How we paid off over $65,000 of debt in 3 years (debt freedom part two)

(click here to read PART ONE of our debt-free journey.)

(Date night: Zack and I are celebrating our debt freedom)

Are you ready for this amazing, achievable announcement?

Zack and I made our final debt payment on March 27th, 2019 ~ we are finally debt free! 

We worked so hard for three years and paid off exactly $65,236.67 of debt.

I can’t even believe we are here celebrating this moment. Zack and I are so proud of this accomplishment. We worked very hard at staying in the race and I’m so thankful we didn’t quit because now we are DONE with our DEBT! In our almost 11 years of marriage we have started & quit this journey multiple times because it felt too hard. But three years ago we said “no more quitting” and committed to work incredibly hard towards debt freedom — now we’re on to saving our money. Gone are the days of owing other people money ~ yeowwwww!

Hearing other people’s debt-freedom stories is exactly how Zack and I started our own journey just three years ago!

It only took a few really honest, raw stories of other families choosing to be financially responsible for our family to also want that freedom. Plus, we had been through the wringer too many times. We had financial hardship. We were overwhelmed with our irresponsibility and honestly embarrassed over our behavior that it had become personal. Hearing other’s successes encouraged us to become successful, too. And so my hope is you feel inspired and equipped to make the same change for your family, whether it be debt freedom, saving for a home, contributing to your retirement, or another other financial goal.

ABOUT OUR FAMILY:

My husband Zack and I live in the Detroit metro area with our four young children (Maxwell is 6 years old, Natalie is 4.5 years, Marigold is 3 years, and Landon is almost 1 year old) plus our dog, Bauer. We are renting a charming brick home with a backyard that wonderfully serves our family. In our almost 11 years of marriage, Zack and I have never had a mortgage, although we have always had (usually expensive) rent to pay. (Does that shock you?) Would you believe we’ve moved seven times since getting married? It’s true :) We’ve lived in Michigan, Minnesota, California, and we’re currently back in Michigan.

Zack and I also visited Tanzania, Africa in 2012 with Compassion International before having children, and just this year we considered moving our family to Berlin, Germany. Both of these experiences are a part of the shaping of our family values and what we desire for our home. Because of how many times we’ve moved, the cities we’ve lived in, and the variety of living costs we’ve experienced, our desire is for our home to be a blessing for everyone who comes inside. We enjoy hospitality.

I like to think in college I minored in home organization (and not holding on to things we don’t absolutely love or use). All the moving we’ve experienced has given us (read: me) a healthy perspective on wants verses needs, although there’s always room for improvement. Our home is our family’s core. It’s where we invite others in, where we find rest, practice creativity and learning, and also where we grow with the Lord. Our home needs to serve us, not the other way around. Knowing our financial goals actually helps us make this happen.

My husband works in downtown Detroit as a video producer and I stay home with our four young children. I’m also homeschooling our oldest two children, in between hosting pop-up shops for my handmade business, Gussy Sews and various writing projects. My family attends the Royal Oak campus of Woodside Bible Church, and Zack and I are very supportive of each others creative pursuits.

Towards the end of 2015 we were finally ready to run the race towards debt freedom. At this time our family was still living in Los Angeles, California and we were expecting our third baby. Zack and I began by listing all of our debts on paper and compared our total debt against our annual income minus expenses. We were overwhelmed by the amount of time it would take to finish and become debt-free. 

We prayed for a radical change.

In order to make substantial progress we decided to move our family back to Michigan (where we both grew up). This would give us the financial margin we needed to make large monthly payments towards our debt plus allow us to live closer to family. You can read more about our surprise move to Michigan by clicking HERE.

We moved to the Detroit metro area in early 2016 and I’ve given birth to two more babies here. Motherhood has exceeded my expectations in the most unimaginable ways.

Fast-forward three years. In March 2019 we became debt-free. Let the living begin!

