Walk with me as I take my journey towards being debt free, having financial freedom, and then growing my wealth. I will share with you all of the tips and tricks I find along the way and what has worked for me in the past when my husband Alex and I got out of debt the first time. I look forward to sharing the nitty gritty details of the real life struggles we all face with debt to show how it really is possible to become debt free, find financial freedom, and become wealthy.
Back story to Becoming Debt Free
I won’t go too deep into my back story because you can find it on my About Me page, but just a quick recap: Alex and I were married in 2013 and not only did our living situation change, but our financial situation changed as we merged our bank accounts, savings accounts, and debt all together. We started our marriage with $28,120.13 in debt. This was an accumulation of student loans, credit card, and other consumer debt. We both already owned our vehicles so we were blessed there.
We had no more debt than the average person (in fact, we had less debt than the average person our age- according to the most recent 2010 US Department of labor census) but I wanted to become debt free. Truly debt free.
As we planned our wedding we knew that people could spend anywhere from $10-100k on a wedding and most of those people end up going into debt to do that. Not us. We were on the track to get out of debt.
Our first step was to stop accumulating more debt!
By January 2016 we were truly debt free except for our house.
Read about how we went from owing $30k in debt to having $30k in savings here
Our Journey to Now and How We Want to Become Free Again
Once we were truly debt free we felt great about ourselves. We only owed money on a house that was growing in equity so fast we only had to pay PMI for 2 years!
But then life hit!
In June of 2016 Alex’s car was literally falling apart. I was driving behind him (because I made him come pick me up and make him drive his car back home because it was making funny noises while I was driving it) and literally saw a part fall out of the bottom of the car as he was making one of the final turns to our house. We had to get the car towed to a shop ($$) then find out the repairs on the car ($$$$). They wanted over $1000 to fix the car! (He only bought the car for $750! It wasn’t worth it!). We figured we were doing very well with our finances and we could afford a new car. (We didn’t have any other debt, right!?).
So we bought him a brand new car which came with a brand new loan.
We haggled to get the lowest monthly payment we could (we were very new at this sort of thing) but that just extended how long we were paying for the car. And of course we had to get the warranty (just roll that into the loan, please!), the added features (cha-Ching!), and gap insurance (because anything with a motor starts depreciating in value the moment you roll that thing off the lot). Plus, this new car came with higher insurance (it costs more money to insure a new car than an old beater). So our suddenly affordable car became a little more costly than we originally planned. But, we were out of debt…except for the house and now his car.
Fast forward 2 more years
As we continued to “keep ourselves debt free (except the house and car)” my car also started having troubles. The heater was dying on me. We live in a climate that, for the most part, a heater is required (good ole Pacific Northwest and that rainy season 9+ months out of the year). By this time we were feeling really great about our financial situation because our annual income was almost double what it was when we first got married. We were debt free (except for the house and car), and we continued to pay off our credit card every month (we like to use a credit card for the miles – which we actually use). So what was the harm in getting me a new car too?
Adding more debt…
Alex was very concerned about my safety. My commute had also doubled and people drive like crazy on the freeway! He wanted to know I was in a car that would save my life and not be a death trap were anything to happen. So we researched cars and I was able to buy a brand new Ford Fusion Hybrid! My credit score was even so great I got an interest free loan! How can you beat that?
So now our debt went from just a house to just a house and a car to then just a house and TWO cars. We felt we were on the right road…but were we really?
The Debt that Broke the Camel’s Back
This year our furnace died on us. During one of the coldest weeks of the year! We were able to duct-tape it together and hold us over while we figured out how to get a new furnace. Since we were in the market Alex also wanted to upgrade to getting AC in the house for the few summer days it warrants it. The timing was perfect. We shopped around and found a great company that installed our new furnace/AC unit and we decided to move forward. They gave us a couple of options:
- Pay up front with cash
- Put a down payment on it and make monthly payments
Traveling down the wrong road
Have you ever gone on a hike or road trip and came to a fork in the road? Were you in any way unsure as to which way to go? Did you make a choice and start towards your destination (hopefully). At first it wasn’t so bad because you could still see the other path and knew you were still headed in the correct direction, but then scenery started looking a little differently. The path became rougher and not like you remembered the last time you came through this way with a buddy who knew the area well?
That’s what this journey felt like to me after we made our decision on this furnace purchase. We had over $30k in our bank accounts that we could have used to pay for this furnace up front with no interest, no monthly payments, and NO LOAN. But that’s not what we chose to do. We only had $12k in our savings account and this purchase would have wiped that out. Which sent us into panic mode because that savings account was our emergency fund!
BUT WHAT’S MORE OF AN EMERGENCY THAN HAVING NO HEATER IN THE MIDDLE OF WINTER?
We unwittingly only paid for HALF the furnace and financed the other half with the intention of “We’ll make extra payments on it each month and then pay it off in 6 months when we have the buffer in our savings account again.” This is where the big LOL goes and you hear cackling laughter from the bankers.
Back on the Debt Free Road
We had enough. Our quick “We’re debt free!”response rapidly turned into a saga of exceptions. Additionally, I have been looking for something that is a “me” thing and came across blogging as a great way to work from home but also help people in something I am passionate about (even if I’ve taken a few wrong turns). I decided I could help people like me find their way back onto the correct road to being financially free and encourage them to become debt free as well and then start to grow their wealth.
So that is why I am here blogging with you. As Alex and I started this journey (again) to being debt free we started off with $47,595.13 in debt. So it was time to start tackling that debt again.
Our Plan of Action
1. Consolidate our bank accounts
We had 4 bank accounts that added up to our $30k we had lying around so it became time to consolidate them so they were all in one lump sum. We needed to see it all together to know it was okay to pay off some huge sums of debt and not panic about it. We transferred all but $1000 from our savings account into our main combined bank account and then we moved $9000 from my personal account to our combined account (we used this account as a “secret squirrel” account for any emergencies that only I had access to because we knew I wouldn’t spend that money…I’m too frugal.)
2. Assess our Debt
We then figured out what debt we had:
Furnace $5,348.98
Alex’s Car $11,810.80
Katie’s Car $30,435.35
Total $47,595.133
Alex and I paying off his car!
3. Tackle the debt
Once our money was all in one pot we figured out how to pay off the two smaller loans first. We had enough between all 4 bank accounts to fully pay off the remaining balance on our furnace AND pay the remaining balance on Alex’s car. That total came to $17,159.78! And now we officially own Alex’s car AND every time we hear our AC kick on we think “Ah, the sound of being debt free!”
4. Paying off Katie’s Car
Finally, we have made a plan to pay off my car. Our goal is to have it paid off in 10 months rather than the 5 years left it would normally take. To do this we had to do a few things:
i. Make a budget
ii. Stick to our budget
iii. Be intentional with our finances
iv. Put any extra income towards paying off my car
And this is where the blog comes in. This is going to be a blog journal of our journey to pay off our consumer debt. Then we will focus on paying off our house. After that we will look into investing. My dream is to become a millionaire by the time I grow up.
What about you? Do you have debt you want to get rid of? Do you have a plan of action? Let me know in the comments below how I can help you also become debt free!
I am so glad you are here and am so excited to meet you and get to know you better. Thank you so much for trusting me to help you with something as important as finances. My goal is to help you break the bonds of debt and get into Financial Freedom!