The rich rule over the poor and the borrower is servant to the lender Proverbs 22:7, New International Version
Chains, bondage, slavery, fear, worry, and anxiety, are all words that come to mind when I think of debt now. A few years ago, I hadn't really heard what it meant to be debt free or live within one's means. If you'll allow me, I'd like to share my financial journey.
I got my first student Visa (credit card) when I was attending Sierra College (circa 2000-2003) in order to "build" my credit score. I didn't have a stable income, but that didn't matter, my local credit union was willing to let me try out the borrowing game. A few years later, I met my husband, Anthony. We were married in March 2006 and I had student loans and six personal credit cards. He had one, with a very low balance. Being in debt was something most people around me not only did, but also promoted. How would we ever be able to buy a house if we didn't have a credit score? How would I qualify to work at some companies, if I didn't have a high credit/FICO score? These were and are common misunderstandings regarding debt that were just a part of normal, American life.
Anthony and I bought our first house, a beautiful townhouse, in October 2006. The economy was going crazy and it seemed like if we didn't purchase something then, we might never be able to in the future. Neither of us knew what we were doing but "grown-ups" owned houses, so that's what we did. Buying a house was the best mistake we ever made. Best mistake? Yes.
After a few months of owning the house we realized we were borrowing money to pay our mortgage and were over $1500 in the red each month. Essentially, Anthony and I were in emotional and financial turmoil. We didn't know where our money was going or how much we were actually spending. One of us would ask, "where did all of our money go, we just got paid?" We both had no idea.
In late 2007, we began listening to the Dave Ramsey Show podcasts that were recommended by some dear friends and Scott, my father-in-law (who we respected, especially with regards to finances). We learned about Financial Peace University, a program designed by Dave Ramsey that teaches foundational principles regarding "your life and your money." In The Total Money Makeover, Dave Ramsey says, "Winning at money is 80 percent behavior and 20 percent head knowledge. Most of us know what to do, but we just don't do it." Yeah, because that's the hard part.
April 3, 2008, we met with a woman from our church that had been trained to teach Financial Peace (FPU). We watched a few of the FPU sessions at our house. We knew a majority of the principles (and could quote them verbatim) from listening to the show, but didn't want to address this issue in our own lives.
April 4, 2008, the next day, we were in a car accident that totaled our car. Of course, we owed more than it was worth and had tried to sell it months before. That accident allowed us to buy another car (which happened to get much better MPG s) and the loan we got was much less expensive than the previous one.
July 2008, Anthony started school again (with a concrete end in sight) and it required us to sell his beautiful 4x4 truck. In August 2008, we wrote out our first budget and began living on it. Those first few months were incredibly stressful; we did not have enough income to afford all of our bills (-$1500/month remember?). We listed our house for sale and were approved to sell it as a short sale (the bank agrees to take less money than it is worth and the owners receive nothing). After many, many offers we finally sold our house on June 12, 2009. During that time we moved to a rental that was within the guidelines Dave recommends of being 1/4 of your monthly take home pay. We periodically met with the woman from our church to go over what we had been spending and our plans for the future, and became quite good friends with her in the process.
July 15, 2009, we paid off our car. This was the first time I had ever owned a vehicle outright. January 2010, we paid off our other car (that replaced Anthony's truck). February 2010, Anthony finished the school he had started in 2008. He was hired at a great hospital shortly thereafter and we became DINKS (Dual income, no kids)! In January 2011, we went on our first big vacation to the Pacific Northwest and our trip did NOT follow us home, meaning, everything was paid for before or during the trip. We had absolutely no bills to pay once we were home, all we had were photographs and memories of our trip. This was a big deal for us.
March 21, 2011, we finished paying the $21,000 in loans for Anthony's schooling. We started in June 2010, 9 months before. During this time, I had been working on my Master's degree and on March 28, 2011, we paid cash for my last semester of the program. We are currently saving up to pay cash for a new car and paying off my school loans, the last debt we have. Since Anthony started school, we have been living on a written budget and haven't borrowed a penny from anyone, except the student loans. That meant, no more credit cards, no more car loans, and no more late fees.
Living a lifestyle within our means has been a great exercise in learning to say no, which has been hard, but over time, the bondage of being slaves to debt has been broken. What used to be a stressful and time-consuming process of monthly budgeting has become much easier, sometimes even fun. We agree to stick to our budget or discuss any changes as they come up. I can honestly say working together to be debt-free has made our marriage stronger and we are more unified in every area of our life together. Now that we know we have the choice of financial freedom, we plan to never again enter slavery.
Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman (others) has fulfilled the law Romans 13:8, New International Version
Happily linked to Works for Me Wednesday