About 10 years ago, my husband and I were in debt. Big time. The funny thing was we had no clue about the potential financial danger we were in.
Our immense debt—about $100,000, not including our mortgage—was a ticking time bomb on our financial health.
We knew that it wasn’t good to have car payments, student loans and a second mortgage, but our reasoning was Doesn’t everyone have that? What’s the big deal?
Our big wakeup call came when we enrolled in a Financial Peace course at our church. We signed up to get more info on investing and, honestly, just to confirm that we were making wise choices with our money (ironic, right, for someone $100,000 in debt?).
Honestly, we had no idea how much this course (and Dave Ramsey’s teachings in it) would transform our lives and even save our family from financial ruin many years later.
Whether you’re feeling financially pinched or you’re blissfully unaware of how much debt your family is in (like we were), I’m praying that our family’s story will encourage you that it is possible to discover financial freedom and to pay off your debts (no matter how large they are)!
How We Paid Off Our Huge Debt and Became Debt-Free
Dave Ramsey’s Financial Peace course introduced us to the idea that, yes, we really were in debt, and that, boy, we really needed to do something about it.
Although we’d faithfully paid our payments on time each month (and even had an “excellent” credit score), truthfully, we had no idea how much we really owed. Since we didn’t have any credit card debt we believed that we were doing OK. However, it was staggering to realize that our car loans and student loans (and that second mortgage) totaled over $100,000.
Looking back, that $100,000 number was painful to admit, but it became the fuel for our desire to become debt-free.
Here was our three-step strategy (as suggested by the Financial Peace course which I highly recommend for every family).
1) We gathered a $1,000 emergency fund.
Is $1,000 in savings the ultimate goal for financial health? No, but we learned in the course that having this extra cushion on hand for those emergencies (car breaking down, unexpected home repairs, etc) kept us from relying on a credit card and forced us to learn to buy things only in cash.
At first, $1,000 sounded like a lot of money, but we sold several items on Craigslist, had a garage sale, said no to a few luxuries, and quickly discovered we had $1,000 cash in our pockets. That felt amazing!
However, it was step 2 (“Pay off your debts smallest to largest”) where we began seeing huge results (and really saw the change in ourselves).
2) We went a bit crazy paying off our debts.
Sure, we could have just begun living on a super tight budget and chopped away at our debt little by little.
However, all this talk about “financial peace” gave us a fire in our belly, and our two beautiful (and almost brand-new) cars in our garage suddenly seemed to be a huge obstacle to that peace.
That’s when we got serious about paying off the debt. We decided to sell our new cars and to buy cash for two (greatly used but dependable) cars.
This was hard for two people who’d always gotten brand new cars every three years when the lease was up! But we realized that those cars were a huge reason why we were chained to that debt.
We also learned that, contrary to popular belief, most millionaires and others who were winning with money didn’t drive new cars but drove older ones that they’d paid cash for.
That period of driving our first extremely-used, all-cash cars broke our need to have the best and the newest of everything. It was exactly what we needed to keep going in paying off our debt.
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3) As our craziness continued, our debt reduction began to snowball.
Financial Peace teaches the concept of the “debt snowball,” meaning that as you pay off one debt, your money is freed up to pay off the next one, and so on.
This is incredibly helpful because so many people seem to get stuck when getting out of debt because they’re trying to pay off everything at once, which yields very little progress overall.
We discovered that as we paid off one debt at a time we saw movement forward. Our debts were getting smaller, and we were that much closer to being debt-free!
That gave us even more fire to work harder to cut debt. We began using (and still use today) an envelope system of cash to pay for our regular expenses. We canceled memberships that we could live without for a time.
In fact, everything got a second lookover as we asked ourselves questions like:
- What if we chose to not eat out at all for several months at a time?
What if we didn’t take a family vacation this year?
- How could monthly meal planning and clipping coupons reduce our grocery bill?
Nothing was sacred! We kept pushing hard and we watched our debts disappear. It was incredible.
Then, twenty-three months after we had begun the Financial Peace course, we finally paid that last payment on our second mortgage. We had become debt-free (except for our mortgage) and it felt amazing!
My Most Important Piece of Advice for Becoming Debt-Free
If you really want to become debt-free, you really need one thing: a step-by-step realistic plan that’s build around financial wise choices. Don’t try to figure this stuff out yourself!
We really appreciate Dave Ramsey’s Financial Peace Course (taught through local classes or via online) because it guides participants through a powerful, proven method to pay off debt and save for the future.
- The baby steps make it easy to implement and to follow.
- The program is fluid and adaptable for every stage of a family’s financial life.
- And because it’s taught in community, there is accountability and encouragement as couples work through each stage together and inspire each other with their progress.
It know that it is the reason why we, ten years later, are still debt-free!
How Being Debt-Free Has Saved Our Family
I want to leave you with one final thought about why being debt-free should be a high priority for every family.
When we went through Financial Peace my husband had a steady job in a good industry. After we became debt-free, we faithfully saved up three-to-six months’ worth of expenses as the course suggests “just in case” we ever needed it (although we thought we never would since my husband has never had a reason to worry about employment).
But then, eight months ago, my wonderful husband was laid off from his job as part of a mass corporate merger.
This has been a shocking, eye-opening time as he’s faithfully searched for employment and yet, eight months later, is still unemployed.
I could write a whole other post about our journey through this time (and the spiritual growth we’ve discovered as we’ve trusted God through it). But ultimately, we are so incredibly grateful for the Financial Peace course and our decision to change our lifestyle ten years ago.
We know that if we hadn’t made it a priority to pay off our debt (and if our mindsets hadn’t changed about needing the best and newest of everything) we quite possibly could be in severe financial straits right now.
However, the fact is that our three-to-six month savings, the frugal living lifestyle we developed during our paying-off-debt phase and God’s miraculous provision has sustained us during this difficult financial period.
We never thought we’d have to deal with unemployment (and certainly not for this long!) but we are so grateful that Financial Peace prepared us for this immense storm!
That’s why, friend, I highly recommend that you check out this powerful financial course today!
FTC Disclosure: This is a sponsored post written by me on behalf of Ramsey Solutions. All opinions are mine.