LET’S GET STARTED:

If you’re feeling discouraged with your financials or are unsure where to begin, we pray our story brings a new way of thinking so your family is equipped to make the right changes. You are capable of doing hard things! First and foremost, I want you to believe that. You are capable of changing the financial trajectory of your family through prayer and progress. You are capable of taking a new path. Pray about your situation and ask the Lord to provide financially. Pray for a community to support your family through monthly check-ins and prayer. You are capable of this, and we are praying for you, too.

Do you believe a little encouragement can carry you a long way? Because it really can.

What motivates you? For our family it was seeing a visual of our progress so we created signs showcasing our goals and placed them in prominent areas of our home. I’ll expand on this more below. We also simply couldn’t imagine just how wonderful life would be without monthly payments, and yes having a car payment is considered debt ;) So we used this “what if” potential, hung visual reminders of our goals and progress, and began to dream.

Zack and I also listened to Dave Ramsey’s podcast, and usually daily. I mean, what else does one do while washing the dirty dishes made by six people? (That’s right, we do not have a dishwasher.) For three years we listened to Dave’s podcast. In fact, we still listen to it! It’s super motivating and incredibly educational ~ have you tuned in yet?

I want to expand on HOW we accomplished paying off exactly $65,236.67 in three years because becoming debt-free is absolutely something your family can achieve.

You must have a goal in mind, you must believe you can achieve your goal, and you must be in prayer with the Lord. I’m praying for you and the success you’re capable of!

A QUICK OVERVIEW OF HOW TO PAY OFF YOUR DEBT:

1. keep your financial goals nearby (we follow Dave Ramsey’s “Seven Baby Steps”, see below)
2. write down ALL of your debt
3. be fully aware your income (work towards increasing it)
4. write down ALL of your monthly expenses (work towards keeping just the essentials)
5. commit to paying with cash
6. communicate your goals and stay in conversation with your spouse

I would also encourage you to spend some time journaling your situation and praying for wisdom! What would happen if you committed to spending 30 days in prayer, asking for clarity on your financial house and seeking wisdom? Trust that big things will be revealed to you during this time. Pray for financial margin so you can make progress on your debt. Pray for motivation to stay in the race. Pray for your entire family to support one another.

Now it’s time for me to expand on the six steps I outlined above. Let’s get started!

1. KEEP YOUR FINANCIAL GOALS NEARBY:

For our family, keeping our financial goals nearby means praying about the financial principles Dave Ramsey teaches called the “seven baby steps”. You can learn more about the seven baby steps HERE. Below are the steps we are taking to maintain a healthy financial house. In fact, we are already on step 3 because we have followed the free advice Dave so generously shares. This plan is exciting because it works.

• step 1: save $1,000 cash as a beginner emergency fund (singles or limited income homes save only $500)
• step 2: use the debt snowball system to pay off all your debt but your house
• step 3: save a fully funded emergency fund of 3 to 6 months of expenses
• step 4: invest 15% of your household income into retirement
• step 5: start saving for college
• step 6: pay off your home early
• step 7: build wealth and give generously

There is also a book which goes to even greater details on the baby steps, which both Zack and I loved, called The Total Money Makeover by Dave Ramsey. If you’re married, you and your spouse should read it together. Or, one can read the book and the other can listen to the audio version. Or both of you listen to the audio! It doesn’t matter which format you choose, but do consider reading & discussing each chapter together.

OK, I have to know ~ are you a list person? I love making lists because they’re easy for me to read and they help me process information faster. I also love knowing I’m making progress by seeing items checked off. Below are two important lists Zack and I focused on during our three year debt journey.

SEVEN *FUN THINGS WE DID DO* TO REACH FINANCIAL FREEDOM:

• hosted really great dinner parties at our home, and often!
• spent a lot of time playing outside with our kids
• visited the library and other no-cost community attractions
• prioritized relationship building over shopping
• created visuals of our progress to keep us motivated
• sold extra items or took odd jobs to increase our income
• frequently celebrated milestones

FIVE *THINGS WE DIDN’T DO* SO WE COULD REACH FINANCIAL FREEDOM:

