A Debt Free New Year

So today it's finally official...

Spence and I are totally and completely DEBT FREE!!!

HOORAY!!!!

We've come such a long way in the past year - starting out at rock bottom and spending the last 12 months desperately clawing our way out. I know some of you may not be familiar with our story, so I will do my best to share it. You may not think of us in the same way after reading it, for good or for bad, but this is the raw and ugly truth that we have lived. For some, it may be irrelevant; for others, it might just change your life. I can only hope that our story can help someone else. Brace yourself, this post is LONG.

Spence and I started out our marriage with debt. We both worked our way through school, applied for and received pell grants, didn't use credit cards, found very small but affordable apartments to live in, and worked our tails off during the summers to save up cash. But every year, we fell a little short when it came time to pay tuition and so we took out loans. Not very much but most standards, but it adds up after so many years.

We figured we needed to get a newer car since Spencer's vehicle was not reliable and wasn't expected to last much longer. We bought used, thinking we had outsmarted the system, and took out an auto loan.

After a while, we fell into the credit card trap. We justified ourselves by paying off the balance every month and swearing we'd never have a late payment or carried balance. We thought we were responsible enough for those kinds of things.

When I graduated from school and got my first job, we thought we had almost made it. I had a good and steady income from my job, but we lived in an area which made it impossible to make that money last. So Spence and I both worked and he finished up school over the next two years. During that time, we traded in our "newer" car for a brand new car. It was a car I had always wanted so I put my better judgement aside and got it the only way we could afford it - a lease (our second dumbest idea of all time).

Once Spencer was finished with school, we decided it was time for us to settle down and buy a house. (This was by far our absolute dumbest idea to date). We thought that since we both had a combined income of well over enough to cover a mortgage payment that we would be safe. So we bought a house. We got a good loan and put as little down as possible. A few weeks before we moved in, we found out we were pregnant. It finally felt like our future was falling into place. The next nine months were fantastic and we tried to have as much fun as possible before the baby arrived. {Enter crazy spending binge.} We decided to trade in our other "old" car for a new version (yes, we know we were dumb - and this is dumbest idea #3)

Then September hit. Jameson was born early September 2008. I spent a few days in the hospital and came home to find that the US economy was on its way down the toilet. Not knowing anything about the financial markets, I just figured it would all blow over. Spence, however, had a college education in finance and knew much better than I did what we were potentially in for.

A few months later, I was scheduled to go back to work part-time only to receive a call a few days beforehand letting me know that the small business I worked for would be financially unable to have me back. I was sad, but Spence still had his job and we figured we could buckle down for the next year or so.

Not long afterwards, Spencer's job in real estate and was then switched over from hourly wages to commission-only.

We scrimped and saved where we could and lived on essentials. I should insert here that I at this point was not at all involved in the finances (we had tried that at one point and I had failed miserably, after which Spencer relieved me of my duties). Spence is great at finances, but after a few months of trying to shelter me from the truth, Spencer started to buckle under the pressure and let me know that we were in trouble. We hadn't had a steady income (or much of one at all) for the entire year and were barely able to make our mortgage payments. Everything else had to be charged on the credit cards in order to keep our lives going. We were scared - our mortgage was horribly underwater, credit card debt was piling up along with student loans and car loans. Things were looking bleak.

I took a trip home to visit family for a weekend and was pleasantly surprised to find a full-time job for myself. A week later, we were planning our move to Texas. It was not an easy decision, but the most necessary and timely for us. We couldn't keep going the way we had been living. It was only a matter of time before we couldn't afford the mortgage and would be foreclosed on and evicted. We had to make a tough choice so we did the first really grown up thing - we swallowed our pride and decided to short-sell the house. We knew we couldn't afford an apartment and needed time to sell our house, so we moved in with my parents (I know you're all jealous, right?). We found the best realtor we could and set him to work on the short-sale. Griff and Maryann worked wonders for us and had our house sold within 5 months of our move. We will forever be grateful to them for helping us through that difficult process and making it feel like the easiest choice we ever made.

So then what? Spencer put together an excel spreadsheet of all of our debt. It was intense - just shy of $50,000 and most of it for dumb things that we could've and should've easily avoided. {Enter extreme frustration and feelings of despair}. We thought it would take us forever to get out.

Then we turned to Dave Ramsey (our personal godsend). We spent what little money we had on two tickets to his live event in San Antonio. Although money and budgeting is not at all my thing, it was perhaps three of the best hours of my life. While there, we were so encouraged that we bought a lifetime membership to Dave's Financial Peace University course to help us work our way through a plan. Our class started a month later. After that, it just got easier and easier. For the first few months, we were paying off creditors and reducing the number of debts.

Spencer was blessed at this point to have been the focus of a friend of my family (also the employment specialist in our area) who happened to work with someone else who was in a position to hire someone just like Spencer. We felt like our prayers had been answered. Our income would increase substantially and we would be able to pay off our debt in months, rather than years. Not only that, but Spencer had found his calling in life (career-wise) and hasn't looked back since.

Shortly thereafter, we got the itch. All our credit cards had been paid off but now we had to tackle the car loans and the student loans. It seemed like an insurmountable task. We put our heads down and cut our budget where we could. Mind you, if you ever looked at our monthly budget, it's super intense. We account for every single dollar of our money. Spence is amazing at dealing with all the numerous spreadsheets and worksheets we have created to plan our budgets and track our money. There's never much breathing room, but we always manage to make it work and stay sane (mostly).

The final hurdle was getting through the holidays. Just before the holidays hit, we found out we were pregnant again. We had planned to visit family for Thanksgiving. We sat down to plan the budget for our trip and realized just how much it costs to take these trips. With our now 2-year-old, we would be purchasing 3 plane tickets and renting a car for a week or driving a car cross country with what I believe I mentioned was a 2-year old (not gonna happen) and a pregnant me. We made the biggest sacrifice we had made to date (and trust me, we've made a lot) and canceled our trip. We were pretty depressed for a few weeks, knowing what we'd be missing out on, but the extra money we had set aside really helped us get things moving along in the debt department. We also knew that with this baby coming, we had a big reason to finish up our debt payoff and start saving money. We set a tight budget for the holidays (overspent by a little, but were blessed to receive monetary gifts from several sources to cover ourselves and then some) and trudged on.

We had made the goal when we found out about the baby to finish paying off debt in January, and we could hardly wait until January to do it. As soon as we had enough money to pay off the last payment (end of December), we could hardly stand putting it off until this month. But we did it for a reason. Starting off this new year is a new us. A smarter, financially stable, and much much happier us. We look back at our old selves and all we can say is how dumb we were. And even when we were being smart, we weren't being smart. It's amazing how much you can learn from one person and we have Dave Ramsey to thank for that. I listened to his radio show as often as I could to stay motivated, especially when we had to turn down amazing opportunities, like a dream vacation to Hawaii with our best buds which had been in the works for a long time, as well as other vacation opportunities with other friends and family. If you know me, you know that I love a vacation probably more than anyone else on the planet, so this was probably the hardest part for me.

I do find it ironic that we are pregnant at this time. Just when we had thought that we would be able to spend a little money on ourselves (I talked all the time about what we would do first when we were debt free), we're reminded of what's more important than vacations or shopping or entertainment. And I'm grateful for that, too, because this is a long process and we're really only part of the way through it. Now we move on to the saving and financial planning portion, so really we'll be on this plan for years and years to come.

I know this post is long and a little intense, but its the story of what changed our lives. I would seriously recommend Dave Ramsey's program (or at least his book) to anyone and everyone (debt or no debt). It gave us a new perspective on life and we can never be dumb again.