The Get Out of Debt Free Post
If you are living debt free with a decent emergency fund, please forward this post to someone who isn’t. If you are living with debt, this information will help you change that. First and foremost, if you are considering paying someone to consolidate your debt, stop it. No one needs to benefit financially to move your debt around. With the right (free) tools, you can become debt-free on your own.
While the focus of this blog is not typically my personal story. This one is important! It demonstrates that you can change your life anytime just by making the choice to change.
My Debt Free Story
I got my first credit card when I was 19, my second when I was 20, and was using one to make payments on the other by the time I was 21. Eventually I defaulted on payments and scarred my credit report. With a less than perfect credit score, I figured I may as well continue to live in debt. That’s what everyone else did, and I was still being offered more credit so what the heck! I made minimum payments on credit cards, bought a car with a horrible interest rate (because that’s what people with bad credit get), got a student loan, or 2 or 3 and figured that was the way life was supposed to be.
Fast forward to my late 20s. I got a better job, made more money, and did what everyone else was doing. I bought a better car, financed with a crappier interest rate, and said yes to almost every store card that was offered. I did clear up my past due balances and improved my credit score but I kept spending. I had a credit card with the Gap, Victoria’s Secret, Macy’s, JC Penny and others. I had more credit, more stuff and bills arriving daily.
Here is the crazy part. I had to work harder, to make more, to keep up with what I owed everyone and I thought that was ok. In fact, until I was 30 something and heard this weird guy, Dave Ramsey on the radio, I thought the rest of my life would include more spending, more bills, more collection calls and more stress.
Listening to Dave say some of the following things made getting out of debt top priority for me.
- Live like no one else, so you can live like no one else.
- Financial peace isn’t the acquisition of stuff. It’s learning to live on less than you make, so you can give money back and have money to invest. You can’t win until you do this.
- If you buy a $28,000 car, in four years it will be worth about 11,000 bucks.
- How you handle or mishandle your money tells us who you are and, more important, it tells you who you are. Your priorities, passions, goals, and fears are shown clearly in the flow of your money. Your value system, or lack of one causes money to flow around you, past you, or to you. When money is in your possession, what you do with it screams loudly who you are.
- Debt is normal. Be weird.
I didn’t start working Dave’s program until after I listened to him for a year or more, but hearing people call in and ask for help, or tell their debt-free stories inspired me to make a change. I closed my credit accounts and cut up my cards and vowed to carry less debt. Becoming completely debt free sounded too weird. Wouldn’t I always have a car payment?
The less we owed, the weirder it got! My husband and I started saying no. We stopped buying things we didn’t need, got rid of the stuff we bought that we didn’t want and cleared up our debt. This summer we made our last car payment, and today, other than our mortgage, we are debt free. We are building our e-fund, and the freedom and peace of mind that comes with that, can not be bought. It’s weird right? I always thought that I would always have a car payment or owe someone something! With no debt and a padded e-fund, our family can make choices based on something other than money.
There are many ways to get out of debt but not many that show you how to change your behavior. Dave recommends a set of “baby steps” that look like this:
- Build up an emergency fund of $1000.
- List all non-mortgage debts from smallest to largest and pay them off using the debt snowball method.
- Save a larger emergency fund of 3-6 months worth of expenses.
- Invest 15% of income into retirement accounts.
- Save for college for the kids.
- Pay of the mortgage.
- Build wealth.
I highly recommend listening to Dave’s radio show or free 1 hour podcast for a few weeks. Then, check out The Total Money Makeover from the library and get started. You can also check with a local church to see if Dave’s Financial Peace University is offered. This will be money well spent but you can do this without the class.
I want to add two pre-baby steps to the plan.
- Say no to spending. You have to tell yourself no to even the littlest wants. Cover your needs and deal with the wants when you are debt free. By then, you won’t want for much!
- Let go of whatever guilt or frustration you have about your spending habits and debt. It won’t be easy, especially if you have collection agencies calling to remind you about your shortcomings, but do it. Do it for you and your family. You didn’t spend money maliciously. You didn’t incur debt to end up in a mess. You just did what everyone else was doing. You were living the dream. Now that you have decided to be different and weird, you can let the emotions that you have tied to your poor money habits go, and focus on your new and improved habits.
When I made the decision to become debt free, I felt lighter even though I still had debt. When our family became debt free, we got closer and more determined to live life our way. You may be wondering, now that we have no payments, what do we do with the money we make? Anything we want. Weird is better. Less is better.
Living debt free is one of the most important thing you can do in choosing to live a simpler life. I plan to tell you more about how to tell you to live debt free. Tell me your debt free story or ask me anything about getting there.
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34 Responses to “The Get Out of Debt Free Post”
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We are out of debt too. We just finished financial peace and the best part about the class was getting my husband fully on board with all the things I wanted to do. We are now working on paying off the mortgage and we are building our retirement savings. We even bought a car with cash-so much fun to write that check!
We use to use credit cards, keep a tally of expenses and pay then off each month but now we stopped that too. I don’t want to support credit card companies in any way, anymore! We are actually spending less-I didn’t even think that was possible.
Way to go Jana! If you didn’t call Dave’s show and scream “We’re Debt Free!”, I’m glad you at least did that here. It’s a huge accomplishment and something to celebrate.
