Your financial health directly impacts the quality of your life. Zero savings, incurred debt, and past bills bring unneeded stress and worry.
When we were first married we had debt and financial stress. Student loans had built up, along with credit card debt and a car loan. We had no set plan and watched our monthly check fizzle away while we sat back and thought, “I have no idea where our money went!”
Over the past 7-years of our marriage we have paid off our debt and felt the freedom from the bondage of debt. We no longer fight over money and actually have money to GIVE to those in need. No matter your age or how much money you make you can still be caught in the debt trap. Here are some steps that we took and helped us in our journey towards debt freedom!
1. The Reason Why?
The first step in winning with your money is to dream up a reason or reasons why? Why do we want to get out of debt? Why do we want to save? What would we do if we didn’t have any more payments? What do you want your life to look like?
Finding your why will give you powerful emotional fuel to reach your goals. We recommend visually capturing this is some way. Maybe a bulletin board, maybe a sticky note on your mirror. Having this visual cue will help you remember why you are making sacrifices and what these sacrifices will bring in the future.
For us the turning point was the eminent arrival of our daughter, Paisley.
2. Learn About Personal Finance
In college I studied Business. I took accounting classes, finance classes, investing classes and I felt I had a pretty good financial head on my shoulders, yet personal finance is not about knowledge it's about discipline. How many broke MBA’s are there in the world?
Winning with your money is pretty basic: spend less than you make and save. That said, there is some basic knowledge needed for best financial practices (like good investment vehicles, the proper insurance to buy and budget basics) and it's a good idea to take some time and learn these basics. There are great resources that teach solid financial principles and we highly recommend “Financial Peace” by Dave Ramsey.
3. Get on the Same Page
To make any lasting progress towards financial goals it's CRUCIAL to get on the same page with your spouse (if you’re married, if not it’s still a good idea to find an accountability partner). As a couple you need to be moving in the same direction. This means having a joint account, discussing and finding your why, and making each individual's perspective valid.
Mastering this step has not only helped us achieve financial success but also improved our marriage. We now have monthly budget committee meetings where we each have an equal vote, we discuss the majority of our purchases and rarely fight about money.
4. Get on a Budget
You must give every dollar a name? If you don’t tell your money what to do, it will find something to do (and often find it’s way right out of your pocket without you realizing it). We do a zero balance budget and spend every dollar on paper, on purpose before the month begins. The most important part of this step is finding what works for you and sticking with it. Momentum is consistency over time, multiplied by God!
5. Use the Debt Snowball
The debt snowball is a powerful tool for eliminating your debt. Here is how it works:
List your debts smallest to largest (regardless of interest rate).
Pay minimum payments on all account except the smallest one.
Attack the smallest account with any extra income.
Rollover minimum payments from paid off account to the next account.
Repeat until all accounts are paid.
The debt snowball goes against modern financial wisdom but it works! The key is early wins and building momentum. It's all about being emotionally engaged with the process.
6. Cut your Expenses & Increase Income
In order to free up cash for your debt snowball you need to cut expenses and/or increase your income. This could mean working overtime, delivering pizzas in the evening, selling unneeded stuff online, etc.
We cut out unneeded items from our budget like: gym memberships, excess spending money and slimmed our food budget. To get some extra cash we had a garage sale, sold a car, and listed miscellaneous stuff online.
7. Chart your Progress & Give Rewards
We had fun with this one by making a chart and filling in our goals on a bar type graph. It was important for us to do small rewards along the way as well as plan out our BIG reward when all of the debt was paid off. This could be anything from having a picnic outdoors together or planning a nice weekend getaway for the family. I recommend holding off on anything too big (or pricey) until you reach your ultimate debt-free prize (and then of course saving up and paying for it in cash).
Achieving debt-freedom requires discipline and the ability to say no. We found that it can be difficult and we failed often, especially in the beginning, with keeping and sticking to our budget. It was hard when our friends were going shopping for fun, out to eat a lot or buying new cars and houses. Delaying gratification was worth it for us and we hope it will be for you too!
We had always dreamed of traveling the countryside, visiting family and doing some sort of traveling ministry. This past summer we purchased a ‘69 Airstream travel trailer and are in the process of fixing it up to live in full-time. We know getting out of debt and making healthier financial choices in the past, along with God’s leading, have helped us in our journey of living the dreams and passions that God has placed on our hearts.
Do you have dreams and passions that you aren’t able to achieve due to financial bondage? You can be free. You CAN be free. You CAN be FREE!
“Live like no one else now, so later you can live like no one else!” -Dave Ramsey
Thanks, guys! Somehow, it's easier for me to understand financial steps from people that are currently doing it, instead of just reading articles or watching seminars. Take a look at their website to see how they are Livin' Lightly, and try out some or all of their steps in your finances.