• go out to eat
• mindlessly shop (we generally avoided the mall/stores, in all honesty)
• sit in our guilt, anger, jealousy, or any other negative feeling
• go on vacation / travel (we mostly only visited family during this time)
• buy things we don’t need (knowing what’s a WANT vs. a NEED is eye opening)

2. WRITE DOWN ALL OF YOUR DEBT:

Writing down all of our debt was the hardest step for us to do, mainly because we didn’t want to confront the reality of the financial mess we knew we were in. We had an idea of our financial trouble (you can read all about that HERE), and it was easier at times to ignore it rather than face it head on. We hit a few hard “lows” which fortunately woke us up from our mess. We knew we needed to make the responsible choice and pay off our debt, so we committed to make a plan. We knew we needed to pay our off debt quickly so we could live life, without our debt weighing us down.

We are capable of doing hard things, as are you, and we kept this close as we pressed on towards our goals.

Zack and I did NOT want to sit in our discouragement. And not only that, but the Lord doesn’t want us to sit in discouragement, nor guilt, anger, or jealousy. So we used our situation to empower us and we began making record of our debt. Every time we came across a bill that wasn’t paid in full, we added it to our debt list. We continued to pray for strength and wisdom.

Using Google sheets we created a spreadsheet with the following information: the name of the creditor, the current amount, the original amount, the monthly payment, any notes, and a contact phone number/website. And then we began to fill in the information.

Ehhh, our list was getting pretty long… But we finally had all of our debt recorded, and with this information we were able to move forward with a financial plan. This is progress! (Using Google sheets allows both of us to have access, even when away from home.)

Next, we added up the monthly payments to see the total monthly amount owed.

This took a little wind out of our sails, to be quite honest. But! We could handle the reality of our mess because God is on our side. Plus, we had resources and community nearby for extra support.

It was now time to evaluate our monthly income and ask, do we have the financial margin to pay our debt?

This naturally transitions to the next question: are we dealing with an income problem (as in, do we make enough money to afford our expenses and payments) or do we have a spending problem (as in, are we purchasing too many un/necessary items)?

One of these was definitely our problem, but some times families experience both of these as the problem.

NOTE: perhaps you have a car payment. Consider selling it and purchasing something less expensive which would reduce your debt balance. Maybe you have furniture in your home you don’t use or need that could give you a bit of a financial reprieve? Think about it…

3. BE FULLY AWARE OF YOUR INCOME:

The next step was to be fully aware of our income and work towards increasing it. Zack and I really needed to dream here in step three. Based on our goals, what changes could our family make to increase our income?

At this point in our debt-freedom journey, we were living in California. Even though some of the solutions were hard, we knew we could get radical with our behavior. We asked ourselves many questions, was Zack due for a raise? Could he change companies and receive a higher salary? Could he take on a second job? Could I work to increase our family’s income? How could I use my creativity to bring in extra income?

Fast forward a bit, we have now relocated our family to Michigan. And even though we have four children ages 6 years and under, there were ways for us to make a combination of these things happen.

Some seasons brought upon us increased work schedules, although short-term; other seasons produced the art of saying “no” in order to maintain sanity.

But remember this, all of this was happening with a greater goal in mind: debt freedom. Remember what I wrote earlier? We are capable of doing hard things! And this includes you :)

Knowing our income gave us the insight to take the next right step forward.

Because that’s all you’re doing here: taking the next right step. There’s no way we could have processed (or completed) this three year journey on day one. Or even after year one. We had to take it step by step. Even when my mind wanted to zoom ahead, the insight of our community brought me back to taking the next right step forward.

Spend some time evaluating your income. Is it enough to support your family? Honestly answer this question. Whether it is enough, or if it isn’t enough, commit to respecting not just the income your household receives but the time spent away from home working for it.

Work honestly. Work accurately. Work ethically. Work with gratitude that your mind is sharp and you have muscles that move. Commit your work unto the Lord. He will bless you.

The last step in this section was to make another spreadsheet. Instead of recording our debts we put our income at the top. And we chose to celebrate the fact we have an income!

Small celebrations along the way provide big glimmers of hope. Be sure to celebrate your income!

