I had to go WAY back in my drafts folder to find this post, because I started writing it so long ago. I never thought I’d get to publish it this soon, and I’m bouncing up and down in my chair as it goes live!!
Before I start, I feel the need to say that today’s topic is one I know some people feel a little weird talking about. Finances are some people’s version of the “F word” and I understand that. So if this seems like taboo to you, you don’t have to read any further! Because I definitely understand where you’re coming from and I know that a lot of people feel that it’s a personal, private matter that shouldn’t be publicized. But I believe there’s power in knowledge and the ONLY way to learn something new is to talk about it.
Our financial journey is probably one that’s similar to a lot yours. Here’s a little bit of history, so you know where we started.
15 months ago, I walked into a Barnes and Noble and picked up a book I’d heard about from two Arizona-based photographers, Amy & Jordan.
The book is called “The Total Money Makeover” by Dave Ramsey. I am NOT passionate about the topic of finance (that’s Adam’s territory) or reading books about it, but A&J talked so much about Dave Ramsey and their road to becoming Debt-Free, which sounded pretty fantastic, so I snagged a copy.
The reason for getting the book is because Adam and I both graduated with student loans – plenty of them. We were on the page that student loans were a necessary evil, and we would eventually pay them off. Someday. And it would be SO cool when we did!!
But here’s what happened…. it had been 5 years since we graduated and even with making the “normal” payments, we felt like we were still drowning in them. Again, I know that most people pay their student loans for a LONG time. The term on a lot of these kinds of loans are anywhere from 10-20 years, so it’s normal to keep making those payments until the term is up. But the more we thought about it, we decided we REALLY wanted to not have student loans when we bought a house someday. That might not be everyone’s intention, but it was ours. And with our current situation, it was hard to see that happening.
So we hit a financial breaking point. It’s not that we couldn’t pay our bills. Our salaries were more than covering them and we were saving money, but we weren’t getting rid of our loans as quickly as we wanted, so we knew something had to change. So we had two options: have more money coming in (ideal, but not always realistic) OR have LESS money going out.
I sat down with that book, and I read it cover to cover in 3 days. Dave has a way of making you EXCITED about money and the possibilities of what you can do with it… if you’re willing to sacrifice for a while. I won’t get into all the details of his plan because there is no way I can state it as well as he can, so you can pick up the book if you’re interested!!
But as soon as I finished, I gave it to Adam to read. And he flew through it, too. We had a hard conversation about what we needed to do, and agreed to follow this book’s recommendation, no matter how hard it would be.
Because we realized that if you want something you’ve never had, you have to do something you’ve never done. And so we simply started. We followed Dave’s baby steps, which are easy-to-understand action items for reaching this goal. One of my favorite things Dave says is that most people know how to save money and get rid of debt. It’s just like how people know how to diet and lose weight. But knowing how doesn’t make it any easier to do. The roadblock isn’t a lack of knowledge. The way to win with money has everything to do with behavior, which is the most difficult thing for most people to change. That’s exactly why the Baby Steps work – they are a roadmap for behavior modification for those who want to see a change.
Now that I’ve explained a little about all that, I’m going to share the steps WE took to make this happen, for us. Disclaimer: this is not in any way financial advice for ANYONE! I’m not an adviser, expert, or in any way qualified to tell you what to do with your money, so that’s not what this is!
Consider this me explaining exactly what WE did to reach this goal. This may not be interesting or helpful to some people reading, and that’s fine!! But if I hadn’t heard about this book because others were talking about it, we would never have gotten to this place. So my hope is that me talking about it might just inspire someone to make the change they want to see, or at the very least, this might just spark one new idea to improve someone’s life. Also, the below steps are not Dave Ramsey’s Baby Steps, in the order he explains them in his teachings. They’re definitely related, but these steps are just the easiest way for me to explain our process.
So, here’s what we did!!