Courtney, great timing. I’m just in the process of examining my finances and this advice is great. I’m debt free and mortgage free, but still feel like I could be doing more to have a better picture of where and how I spend so that I can focus my money more directly on my dreams – like travel. Thanks for this.
Katie, Where do you want to travel?
Absolutely doing it yourself is the best way. Don’t pay anybody to help you fix your credit. If you must do something, go through CCCS.
Bernice
http://bernicewood.wordpress.com/2010/10/04/is-it-time-to-change-for-a-change/
Thanks for writing this post, Courtney. We did FPU, the baby steps, and are debt free including the house for 4 years now. It’s awesome to be debt free. I especially love the fact I can pay my daughters college tuition with a check, and no school loans. Today I offered to my son and his fiance to go to FPU and I’d pay for it. The program really works.
What I think is really interesting is that the almightly “credit score” really is a “I love debt” score, as Dave says. That was a hard thought for me to wrap my brain around. You have to stay in debt and make payments on time to have a “good” credit score. Now I’d rather have cash than good credit!
Hi Courtney,
I’m 25 and will soon begin payments on student loans. I already can’t wait to be debt-free and plan to be just that once I pay off my car (which I hope to sell eventually once I can work without it) and student loans. Definitely not planning on taking any further debt. Thanks for the post.
Hi Courtney,
Why do people throw so much credit at students?! I had every loan and credit card going and got in a huge mess. I cut all all my cards a couple of years ago, and while I am still paying back some things, it feels good to know my debt is shrinking rather than growing and I’ll never be in that situation again.
Hi Courtney,
The Financial Peace program has played a huge part in our lives and on our journey towards minimalism. We took the course early this year and since then we have paid off all student loans, credit cards, and other miscellaneous debt. At the end of this year we will have no more car payments and by March we will be completely debt free! For those who are wavering, don’t. The program is common sense and works!
Hi Courtney,
Hubs and I have been married over 38 years and we’ve saved tons by not having new cars. My volkswagon beetle is 11 years old and still purrs like a kitten;) When it dies we’re going back to one car. How exciting that you were wise enough to follow the plan and walk your talk.
Perfect timing – exactly what I needed TODAY!
I love Dave’s budgeting approach for irregular incomes. My husband and I both earn irregularly and I’ve never found a budget planning approach that actually copes with that. His suggestions for both budget planning and snow ball debt reduction both make sense and fit more logically with our income pattern.
We’re looking forward to being debt free. Bring it on!
Hurray for you, Courtney!
Our daughter and son in law are doing FPU right now and they’re so excited. My husband and I are planning to take the course soon even though we have been debt free for many years (mostly thanks to my husband’s training from his mother). We love the freedom and choices we have now!
Fantastic post Courtney, it helped so much. I have made a committment : NO UNECESSARY PURCHASES UNTIL MY DEBT IS PAID OFF (see my newly created blog zen-journey.com) and would appreciate your help:
My question for you is around two items I want to purchase … I am in a dilemma as to whether they are necessary:
1. Compost Bin. I am a recent gardener (just learning) and have started collecting compost using the bokashi system. However, this requires burying the goods in the garden and letting them compost there. I have a very small garden with little left over room for burying things so would like a proper compost bin. However, I already have the Bokashi system, so is this really necessary? (please don’t say just make a compost pile, I am terrifed of rats).
2. Vacuum Cleaner. A bit like the above, I already have a vacuum cleaner but its not that great. I have two cats and my girlfriend is allergic to them. I want a better vacuum cleaner (not top of the line, but just a good one as mine is a real cheapy). But – is it a necessity? to be very honest with you, since I have started vacuuming twice a week, her allergies have reduced, so the crappy vacuum cleaner is working. I could live with it.
I would appreciate yours or anyone’s thoughts so much.
Hi Catherine, I am excited to check out your site. I can’t really decide if these items are necessary for you, but they sound like good investments. I have two cats and a dog, so a good vacuum is a must.
I don’t know much about the Bokashi system, but if it works, then I would stick with it. No rats allowed!I think the key here is to be sure that you don’t put anything on a credit card. Save and pay for it.
You have to decide if it can wait until your debt is paid off or not. All I can tell you is being debt free feels AWESOME!
Hi Courtney
thanks so much. I am still not sure, will think it through. I got my annual bonus today, and did not spend any of it on me. I paid off my overdraft and a hire purchase, and a lot of my credit card. It feels fantastic. I am going to get rid of 500 things in 2011. Thought doing your 333 project is a good place to start.
Thanks so much. Its great to have other people leading the way.
Catherine
thank you very much. this is most helpful. i have hit rock bottom and is now little by little payin off 6 credit cards. i have already paid of 2 and will continue to strive til im debt free. thanks so much for inspiring me
Great post and I like your suggestions and insight. I’ve always been interested int the financial savvy, so I really enjoy your website.
I always pay off my credit cards at the end of the month…like there is no other way. And use similar methods like you mentioned to pay off my auto and mortgage. I like to think that interest is my enemy.
Here is a post the combines Dave Ramsey, Suze orman and david bach’s get free steps to get the best of them all. I hope you find it interesting: http://www.homebusinesssmart.com/help-me-get-out-of-debt-free/
Great post. I especially love the part about forgiving the mistakes you made in the past. That part can be difficult but is so necessary to really get on the path to debt freedom and financial freedom. Congrats on living weird and being debt free. We’re still working on it but stories like yours help us keep going so we can be weird too