4. WRITE DOWN ALL OF YOUR MONTHLY EXPENSES:

First, Zack and I needed to record our debt. Second, we needed to be aware of our income and it’s frequency. And now we need to write down all of our monthly expenses. We begin each month with our monthly income listed at the top and all monthly expenses listed below. 

Here’s a snapshot of possible monthly (and yearly*) expenses:

• current debt payments
• tithing
• groceries (NOT household items)
• household items (NOT groceries)
• mortgage or rent
• babysitter or childcare costs
• home utilities
• car payment
• car insurance
• car gas
• car repairs, oil changes
• life insurance, disability insurance
• monthly/yearly subscription services (Costco, Audible, Amazon Prime)
• personal spending money (a very small amount)
• birthdays, holidays
• Non-profit donations
• date nights
• clothing
• doctor visits, prescriptions, therapy
• haircuts
• veterinarian expenses
• travel costs

*for all yearly expenses be sure to divide the total amount due by the number 12 to determine the monthly value.

Next we compared our monthly expenses against our monthly income, and fingers crossed — did we have a positive balance? The goal was to have a positive balance so we could put that amount towards our debt. The greater our financial margin the faster the progress.

NOTE: we keep a small amount in our checking account for “forgotten” purchases, things we forget to record. This is important so our checking account doesn’t overdraw and generate a fee.

Now it’s time for you to make YOUR list of monthly and yearly expenses. Be sure to review your bank statements, including credit card statements if you use them, to give yourself an accurate picture of your expenses. Be very honest with this step. And remember, the best way to make progress is to be aware. Do not make room for guilt to come in; may your awareness bring you peace and progress.

We then reviewed our expenses one more time and asked ourselves some hard questions:

• which expenses aren’t truly necessary?
• what could we go without for a pre-determined amount of time (remember your greater financial goal!)
• what are our highest expenses outside of our non-essentials (essentials include housing, food, utilities, clothing, transportation, insurance), and can we eliminate or greatly reduce our non-essential expenses?

If we wanted to get rid of our debt quickly we must put a stop to all non-essential spending.

We decided to scale back our spending in a huge way. We seriously evaluated what we considered “necessary purchases”. We continued to rake through our expenses and removed what wasn’t necessary. And guess what, every time we did this our financial margin increased! In addition, we did occasionally increase our income through freelance/temporary work. We finally had the margin needed to make serious monthly debt payments. And again, we celebrated this!

Zack and I worked this process multiple times a year and we always found extra money to apply towards our debt payments. We reviewed often what we considered “necessary purchases”, even to the point of others asking us: why aren’t you going out to eat? Why aren’t you taking a family vacation? Why aren’t you exchanging gifts at Christmas, giving gifts on birthdays, filling Easter baskets for your children, or updating the dishes in your kitchen cupboards? 

Ultimately, all emotions aside, our financial goals are our goals, as are yours! Our financial decisions should not, can not, be decided by others.

I’m telling you, we did some very against-the-grain things during the three years we were working towards debt freedom. But in the end, this was the best choice Zack and I ever made for the future of our family as we have truly experienced financial freedom by paying off our debt.

Believe this: the less you spend each month the more you can apply to your debt. Only your family can decide what your family spends money on. Other people’s spending opinions do not need to become your choices (or opinions). Stay focused on your goal and let your healthy progress propel you forward!

(yearly debt payments as of January 30, 2019)

5. COMMIT TO PAYING WITH CASH:   

So, what do you think about the title? ;) Don’t throw me your best side eye, I know this can be hard for some of us – ha, ha!

I’ll get straight to the point here. If you’re spending with cash you are more aware of your choices because cash is finite. Cash is not infinite, unlike a debit or credit card alludes.

Cash has an ending point. If your wallet is empty of cash, and you DON’T have a plastic card to swipe, then you literally can’t buy anything.

If your wallet holds a debit or credit card you can more likely buy something ~ pending your credit limit or overdraft protection settings.

