Debt

Piggybacking on Catherine's debt free post, I wanted to share our story in the adventures of debt free living. Today, after all, marks an important milestone - we paid off my husband's student loan.

About a year and a half ago, we decided to switch to a debt free lifestyle by using a few simple methods:

• Only use cash to buy items. If we do not have the money, we do not buy it. (see Saturday Night Live Clip below) Even when our refrigerator broke, we did not buy one until we had the cash. That meant living out of a dorm size refrigerator for over a month until God provided us with an old one from a friend. Not that we ever spent big money on luxuries like a big screen TV, but we probably would have thought in the past that we HAD to have a refrigerator right away, and put the purchase on a credit card.
  
• A budget on a weekly basis
• Pay off our smallest loan 1st, than use the budgeted amount from the smallest loan to pay toward our next smallest loan, and on it goes until our mortgage, God willing, is paid off. This system is nicknamed the debt snowball. Let me give our example, our loan with the smallest pay off amount was our car loan. Once the car was paid off we had an extra $250 to pay on top of our budgeted amount for my husband's student loan for a total of $550. Now our we have $800 towards our next loan, our credit card.
  
• The first thing we did though was put $1,000 in the savings for emergencies. We tend to have expensive ones here - hence the credit card debt. When an emergency arose, such as dental work, medical expenses or car repair, we had in the past no choice but to use the credit card.
• Getting additional income through hard work. Another reason for the debt was the year that my husband loss his overtime, which we counted on. If you have a chronic illness, you can easily spend a few hundred dollars on medical expenses in one month even with good health insurance. There is no way to stay out of debt other than to bring in additional income. We had already cut everything back possible. I got a part time job for a while, and my husband received his overtime back. This money helps us cover our unexpected expenses and pay down our loans faster.

By paying off our loans, we will have less overhead expenses and more money. After our credit card is paid off, we will save for a large emergency fund, a large purchase fund, and home repairs fund. We hope to buy our next car with CASH. Then it is on to our mortgage.

These two books were extremely helpful, and I highly recommend you get them from your local library (COST $0):

America's Cheapest Family Gets You Right on the Money by Steve Economides and Annette Economides - Yes that really is their last name. Great book. They are a homeschool family with five kids who lives debt free on a modest income by being smart, thrifty and hard working.

The Total Money Makeover by David Ramsey

The Duggars: 20 and Counting!: Raising One of America's Largest Families--How they Do It by Jim Bod and Michelle Duggar - Thrifty ideas, as well as their story how they live debt free with 19 kids.

Here is a very funny clip that makes a lot of sense:
Don't Buy Stuff You Cannot Afford from Saturday Night Live (saw this one on I.O.U. U.S.A a DVD on America's national debt problem, which is also very good)

There is a lot more I could say about how paying off debt is liberating, how you are more available to God, or how living simpler is so much better. But, I will save that for another time.

The picture above was found on Flickr with the title "Get in Debt, Get Fat and Die at Walmart no less."