 3 children DO have beautiful clothes… but they are all hand-me-downs or garage sale buys), evaluating NEED vs. WANT, waiting until we find a “steal” on big purchases, and generally being HAPPY WITH WHAT WE HAVE. It doesn’t hurt when our financial advisor cheers us on and lets us know how rare we are when she shows us our substantial retirement savings.
loved your website i’m adding your link to mine.
This is a really great success story. We readers need to know that it really can happen. Happily ever after does exist! Thanks for sharing all these really great tips.
Wow — I can’t believe you were able to pay off $10,000 in four months! That’s amazing! I know we have to work on our debt, but I have zero will power. Every time we try to work on it, we just mess it up.
We are to the point of paying off 2 c.cards. We will still have a mortgage though. But we are doing better at the budget. I just informed them that we are not to eat out any more. That is our biggest weakness. I don’t want to deprive us of some fun things to do so we will sit down and plan.
I’m glad to read that someone else buys Christmas gifts at yard sales. I started doing it last year and have already started the hunt for this year’s gifts. It is tricky though when the kids want to go with you! I am impressed with $100 for 6 kids, I have two older and two younger ones. The two younger ones are MUCHeasier to yard sale for. Although I did get an electric guitar for my son as last year’s gift. I even bought the amp at the pawn shop. Christmas is supposed to be about giving anyway not about how much the gifts cost.
[...] other great articles here, notably these real estate & mortgage tips at Bible Money Matters and this personal story of one family’s journal to debt freedom at Happy To Be [...]