Now, I know there are those who promise they have control over their spending even when using a debit or credit card, but I want to offer another perspective. If you have the money, why not pay with cash and be sure of what you can afford? Why run the risk of buying off credit, of flirting with overdraft fees, why buying more time to pay the bill, or bu high interest fees because you simply forgot to pay your bill?

Hear me out, the reward points you accrue are NOT worth it! Studies show we are more likely to spend more money (read: money we don’t have) when we pay with a debit or credit card.

Cash allows you the ability to stop spending. However, this is a personal discipline and requires intentionality and accountability. But say it with me, I can do hard things!

So what’s the solution? Write a budget, anticipating your spending needs as best as you can, and withdrawal the cash needed upon receiving a pay check for each category you use.

This method is possible! Our family uses this method, and we used this method for three years while we were paying off over $65,000 of debt.

My point with this section is not to argue or point fingers or bring upon any unhealthy emotions. I truly want to encourage you to consider a new way of spending by using cash for all purchases. I want to encourage you to say “no” if you don’t have the money in your wallet (or checking account). I want you to buy what you can afford by having a plan and making healthy financial choices.

Once you’ve recorded your income and the bills that need to be paid, including which expenses need to be purchased, go to the bank and withdraw the cash needed for each spending category. Then, write the name of the category on an envelope and stuff it with cash. (This is so fun!) Keep the infrequently used envelopes locked in a fire-proof safe, the frequently used envelopes go in your wallet (like groceries, household, vehicle gas, clothing, etc).

Refer to section 4 above for envelope suggestions for your spending categories.

When you pay with cash and create envelopes for your spending categories you create assurance knowing you have the money to pay your bills. This assurance will help you from overspending because again, cash is finite.

For some purchases, using a debit card is the only option. If you find yourself in this situation, practice healthy decision making. Ask yourself, have I planned for this purchase? Is making this purchase a responsible choice? When you are aware of your purchases (because you’ve planned for them) you can rest knowing you’re making responsible choices.

And for those unplanned emergencies, you will use your emergency fund to pay for them. Then you work towards re-filling the fund ASAP.

You can practice healthy boundaries with your money by having a plan (writing a budget) and sticking to the plan.

Alright, so what does paying with cash look like in action? Good question. Each time you receive a paycheck, regardless of frequency, make a plan for how you are going to spend your money. Where are you telling your money to go? What bills are you going to be paying with this income, and which necessities are you going to purchase for your household? Refer back to your list of expenses (see above in section 4) and literally withdrawal the cash you need for each expense category.

Will you need groceries? Decide how much you’ll spend at the grocery store by meal planning.

Will you need to buy gas for your car? What will this cost?

Will you need to pay your utilities, insurance premiums, renew a yearly subscription?

Do your children need a new set of clothing?

Is your pet due for an annual veterinarian exam?

Plan ahead. Study your spending habits. Stay in prayer with Jesus. Ask for accountability and community encouragement.

Remember, being on a budget does not mean you live a life of less. Instead, being on a budget offers peace and assurance.

For our family, being on a budget means we know exactly how much money we can spend. Being on a budget means we don’t have to feel guilty or worry over our spending choices. Being on a budget means we know how much money we’re saving, spending and giving.

If you want to go on a vacation, go out to eat, buy a new shirt every month, update your back patio this spring — you can because you have it budgeted! If you want to do those things while you’re paying down your debt or saving for a specific amount, you can ~ it just changes your “goal achieved” date. 

So it’s a choice, and it’s your choice to make! :) but it’s definitely a choice.

Set aside the money by withdrawing cash and stuffing a literal envelope with the right amount needed for the category. Scroll up to section 4 to review which spending categories you should consider. Keep the envelopes you’ll be using in your wallet and use cash. The rest of the envelopes go in a locked fire-proof safe.

• Are you going on a trip? Plan ahead and bring the envelopes you’ll need.
• Are your children outgrowing their wardrobe? (By the way, it’s OK to keep their wardrobe minimal!) Plan ahead and bring your clothing envelope with you to the store.
• Oops, you don’t have the envelope you need. Simply drive home and get it.

