Paid in Full

SCREAMS: “WE’RE DEBT FREEEEEEEEEEEE!”

Surprise! We made our final payment today and we’re 100% debt free. We don’t owe nothing to nobody. We’re not heading to Nashville or getting on the waiting list to do a Debt Free Scream with Dave Ramsey, but we can still answer all of Dave’s usual questions here. If you’ve been an avid follower of my blog (Hi Mom!) then you probably already know these answers. For everyone else, read on…

How much have you paid off?

$55,421

How long did that take?

21 months – Well, 20 months and 8 days really :)

How much did you make over that time?

Including a couple months of unemployment, our combined income over the payoff averaged about $75,000/year.

What kind of debt was it?

$1,640 was leftover on a 0% interest travel credit card from our honeymoon; the remaining $53,781 was federal student loans at 6.8%.

What happened 21 months ago to fire you up to pay off debt?

We got married October 18, 2014. We had already decided we were going to attack the debt, but with the busyness of wedding planning and also paying for and planning the honeymoon, we decided to start right after we got home from Ireland. [In the words of our brother-in-law, we went out to eat the night before starting our diet!] We started the payoff in November 2014 and after finally getting everything combined with our bank accounts at the end of 2014 and taking Financial Peace University in January 2015, we were really kicked into high gear.

Whose idea was it?

It was my idea. As we were dating and engaged, we were talking about our financial situation and goals and the student loans felt like lead shoes that were going to hold us down financially for a long time. Keep in mind, when we first met and started dating, we worked the same job and each made about $25,400 – so $53,800 in student loans was a huge deal.

By the time we got engaged, we’d each secured significantly better jobs and suddenly it seemed like paying them off could be a reality. I think at one point during the engagement – being a total nerd – I started testing out some debt calculators to see what we would have to pay to finish the loans off in 3 years or 2 years. I think a lot of people get used to student loans and they really go on autopilot with income based repayment or just a standard 10-year repayment. Because I hadn’t ever had to take on loans for anything, they didn’t feel normal for me. When I mentioned to Mark that I thought we could pay them off in under two years and he thought I was crazy.

Mark and I talked about it this week and he said he just assumed he’d be paying his student loans for decades. He’d never known anyone who paid them off early and was a little afraid to actually go online and figure out the total amount owed. I remember him looking at me in disbelief when I first brought it up an accelerated payoff. But when we sketched out the numbers (looking ahead to when we would share a place with only one set of bills), it became apparent that if we really worked, we could hit the monthly payment targets we needed to get our pay off under two years.

Mark jumped on board immediately. It wasn’t that he needed to be convinced to get rid of the debt, he just hadn’t seen a way it was possible previously. We both had a basic familiarity with Dave Ramsey and each started listening to his podcasts which gave us a good framework for how to start on the payoff journey.

What was the hardest part?

For Mark, he said the hardest part was that he couldn’t just go buy something or do something, he had to learn how to plan ahead for it. We’ve each gotten $60/month in spending money during this time, but you definitely have to think about how you were going to allocate that in the month. Mark’s biggest spending weakness before we got on a budget was probably fast food. Learning how to not blow his $60 all on fast food when he wanted to be able to golf with his friends or bring a six pack to a boys night was really hard for him initially. These days he’s pretty awesome at saving his spending money so he can enjoy his hobbies more.

For me, it wasn’t very hard getting and staying on a budget or limiting my spending. But it was hard not to get obsessed and hyper-focused. I had very specific (and lofty) round number goals each month and sometimes you just have to budget for an oil change or copay or wedding gift and you don’t quite hit that goal in your budget. But it’s not healthy to be so obsessed and so stingy. We were already minimizing our expenses in every category and doing as much as possible toward debt. I had to learn how to appreciate how far we had come and how much we were doing. Sometimes you really do have needs to take care of and that’s okay. I’m still working on this one…

How does it feel?

AMAZING. Actually, it really hasn’t sunk in yet, but I’m pretty sure it’s going to be amazing. I think it will hit us when we make our August budget and then actually see the money that we’d been sending toward debt go toward our various savings goals instead. Like, we actually get to keep our money now. That’s amazing.

What would you tell people is the key to getting out of debt?

