We’ve been out of debt, aside from our home mortgage, for 4 years now. We realized we couldn’t get ahead by being behind.
We were never in particularly bad shape. By the time we got serious about paying off our debt, all we had was about $12,000 in student loans. We had been working through for a few years just paying the minimum payment. If we had continued on that path, we’d still be paying now and have a few years to go. We talked about how we *should* really get around to paying this thing off, but we never executed the plan.
One day, I realized that when my 13 year old car died, we couldn’t replace it. That was the day everything became real. We started looking at our finances and realized that we had been slowly bleeding cash for 2 years. We looked for ways to cut expenses and found a few, but it wasn’t enough.
Within 3 months, we both found better paying jobs — we doubled our income. And that was it. The squeeze was gone. With that, we started putting at least $1000 a month toward that loan. With an income tax refund, we finished paying it off in 9 months. Debt free. What a relief!
We continued saving that $1000 per month to be able to replace my car, cover some home improvement projects, and to save for emergencies.
As I said, that was 4 years ago. But we cheated.
Since our income went up so dramatically and so quickly, we never practiced a real budget. When money comes in faster than you can spend it, you get sloppy. We sure did.
We never took the time to really iron out our budget. I knew how much our bills were going to be in a given month, but I didn’t pay attention to any of the other spending. We didn’t have to.
Now we’re paying for it. We are just starting to do the real work of writing up the monthly budget, categorizing everything, and most importantly, examining the results at the end of the month.
Here’s the weird part: It’s actually fun. I didn’t push the issue for years because I didn’t think it would be worth the effort and I didn’t want to accept what the outcome might be. We found so many ways that we were wasting money that it is sickening.
We model the budget and our personal finances based on Dave Ramsey’s The Total Money Makeover. It makes a ton of sense and I only regret not having started for real years ago.
What do you do to keep your family finances in line? What could you be doing better?