Have I told you you can do hard things? Have I told you you can achieve your financial goals? Do you hear me cheering you on? I’m wildly excited for you and your family! What goals are you dreaming of?

Every single time you receive a paycheck you will write a budget. This is how you prepare your financial house. Writing a budget means you are making a plan for your money. Refer back to the financial goals you wrote down ~ what are they? What are you wanting to accomplish? What are you wanting to stop doing, start doing? What healthy changes do you need to make? What is the most stressful about our spending?

I love asking these questions because they offer a starting point. They allow me to connect the dots between where where I am and where I want to be.

We spent three years diligently paying for everything with cash, including paying off $65,236.67 of debt. Paying with cash works! And not once did we use a credit card to achieve this milestone. We are so weird, and I love it.

6. COMMUNICATE YOUR GOALS AND STAY IN CONVERSATION:

For years Zack and I were not on the same page with our financials. Zack wanted to pay off our debt and experience financial freedom; I was so overwhelmed by the persnickety details that I couldn’t see the big picture. Ugh.

I let my questions debilitate me from getting started. And most importantly, I was certainly not praying about it. Once I asked the Lord to soften my heart towards learning a new way of thinking, things began to turn around for us.

I asked the Lord to help me understand how to work this process. Zack and I began praying together for our financial goals, for our conversation to continue as the weeks and months passed. We prayed for patience, wisdom, and understanding. You can pray for those things, too. The Lord hears every one of our prayers, even before we think them or speak them aloud. Isn’t that encouraging? I love that He hears us.

If you have a spouse that is unwilling to talk about a new way of living, or if you have a spouse that is hurt or upset over your/their financial choices, commit to praying over this, too.

Instead of wanting to change your spouse’s mindset on how to handle your financials, consider how you can explain your goals in a way that will best relate with him or her.

Help them see the positive changes that will come by drawing an inviting, interesting picture. Help your spouse see how their giftings, their positive attributes fit into the life you’ve created together.

Combine your finances, your strength, your love, your endurance, your positivity, your wisdom and become an inspiring team.

Become a power house together! Communicate your goals and stay in conversation weekly, monthly, and annually.

BONUS! CREATING VISUALS OF OUR PROGRESS:

As mentioned at the beginning, Zack and I kept many visuals of our debt reduction progress. One of the most impactful visuals we created was a paper chain of our debt. We made each link in our chain worth $500 which we then hung around our kitchen and dubbed it, “the ugliest but most encouraging decoration in our home!” Ha, ha. It’s a true story, though.

This paper chain was incredibly successful at helping us finish our financial goal of becoming debt free, especially once we were making consistent progress. We could literally see the positive choices we were making and how they were helping us reach our goal.

Every time we made a payment of at least $500 we ripped off a paper chain. Glory!

Any time someone visited our home this paper chain was a conversation starter; people wanted to know what the paper chain meant. It piqued their curiosity. It also gave us a boost every single time we ripped off a chain because ripping off a chain meant we were making progress! We were getting out of debt! Towards the end of our journey our children were actually stomping on the ripped-off paper chains. What a sight! 

After two years had passed and I was feeling a little weary from how diligent we have had to be, I took some time to write down our financial progress each year and hung it on our fridge. I’m frequently opening our fridge to prepare meals for our large family, so this positive reinforcement was constant. It encouraged me big time to see the fruits of our labor so matter of factly.

We also celebrated mini-milestones by sharing how far we had come with our support community. We LOVED having them cheer for us.

What would encourage you on your debt-freedom journey? Maybe you aren’t so much a visual person as you are a person who thrives on affirmation? Ask a few trusted friends to meet with you once a quarter to review your progress. Maybe they can also serve as a springboard for advice or guidance? (Although do discern who you should receive financial advice from.) Be sure to pray together, because we know what happens when two or more gather…

Now it is your turn, I want to hear your story. Where are you with your debt-free journey? What goals do you have? What areas do you need more knowledge or encouragement? Read this book, journal your heart and record your financial goals, and stay in prayer. I am praying for you! Consider leaving a comment and we can discuss together. xx