Wednesday, February 2, 2011

Helpful How-To: Baby Steps to Being Debt Free

So here's a handy tid-bit that you never knew you never wanted to know about Techy and I.

We haven't had a car payment in over 2 years.

We have lived completely debt free ever since.

BUT unlike the world of debt-free-ers out there, we continue to use credit cards.



RULEBREAKER, anyone?!?!

I'll take it one step further for you....

Just to really get under your skin.

We make our credit cards work FOR US.

Instead of working for them.



Month after month, we pay all of our bills on our credit cards.

Building up loads of points.

But the catch is that month after month, we have to pay off our balance. 

Every last little red cent.

Which leads me to wonder, were pennies at one time red?  Because red is not copper people.

It is not.


This is coming from a life-long NOT-redhead.

But I digress.

This madness (rulebreaking, if you will) of paying our bills with credit cards has worked for us.

For 5 years, it has worked for us.

Sure we have bad months just like everyone else.

But for the most part, we haven't skipped a beat.

And since we paid off our cars in 2008, the only debt we have carried is our home mortgage and the mortgage for the land we own in Virginia.

In comparison to some stories, ours has been relatively easy.

But that is mostly due to the fact that we opted to postpone our wedding until both of us had completely paid off our college debt. 

Together we managed to start our marriage with only the necessary evil of 2 car payments.

And here's how we did it.

1.  Save, save, save.

The very first thing that we did was start a savings account and save, save, save.  Yes, with 2 car payments.  I had a very wise Home Ec. teacher in college who cautioned all of us to maintain at least 3 months of our salaries in the bank as an emergency fund.  No matter what.  And that was our goal.  Prior to paying extra on our cars or buying a house, our goal was to save. 

And in reality, I don't know that it is about a magic number in the bank.

The idea is to get used to saving.

And not automatically turning to your credit cards in every pinch.

A few years ago, my sister and her husband worked through Dave Ramsey's Financial Peace University, and the first thing they did was scrape up $1,000 emergency fund and put it in the bank.

The point is really to have money to draw from in case of emergency, so that when or if the emergency happens, you don't have to resort to piling on more debt. 

Makes sense, right?

It's not brain surgery. 

Just playing with money.

I would argue that it could be almost as dangerous.

But that's just me.

Tightwad, me.

Correction, RULEBREAKER, me....

2.  Don't pay interest if you don't have to.

IF you have the ability to use credit without overspending, go for it.

But if, like so many out there, the temptation is just too much, forego it.

Case in point, we have never charged one piece of furniture in our home without immediately paying it off.

However, Thrifty Decor Chick tells a sad story of someone who built up years and years of debt paying for things like furniture, new flooring, and household amenities.... Of course, today, she told the story of someone who after years of hard work is now debt free, so YAY for her!

But it's so easy to do.  Especially when your sofa is falling apart and you are spending all your money on diapers.

But guess what?!

That's what Craigslist was invented for!

Craigslist and drop-cloth slipcovers, that is....

And for the record, I have never purchased anything off of Craigslist for more than $100.


Do you know how many items are posted in the furniture category DAILY on Craigslist? 


Chances are there will be one in there to fit your price range within just a few days. 

But that's a whole other post.

3.  Vacation fund.

Are you planning on a vacation this year?

How are you planning to pay for it?

I may have mentioned a time or two, but Techy and I have never been on a vacation that we didn't have the money for.

We have never "charged" a vacation.


Including our honeymoon.

As a matter of fact, rather than going on the honeymoon of our dreams, we opted for one we could AFFORD.

With NO regrets.

No, we may not have come home with amazing photos of our visit to the tropical rain forest or romantic tales of wandering the streets of Paris together or anything quite so amazing.

But we also didn't come home with a ginormous credit card bill.

Just saying.  Do what you can.  And enjoy it to the max.

And then enjoy it the month after when you aren't still paying for it.

4. Free money.

Hello, coupons?  It's Leah...yeah, I have missed you too...let's get back in touch soon.

Coupons are free money.


Find them for the stuff you were going to buy anyway. 

Diapers - check.

Wipes - check.

Toilet Paper - check check

And then find the store brand coupons for everything else.

And then feel better because you didn't spend all YOUR money, you spent some of THEIRS too.

5.  Cars - Pay them off.

I know it isn't reasonable to think that we all have $20,000 sitting in the bank to buy a car with.

To be honest, this isn't even an option for me. 

But the goal is to get them paid off as soon as possible.

Now I know it doesn't sound feasible.

Or reasonable.

When I first bought my car, I thought the same thing.

I had no money to put down on it and I certainly didn't have any extra to pay every month.

But over time, I did.

And when that time came, we started paying extra on our cars.

Both of them.

And we paid both of them off within 6 months of each other.

And they were both a full year or more earlier than our expected pay off time.

I can't tell you how good that felt.

Of course, now, my car has 90,000+ miles on it and Techy's has 100,000+, so I am pretty sure that it won't be long until we have to start planning for the next one, but we have a game plan this time.

6.  Get Paid Back.

If you, like me, can typically contain your credit spending, and are going to use credit cards on a regular basis, find a credit card with rewards.

We have a Chase Sapphire Card.

Which is awesome.

But I have heard amazing things about American Express Blue....

Both (I am assuming with AMEX...based primarily upon their reputation) have excellent customer service standards and the rewards are certainly nice as well.

In conclusion, I certainly do not claim to be the end-all, be-all of debt-free-ness.  But I can tell you the things that have helped me, along with the things that I have learned.  (Some not so me on this one...)

However, if you want more information, feel free to head on over to my sister's blog, where her passion for finances (not to mention her crush on Mr. Dave Ramsey himself) is clearly apparent....

And to her credit...

I can't really blame her...

I think he's a cutie too....

(Chalk it up to my previous life as a housekeeper and my life-long affection for Mr. Clean products.)


Cortney said...

Wish I could say we are there in debt free land with you, but we're not. Maybe one day...if our plan works it'll be early next year actually.

I hate Chase cards and company,but that just comes from my own personal experience with them. I'm hoping to write more on my blog soon about how to pay off debt, cause I think you guys are rare to no debt-ers. I could be wrong.

Great post though, very inspiring.

Roberta said...

Cudos and congrats to you both for working so hard on "paying yourself first" by really is the key...attitude that is. If you think you are "worth it" then you pay yourself first by NOT living out of your you say in new cars every two-three years, vacations you can't afford. etc.