We’re Out of Debt, So Now What?

(Images taken by Karen at the Dave Ramsey Studio)

Good news! Karen made a final large payment to our credit card company a few weeks ago. We applied my 2010 bonus money toward paying off the remaining balance on our card. We’ve done this before. (Gotten out of debt) What makes this time different? And what now?

Before I describe why “this time is different,” let me give more background. I’ll disclose as much as I can, in hopes that it inspires others. During *this* round of debt, I think our high point was about $7,500. To some, this is huge. To others, this is only a portion of what debt they carry(ied.) For now, let’s just agree on, “any debt can be deemed an intimidating and a life-altering nuisance to the debtor.” At one time, during the peek of Karen and I not being “aligned” with our finances, our debt was closer to $10,000+. I try not to think of those days and the way it happened. I try to focus on the future, the positive steps we’ve made TOGETHER, and the checks and balances that serve as tools to make us more successful in the future.

So, first things first … how did we do it?

• We started to focus on the debt TOGETHER
• We committed to the goal of being debt free
• We discussed finances together more frequently
• We started saying “no” to things we wanted (this sucks, but gets easier)
• We started making lists of items we wanted before committing to a purchase (sit on the temptations for a while and weigh the items that appear on the list — you may be surprised how often you just cross them off)
• We started monitoring where our money was going
• We continually updated where our money was going (it takes time to follow that trail, to continually add to the list of where that cash, where that check, where that credit card swipe, where that debit card swipe, where that internet purchase was happening and why — and determining if it was worth it now, during this time of debt, or not)
• We got the kids involved
• We let our family know we were working on it
• We let our friends know we were working on it
• I let my coworkers know we were working on it
• We reminded each other why we wanted to get out of debt
• We reminded each other how different it feels to be in debt vs out of debt
• We reminded each other of the traveling we wanted to do
• We wanted to model better responsibility to our kids
• We wanted to model better responsibility to our family
• We wanted to show others it was achievable and not a winless battle; we were confident ourselves, but others can often fail to see the light. People need to see realistic successes that were made by folks who are not doctors, lawyers and “rich people.”
• We agreed that wealth can be measured differently by various people
• We agreed to stop comparing our income to the income of others (We pondered over when enough was enough — at what point do you have too much house, too much land, too many Apple products?)
• We agreed on and implemented an allowance system for guilt free spending

Here’s what makes this time different. We’ve created some healthier habitual thinking to get out of debt. We have committed to continuing those thought processes as we move forward. Some examples:

• All foreseeable purchases should be budgeted. We’re not going back into debt! If you know it’s coming, you better know you’re going to have cash, otherwise, you’re not doing it. (Ex. Karen’s blogging conferences – she better save or get sponsors or six roommates filling two beds in the hotel room)
• Start beefing up that emergency fund for unforeseen car, home, medical expenses. In our case, we’ve been beefing up our HSA account.
• Start beefing up fun money for family travel
• Agree that if something happens that causes debt because the emergency fund wasn’t enough, that you go into debt-mode and lock down unneeded purchases again, and start up again.
• We continue to minimize what we have in the house. We have almost anything we could need and in reality, want … multiple TVs, computers, mobile devices, way too many clothes, etc.  Downsizing your junk helps give you breathing room to focus on what’s important and what you really use day to day. (Ex. If it doesn’t have an Apple logo, do we really need it?)

So, we’re out of debt. We have great momentum with “let’s continue to stay out of debt” and “let’s continue to monitor our spending” because that’s what’s needed for our success. We have to resist the urge of falling into old, bad habits. Monitor you income, adapt your spending and commit, TOGETHER.

Being in debt sucks. Not agreeing with your spouse about how you manage the money, or lack thereof, sucks even more. You have to get passed that. You have to communicate. You have to set boundaries. You have to come up with a certain amount of understanding and agreement between the two of you, so you can both be successful for yourselves and your family. If one or both of you chooses not to comply with a common direction, you’re increasing your struggles tenfold. Seriously, get therapy. You have to align with each other or you’re screwed. At that point, it’s not a financial struggle, it’s a relationship struggle. It’s a potential lack of respect for one another. You’re living in a fantasy land where you think the rules of mathematics don’t apply to your special circumstance. You’re in denial. Seriously, have a sit down with your partner and let them know this is important and be prepared to show them why. You should be prepared to say:

1. “You earn $xx,xxx salary per year”
2. After taxes, etc., you bring home $x,xxx per month (net pay)
3. We spend $x,xxx per month on these known budgeted items
4. That leaves us “x” in the hole or “x” in the plus

Take it from there. You’re either in good shape or bad shape when you do the math. If you’re in good shape and your profiting each month, yet you’re in debt, something is wrong, isn’t there? You have money going somewhere unaccounted for. Your hubby is eating out too much at work? Too many online games? Too many iPods? Committing to season tickets to the local sports venue? (Great for the city – sucky for your family) Clothes shop much? Antique shopping? Your home decor is great but getting deeper in debt?

Step back. Assess your money. What’s coming in? What’s going out? Simple math. Track it. Track it for months. Discuss it with your partner. Agree on your future. Agree on a process. Implement! Stay the course. Get out of debt. Every month, tweak your budget. You’ll always find ways your spending. Do this for years. Rinse and repeat. Stay out of debt.

Here is our continually changing list of expenses. See anything missing? Let us know! We may or may not have items you’re thinking about, but we’re here to help each other. Share. Help each other succeed. Math is easy. Use a calculator. Ask us for advice. We’ve been there, but we’re not going back.

Allowance
Car and Home Insurance
Car Maintenance
Cell Phones
Clothes
Credit Card
Credit Card Fees
Domain Hosting
Electric
Floors (0% interest payment)
Gas
Gifts
Gifts (Christmas)
Groceries
Hair Care
Home Repair
Home Supplies
New Computer Payment (0% interest payment)
Internet
Life Insurance – K
Life Insurance – M
MOG
Mortgage
Netflix
Pandora
Pet Food
Property Taxes
Satellite
Soccer
Water Payment
Web Hosting
Mail Chimp
School events
Car Tags
Bug Out Yard Service
Property Owners Association Dues