Nick and I are on a mission. We are going to be completely debt free by the time I turn thirty. We ran the numbers, and we know we can do it by November 2013, but my thirtieth birthday is May 2013. That will cut six months off of our time line. I'm not entirely sure how we will pull that off, but we may just have to sell something.
I read a book by Dave Ramsey called "The Total Money Makeover". That man is a genius. He doesn't have any short cuts or magical ways to make more money. His philosophy is very basic. Don't buy something you can't afford. Yep, that means no credit cards, no car loans, nothing. If you want something, you need to do the work, save your money, and buy it when you can afford it. He doesn't include a house loan in this, but he advises that you have at least a twenty percent down payment and a fifteen year loan. But I'm getting ahead of myself.
Fortunately for us, Nick and I have never had a credit card. I'm not sure why, but we just had a fear of them in the back of our minds. We've always used debit cards instead. We do have student loans, though, and at the rate we were going, we'd have those paid off in about 15 years.
I had no idea how to pay extra on our loans. We were basically using all of our income each month. Dave Ramsey said the first step was to make a budget. A firm monthly budget that Nick and I had to agree to stick to. I didn't see how that could help much, but I did it. To our surprise, at the end of the month, we had several hundred dollars left over. It was awesome! It took a lot of sacrifices, but Nick and I got used to them quickly and we don't feel like we are missing out on anything. It is actually pretty fun and challenging to find ways to save money.
At the end of the month, every penny we had left over went straight onto our smallest loan payment. Once that one is paid off, our monthly payment plus all extra money will shift to the next loan. Dave calls it the snow ball method. The first loan may feel like it takes a while to get going, but once you pay it off and move onto the next one, you will pick up speed and pay them off faster and faster.
Once we are debt free, we will start saving for a van so that we can have a third child. (I'm not sure that we can squeeze a third car seat into the back of our Chevy Aveo, but I'll look into it!) Then we will save up for a down payment on a house. Can you imagine how quickly you could save if you didn't owe any loan payments? And I don't want to even think about all that money wasted on interest.
I'm a little obsessed with paying off our debt right now. I just love paying bills and balancing our budget. It is super exciting to see how much under budget I can be on groceries at the end of the month. I never thought managing our finances would be fun. I guess I'm a bit of a nerd, but I'm proud of it!