Getting Out of Debt Part 4 – Inspiration Strikes!

When we last left the ‘Getting Out of Debt’ story, we were doing the right things with our money (retirement, no credit card debt), but we still had no overall plan and were spending a lot of money as a result.  To go back and read parts 1-3 start here:

As the curtain opens on Part 4 of our story, a huge change has occurred – the arrival of our dear daughter.  For the first two years of her life I continued to work at my professional career, which entailed a long commute and a day care bill closing in on $10,000 a year.  Even more pressing was a growing desire to be home with her.  My boss was very family-focused and I continued to work by reducing my days in the office, and eventually,  job sharing with a friend and fellow mother at work.

Over Memorial Day weekend, 2007, I tuned into a TV show that radically changed our direction.  The show was The Dave Ramsey Road Show.  As Dave outlined his financial plan to ‘live like no one else’ we discovered we were already pretty far along.

1. Emergency Fund of $1000 – Check
2. Pay off all debts excluding your house – Check
3. Emergency Fund of 3-6 months expenses – Check
4. 15% income into retirement – Check
5. Save for kid’s college – Check
6. Pay off your mortgage – BINGO!
7. Build wealth and give like no one else

Our house is small, but it is paid for!

We had never even considered paying the mortgage off early.  Dave Ramsey’s plan made so much sense to both of us.  We decided to attack the mortgage so that we could be free of payments and get to a point where I could stay home with our daughter.  Having a specific goal and a vision of the way we wanted to live gave us a laser-like focus on our finances.  We were about midway through a 15 year mortgage so our additional payments made a decent impact on the principal.  My daughter began to think every balding man was Dave Ramsey.  Instead of take-out from the Cheesecake Factory we were rocking the beans and rice at home!

As the mortgage ticked down, I was able to leave my professional career when my daughter was 3.  By the time she was in kindergarten, I took a part-time bakery job to earn extra money to throw back on the mortgage.  That same year we were able to make a final lump sum payment and finish the mortgage off!  When you need a large cashier’s check from the bank it makes you feel like you are participating in one of those scams to send money to a “prince” in Nigeria!  Mailing the check was exhilarating to say the least.  When my daughter went to her 6 year old check-up that week she announced to the pediatrician, “We paid our house off!”  The pediatrician said “What?  No one does that!!”

Since paying the mortgage off three years ago we have been focused on saving like no one else so that we do not have to take loans out in the future.  We have been able to enjoy more travel opportunities and I continue to work part-time in a job that lets me primarily be home for our daughter.  If you are interested in what Dave’s plan involves, I recommend getting the The Total Money Makeover: A Proven Plan for Financial Fitness book from your library.  If you want to give yourself extra inspiration, check out Dave’s video from the radio broadcasts.  Watch and read and do the steps until you find yourself beginning sentences with “Well, Dave says…”

Thanks for reading our story!

On Paying off the Mortgage…

“For the next 6 or 7 years, we did everything in our power to pay off our mortgage, and to the extent I can point to a specific time when my aversion to debt became a life-altering force, this is it.  I could not stand having that debt; it felt burdensome beyond all reason, like a whole-body flu I couldn’t shake.”- Ben Hewitt in ‘Saved: How I Quit Worrying about Money and became the Richest Guy in the World’

I had to share that quotation with you.  If you are on the journey to be debt-free, and are ‘gazelle intense’ you will understand this statement with every fiber of your being.  We feel the same way about ever taking on any type of debt again.

I requested this book from the library after Fiscally Fit Chica mentioned it a few weeks ago.  I am enjoying the book, but the chapters about the monetary system are a little too much to contemplate while sitting at swim team practice.  I am gaining the most from the author’s personal stories.

Have you read any great personal finance books this summer?

Hocus Pocus! Change My Finances!

If you want to cast some ‘presto-chango’ style magic over your money situation, the best solution I know is to set specific, measurable goals.  Alas, this is not as quick as pulling a rabbit out of a top-hat, but it is more reliable!  If you have a partner, setting goals together and having a weekly budget meeting is essential to keeping everyone focused and ‘gazelle intense’, as Dave Ramsey would say.

In May my husband and I were ready to set some new financial goals which I wrote about in “What’s All the Saving For, Anyway?”  I would like to give you an update on how things are going.

Goal 1: Increase cash savings 30% by the end of the year.  To date we have increased our savings by 10% and are one-third of the way to meeting the goal.  This goal seems attainable as long as there are no major setbacks.  We have been gazelle intense about meal planning and only eating out when we are really going to appreciate the experience.

Goal 2: Fund each of our Roth IRAs up to the maximum, if possible.  The maximum contribution we can make to the Roth IRA is $11,000 total for two people ($5,500 each).  We have deposited $3,000 so far.  We have until March 2014 to make contributions.   Will we get to  $11,000? Probably not because we are pushing harder on goal 1.  That said, we don’t want to overlook this fantastic saving vehicle for US residents.

Assessment: nothing motivates like having the numbers right there in front of you.  Our best shot at meeting our goals will be continuing to meal plan, and monitoring our weekly budget together throughout the week.  We know that when we let go of budgeting and meal planning, it costs us an additional $100 – $200 per week.

In the words of Gordon Gekko in Wall Street: “You done good, but you gotta keep doing good. I showed you how the game works, now school’s out… Go to work.”