Even typing that title feels surreal, but as of the first of this month – our family is officially debt free. It certainly wasn’t quick and it took the both me and my husband being on board, but I wanted to break down how we were able to accomplish this milestone:
We didn’t get into more debt.
Understanding that we wanted to get out of debt, it made sense not to get further into debt. This meant not using credit cards anymore as well as enjoying what we have, and not buying thing unnecessarily. For example, combined our vehicles have over 350,000 miles on them, but they’re well-cared for and both are paid off. This makes them more valuable than trading in for newer and better in our eyes.
We also took advantage of a program that our bank offered that was similar to Acorns, where purchases were rounded up to the nearest dollar and the round-up was deposited to a savings account. This helped us prepare for Christmas and vacations each year without having to charge anything.
We wrote it down.
We had to understand what all we owed. I took inventory of all our credit cards, medical expenses, and student loans. I wrote down how much was owed on each as well as what we were paying for each of them each month. Writing it down was key for me, I had to keep it in the forefront of my mind. I wanted to see, to the penny, how much of my money was going towards these old debts. It was added motivation and kept the goal from getting stale.
Once all the totals were written down, we put them in order from smallest to largest. All monthly payments, other than those towards the smallest debt, were dropped down to the minimum amount due. Then any and all extra funds went towards that smallest until it was paid off entirely. Once paid, you roll all the funds that were going towards the smallest to the next one on the list. Dave Ramsey has made this idea so popular because it’s simple and it works.
We sold our house.
Clearly, this was the most extreme step taken and not an option for everyone, but one that was necessary in order to meet our goals. Doing the first steps kept our debt to a manageable figure, selling the house allowed us to move up our debt-free date dramatically.
We uprooted our family of four into an apartment. The smaller square footage meant giving up a lot of extra stuff we were used to having around, but it also helps us simplify our lives and work together to adjust to the “less is more” mentality.
So what are our next steps?
We do plan on being homeowners again, but we’re going to take our time and make smart decisions. As tempting as Zillow’s daily listings can be, we want to make sure we have a fully-funded, sizeable down payment ready before we make another home purchase. We also are planning on a 15-year mortgage instead of the more common 30-year ones, which will mean a higher monthly payment so we have to plan our budgets accordingly.
We’re also going to relax a little bit. After all, this was something we’ve been working on for four years and it’s finally done. So we might just sit back and enjoy the little things for awhile…or, you know, go to a beach and celebrate. Whichever.