According to Mark, the key to getting out of debt is realizing that the budget isn’t out to get you, it actually gives you freedom. Without a budget, it can be hard to know if you’re on track, spending more than you have or should, or maybe even holding yourself back from a reasonable purchase. With a budget, you know that all your needs are covered and bills are paid. Then with the rest of your money, you can give it a name and a purpose. When you have a budget and you’re sticking to it, you don’t have to feel guilty about spending money. You have confidence and control. It really is not a punishment.

To me, the keys are to track your spending and put all your spending on the table at the beginning. It’s so easy to set a goal budget and then fudge on it and do what you want if you aren’t committed to actually tracking your expenses and cutting yourself off when you’re out of money in a category. As for putting all your spending on the table, I think it’s important that you are willing to make sacrifices and admit that some of your spending that you’re holding onto really isn’t a necessity. If you keep doing everything you were doing before you started really trying to get out of debt, then you’re going to keep spinning your tires. You have to be willing to scrutinize every part of your spending in order to attack the debt aggressively.

For more info on how to budget effectively, check out: Okay, but really, how do you budget?

Now that you don’t have any payments, what’re you going to do?

Save all the money! And spend a little bit more too. We don’t have exact numbers nailed down to the dollar, but here are some of the plans now that we are 100% debt free.

Planned Purchases & Spending Increases

• More blow money! Probably looking at a $20 increase. Woohoo!
• New Mattress! We need a new one and we want a bigger one. So we’re looking at getting a King Size pillow top something. It’s a dream come true.
• Mid-Shelf shampoo/conditioner! I’m so tired of Suave shampoo. We’re going to bump up that toiletries budget and I’m going to buy some uber luxurious TRESemme.
• Furniture &or Decor! I don’t think we’ve bought a picture frame, pillow, candle, or piece of furniture since we got married (excluding gifts). My main desire in this category is matching bedroom furniture. Stupid IKEA recall is throwing a wrench into my well-laid plans to do this super-frugally, but now that we’re through with debt, we can actually consider buying things like nightstands that match. YAY!

Planned Savings

• Retirement: We want to jump on this asap, especially while we’re still DINKs. We have different retirement options from the usual since we’re both public (ish) employees, so we are still working on what mechanisms we’ll use. But we want to get automatic retirement savings set up before we get used to the money that was previously going out to debt now staying in our accounts.
• Emergency Fund: We took $900 from our $2000 emergency fund in order to make the final debt payment (basically did Dave’s baby step #1 in reverse). So we need to build that remaining $1100 up considerably now that we’re debt free. We’re planning on saving about 5 months of expenses in the emergency fund then letting it sit. Hopefully it’s not something we have to crack into ever, but it’s going to be nice to have that security if we do face an emergency.
• Car Fund: Mark’s car is currently going strong, but we probably won’t put much more into repairs on it aside from routine maintenance. So we’re going to ramp up some of our car savings (during debt payoff we did $100/month for this) so that we’re ready when the Malibu goes beyond the point of no repair.
• Down Payment Fund: We’re not buying a house tomorrow, or next year, but we want to buy a house in the next couple years. Once we get the emergency fund built up, we’ll start sending most of our savings each month towards a down payment fund for our future home.

Final Thoughts

It was totally worth it. We probably saved over $20,000 compared to the 10-year standard repayment plan. Now we have so much freedom to put our money where we want and plan for the future. If some unexpected emergency or health issue comes up, we don’t have to worry about a $600 required payment each month. More than anything, it was worth it to figure out how to do gain control over our finances and our financial future. We have learned the tools necessary to accomplish so many goals. And we know how to communicate openly and regularly with each other about money, spending, and the future. I’m so glad we’re done with the debt payoff and we’ll never go back (mortgage doesn’t count!), but I’m also so glad we were able to grow and learn so much through this process.

Special thanks to all the people who have supported us throughout these 21 months. Mark’s sister and brother-in-law paid for our FPU class and were so encouraging as we were just starting out. Our families in general have been so supportive and have shared in our joys. Our friends did not make fun of us and instead were accommodating and encouraging. We enjoyed several free meals and other goodies from generous friends who wanted to give us a little boost. It has been so great to have your support and encouraging words. We’re excited to be able to give back and pay it forward in this next part of our lives.