OUR DEBT FREE JOURNEY | GET OUT OF DEBT | FINANCIAL FREEDOM | BABY STEPS
About two years ago, I graduated from Financial Peace University. A local church was offering it free for military members and their families and it was an absolute game-changer for us! Well, mainly me. Brenton, at the time, had been trying to implement the ever elusive word "budget" into my vocabulary since we got married in 2012. Like a baby sometimes need to be introduced to a food a lot to finally take to it, budgeting was like that for me. I always knew that a budget was important but never quite knew how to implement it and own it. How Dave Ramsey laid it out for me got me thinking. How would we be able to take vacations, save for a growing family, purchase another car, and buy a house? How would we save for retirement, factor in tithing? The things he teaches isn't rocket science, but the way he presented them revolutionized the way we thought of money, improved our spending habits and finally taught me that I'm the boss of where my money goes.
Our journey with our debt began before we were married. Before Brenton and I even met. And well before I even heard of the name Dave Ramsey. I had signed my name to student loans to pay my way through Penn State. I raked up more than 90K in student loans and it would have been more if my parents hadn't help pay for part of my schooling. I knew that was a strain on them but I am grateful for my education and experience at Penn State. Brenton on the other hand received a portion of his father's GI bill and then a ROTC scholarship so he was student loan debt free, which was an absolute blessing. He did have a monthly car payment though.
We definitely are far from perfect and are still learning how to make wise and intentional decisions with our cash. We have made a lot of poor decisions, gotten a little ahead of our money. The truth is it is hard- we have fallen short of our goals and we have learned.
It's been really on my heart lately to share our journey with money publicly. I know that so many other twenty-somethings and "young professionals" have questions and need to learn how to be the boss of their money. To learn how to steward their earnings well. I certainly didn't know much about budgeting and certainly didn't know the true value of money before living life out from under my parents' home. I have a feeling a lot of other people are like that too.
This post is not to tell you everything we went over in FPU because if you really want to learn more about it I do highly recommend the course! It will be the best $100 you spend and they even have scholarships that can cover the cost. And if you are a service member then your base may offer it for free! You can search for your nearest location here.
But, I will share the baby steps with you since he shares them readily on his website and popular podcast/radio show. We started with baby step #1 and are moving our way to baby step #7 to achieve financial freedom. You work on them one at a time. Even though this is difficult it is imperative to your success. You are hyper-focused on one task and the momentum builds.
Baby Step 1: Save $1,000 to start an Emergency Fund
This step is the first and foremost important step. It gets the ball rolling. You save this up the unexpected events you can't plan for. We have used this glorious stash of cash for mainly car mishaps. It's your little safety net for when you start step 2! It took us about 2 months to save this living on one military 2nd Lt. full time salary. But now might be a good time to think about where you might put that tax return... maybe you shouldn't spend it on a vacation? Also, you should try and file your work paperwork that your tax returns equal zero.
Baby step 2: pay off all debt in a debt snowball
List all your debts in order of smallest to largest but the house. The smallest debt should be your number one priority. Why not list by interest rate? Because this is a mind game. You want to start with the easiest one first. When you see that you are crossing debts off you will be motivated to keep going! And when you are done with that debt you take the money you were using and add it to the minimum of the new one until that is gone and so on until all debts are done. I totaled all of our debts including student loans, car, borrowed money from families, etc and it added up to over $120k! We were able to pay all that off in 4 years of mainly living off of one salary! If we can do it you can do it too! We are so excited to get this done and never have a debt again!
Baby step 3: save 3 to 6 months of expenses
This is the step Brenton & I are currently on. This is building a true and full emergency fund. 6 months of living expenses for us is about $7,000. This means if we were both out of a job for 6 months we would be able to pay all our bills, buy groceries, put gas in the car, keep the roof over our head, continue with the essentials. Thankfully, Brenton is pretty secure working for the government and having 8 more years on his Air Force commitment. But our 2017 goal is to save this money and keep a nice cushion just in case. It's way better to be over prepared than under prepared. Now, this is totally separate from saving for Christmas or a vacation. Those are in addition to saving for the e-fund. Purchasing presents for Christmas is NOT an emergency!
Baby step 4: invest %15 of household income to retirement
Brenton contributes to a TSP through automatic allotments through his paycheck at work. We don't completely love the idea of the TSP, there are more tight grips on that than a traditional ROTH IRA. We're torn right now about stopping that and just rolling it over to a traditional ROTH. Do you have any thoughts on that? Also a goal in 2017 is to begin contributing into a ROTH in my name. I'd love to be able to max it out every year... Anyone need a photographer?? It's difficult to not want to contribute to but 3 & 4 at the same time but Dave has had some seriously great success so we're sticking to the plan!
baby step 5: save college funding for children
Just like housing, college tuition continues to rise! Do not let college sneak up on you. I have friends and family who have had babies are putting away 10K a year for their kids' tuition! That's bananas! But theres no denying to further your littles education will cost a whole lot more than yours. Two smart ways to save in this area are a 529 college saves fund or an ESA (education savings account). These are both tax free when your child uses them to further their education.
babt step 6: pay off home early
Y'all, just imagine life without a mortgage!!! Sounds unreal doesn't it. It takes the average family five to seven years to pay off a mortgage. We don't have a house and honestly we hope to pay cash for a house when the time comes to purchase one.
baby step 7: build wealth and give
This one I cannot wait to get to and the journey getting here will be such a reward! Dave says this is the pinnacle with "Live like no one else so you can GIVE like no one else." Building wealth, becoming extremely generous not only leaves generations to come with an inheritance but also with legacy of generosity. You will teach your kids and grandkids and prayerfully great grandkids the importance of managing money well and owning it! I cannot wait to leave $100 tips at restaurants and treat strangers to dinner and things like that.
Did you know money is mentioned 800 times in the Bible? There are so many verses teaching us how to use our money and we believe that the money we make or accumulate is not ours. God entrusts us with his money so that we can glorify Him and further His kingdom. Clearly if God values the intention of money, we should too.
So there you go friends. Just a few thoughtful nuggets for you on living financially free! We are walking these steps along with so many others around the globe and it is transforming our lives. The way we view money shapes our view on so many things! From my thoughts on a capsule wardrobe, creating an intentional home, the way we eat, being mindful of events going on for a date night, creating restaurant meals at home, the list goes on and on! I'm so excited for 2017 and building our full e-fund and growing my business debt free so that we will have peace of mind if we have to purchase plane tickets for all of us (dog included) or our washing machine breaks. No sweat! We got it.
What about you? Any FPU graduates out there? Having a community of likeminded people to chat about things with has been so helpful for me and keeps me on track. There are plenty of Facebook groups out there that I have found helpful (and also to be a black hole of endless reading and research). What have you found helpful? Which step are you on?
Next week I'll actually be sharing numbers and budgets and how we run our household month to month! I'm pretty pumped to share them with you! I seriously use to hate the word budget and now its a freeing word because I'm the boss of it!