STEP 1: THE BUDGET
We revamped our budget. We’ve always thought we had a budget (we knew about how much we spent on most things) But this time, we wrote it all down using DR’s simple template. We accounted for EVERY. SINGLE. DOLLAR. and then gave it a ‘home’ (groceries, gas, etc.). After all, if you don’t tell your money exactly where to go, it tends to wander and get lost.
We can attest to that. This step was enlightening and disheartening at the same time, because once you go through your bank account to see everything you’re spending, it can be a little shocking how much money goes out the door on things you may not even need.
Adam and I agreed to STICK to this budget. No matter what, because a budget is only as good as the control you exercise over it. We made envelopes for all variable costs & spending money (again, read the book if you want the nitty gritty details and advice!) At the beginning of the month, we sat down together with a glass of wine and would go through every line in our monthly bank statement, make any necessary tweaks to the budget, and then go to the bank and pull out all of the cash we needed to split up into our envelopes for the next month. We spent that envelope money throughout the month. Once the envelope was empty, we couldn’t spend any more. Plain and simple.
Once we knew our budget, we started sacrificing in order to find more money in our budget. By “find” I mean we gave up certain things so we could apply them to more important areas. Restaurants, clothing, etc. are obvious areas to find extra money in. You simply spend less. Notice I said “obvious” and not “easy” because when applied, none of this is actually easy. We even cancelled our vacations, because we knew we shouldn’t take them. That one hurt. But according to Rachel Hollis, “If I want to achieve anything new in my life, the question is never, Can I do it? The question is always, What am I willing to give up in order to get it?”
STEP 2: THE EMERGENCY FUND
An emergency fund is basically an “oh crap” savings. It’s money you set aside and DO NOT TOUCH unless there is a true emergency. It should be enough to get you by and pay your bills should something happen to you, so it’s important to have one. Luckily, we already had this money saved so we just moved it to an account that is untouchable, for any reason, except a true emergency.
STEP 3: THE SNOWBALL
We started paying off everything we owed. We tackled a few little payments on credit cards first, but we didn’t really have much of those anyway, so our real target was our student loans. But before doing anything, we listed all of them in order from smallest to largest, and used our savings to pay what we could immediately (see ya later, down payment…) one at at time. Every time we paid one off, we did a happy dance, and then applied that loan’s monthly payment to the next largest loan. This was the beginning of our debt snowball. And it was awesome to see it start rolling.
We also got rid of our car lease. The timing was right that my mom needed a nicer vehicle, and she wanted to get rid of hers. So we traded – she bought out our jeep and we paid off our lease, and we bought her car (with all cash). Bye bye, beautiful Jeep. This is where Adam felt the most pain. Boys and their cars…
And we got through it. That’s really what brings us to today, done paying every student loan and living without a single loan payment. Now, we get to save for a house and when we do buy one, we get to do it WITHOUT the financial burden of student loans lurking around. That’s a great feeling.
After reading this, you might think this all sounds too simple. You’re right. It is simple. It’s not the knowledge of how to do this that hangs people up. Nothing I’ve written here is mind-blowing or newsworthy in ANY way. Dave Ramsey says in his book, “These are not my principles. I stole them from God and your grandmother.” Meaning they’re tried & true, and they’ve been around for a long, LONG time.
All we really did is have gazelle-like intensity. We did everything possible to obtain more money, and we put it all towards our loans. And it was HARD. Adam and I had our biggest fight, to-date during this process. There were lots of tears. It tested us in ways we never expected and it brought out each of our biggest insecurities.
Thinking about it, the biggest reason we were able to make this happen is because our fear of doing “just okay” was far greater than our fear of sacrificing for a while for the greater good of our life. I have never, EVER wanted to be average or to just “get by” in life. That played a huge role in this.
To wrap up this ridiculously long post, I’ll leave you with this, which sums up my philosophy on this subject…
“if you aren’t really careful, ‘the good enough’ can become the enemy of ‘the best’. Mediocrity with a dose of doubt can keep you from excellence.” – Dave Ramsey