In January of 2019, we made a goal to get out of debt, Dave Ramsey style. Thus began our debt free journey.
Before our debt free journey…
If you haven’t heard of Dave Ramsey, he’s the author of Total Money Makeover and really got the “get out of debt” and “debt free journey/community” off the ground.
He has a radio talk show where callers call in – mainly about debt problems – and he gives them a plan to get out of it. And then it goes on YouTube.
He offers a class called Financial Peace University where you can dig deeper.
Being the “frugal” person that I am, I tried to learn everything about his method without actually purchasing the book or attending the class.
I rented the audio book from the library. I watched his youtube channels to the point where I could quote his intro and outro. And you may even notice references to his blog on here from time to time.
He’s been doing this for a long time and has helped millions get out of debt.
- Related: Our Debt Free Journey
DEBT.
That is something we could relate to.
So when he talked about getting out of it, our ears perked up.
How crazy is it to think that we could be completely DEBT FREE in under 2 years. No student loans hanging around our necks for the next 10 years.
On Dave Ramsey’s plan he says that most can be out of debt in 18-24 months.
So we got to work and followed Dave’s plan.
Almost.
Baby Step 1
Step 1 is to save a starter emergency fund of $1000. We didn’t quite feel comfortable with that so we saved a little more.
We’ve been through sudden job loss before when we only had about $1000 saved and it was STRESSFUL. So that’s not a position we wanted to find ourselves in again. Especially now that we have a kid.
We saved up a little more of a cushion and moved on to step 2.
Baby Step 2
Step 2 is to pay off ALL non mortgage debt.
We’ve tried to be careful with regards to debt – as in not to go in it. But over the years we’ve had a car payment and credit card debt. And now we were saddled with the biggie: student loans.
How we got into debt
Student loans are tricky. You go through school being told that you’ll need to take out student loans. That there is no other way to go to college and get an education.
We tried our best to avoid debt. I went to a community college and lived at home for the first two years.
My husband had a scholarship for his first semester and took out a loan for the second. Then he went to a tech school and was able to cash flow his degree!
**Guys, community college/technical school is WHERE IT’S AT. You don’t receive a second rate education. Personally, I had a MUCH better experience at the community college than any of the universities I attended.**
When I started on my junior year, I transferred to a university and thought I had* to take out loans.
*I thought I had to but looking back now we may have been able to make it work if we were better informed of our options. I definitely wasn’t aware of the resources available now – I just did what everyone else was doing.
This is one of the reasons why I have this blog – so I can inform people that they have other options than going into debt!
Taking out student loans was SO EASY. Just a few clicks and I had thousands of dollars..
[side note: why is it this easy for young adults to take out so much money…??]
“You can wander into debt but you can’t wander out of it.”
Dave Ramsey
Even so I still tried to go into debt as little as possible. I was living off campus so I only took out enough loans to just cover tuition. I packed my own lunch every day. And, I got 3 jobs on campus but was barely enough to pay for my commute back and forth.
After financial aid (scholarships and grants) I had to take out a few thousand dollars each semester to cover tuition.
Repayment
Fast forward to 6 months after graduation and the government comes a knockin’ – they want their money back, with interest!
We knew that we wanted to be out of debt sooner rather than later. Paying loans off for 10 years did not sound like fun. That’s when we came across this guy named Dave Ramesy.
I had briefly heard about Dave Ramsey when our church was offering his course about getting your finances together that you had to pay for.
Being the frugal person that I am, I figured I could find the info some place on the internet – for free. I didn’t give it a second thought.
I got a temporary tax season job right after graduation – I was pregnant and was planning on staying home once our baby was born. We were wondering what to do with the “extra” income. Pay off loans or put it towards a down payment?
Personally, I was leaning more towards the down payment. But then I started googling. A youtube video popped up with a pretty similar situation.
And this guy (Dave) told a lady to forget about buying a house and to put all the money towards debt. At first I was put off – that lady (and myself) really wanted a house! Why in the world would he tell her not to get one?!
But then I kept listening to more and more. Then I was hooked. I realized that we should probably do the same. I talked to my husband about it and he was on board right away. To the loans the money should go.
But then…
The same month repayment was to start was the same month our baby was due. We paid a little more than the minimum but not much. We had just moved and were in “stork mode” a.k.a. saving everything we could for the baby.
Fast forward to the birth of [the world’s cutest] baby. We were so wrapped up in the joy and fog of new parenthood that we didn’t really revisit our loans until 6 months and another move later.
Sure, we had talked here and there about paying off the student loans early but weren’t really intentional about it. We thought that if we paid an extra $50 each month, we’d be out of debt in no time.
Boy were we wrong.
Once we actually sat down and ran the numbers, we realized that in order to get out of debt in a year, we’d have to come up with an extra $1000 each month. Which is a lot more than 50 bucks.
The Turning Point
After our second move of the year, my husband’s car broke down.. again. We had been a one car family off and on for the last 3 years. And that one car is a little 2003 Toyota Corolla.
So now that we had a baby, a compact car was way to small to haul a child. Never mind the fact that the child is also very compact.. (but their stuff sure isn’t!) But we had to have an SUV. In reality we didn’t but we bought into the lie that said we did.
So we went car shopping. And test drove a car.
And boy it felt good.
But something didn’t sit right. If we were willing to pay that much for a car, we should really pay off our debt instead.
I told the dealer that we’d rather wait and save up.
He said that most fall in love with the shiny new car and then try to rearrange their budget to fit the monthly payment.
The dealer turned to my husband and said, “she’s going to get you to retirement faster.”
Thank you car salesman, if only you knew how big of a compliment that is to me.
“She’s going to get you to retirement faster.”
We went home and turned on Youtube. And there was Uncle Dave chatting with The Minimalists about how we need less than we think we do.
So that means we don’t need an SUV?
Or a big house?
Hmmm.
Then we decided to really go after the student loans – Dave Ramsey style. But modified.
What did that look like?
Read next: Our Debt Free Journey.
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