08 September, 2011

Our Debt Story Part III: How We Climbed Out (the big picture)


Now that you’ve heard Elizabeth's and Eric's stories of how we got into debt, we want to share a bit of how we climbed our way out....

My (Elizabeth) story picks up with my car accident and piling up medical bills...
I read a few basic money management books and learned how to cut every ounce of spending out of my “budget” (I use that term loosely at this stage of my life), cut all my bills down to their minimum payment and found ways to scrape together some big money and fast.  I called around for babysitting jobs, returned unworn things from my closet, and sold old books on Amazon.com.

Funny how desperate times call for desperate measures.  I learned a lot in those months.  I learned how to negotiate car insurance and health insurance. I learned how to make sure the insurance and doctors were filing and billing correctly. I learned to ask for a reduced payment or a payment plan. All skills that have helped me be more careful and detail oriented with money now.

The car accident and subsequent bills didn’t set me back any further than I was, because I was finally smart in how I handled things.  I’d stopped over spending and started to take a look at my debt situation more carefully.  I had no idea how I was going to get myself out of the mess, but I did know that it was time to control the spending tornado.

Admittedly, I did have relapses and would occasionally find a Saturday night out or trip to Target on my credit card, but the good-for-me guilt was back.  And reality had set in.  There was no way I’d ever get out of my parents house before I was thirty (thirty-five?) unless something dramatic happened.

Eric was a champ during these “transition” months.  He patiently listened to me vent and sort through the stress.  He didn’t have all the answers, but he was able to offer advice in some areas like the fact that I was throwing $100 down the drain in overdraft fees for less than $100 worth of purchases. All the struggle I was going through made him realize he made the right decision in not buying the town house. The whole thing was a wake up call to him as well.  If he was going to marry me, he was going to marry my car loan, student loans, and credit card debt, as well as my spending habits.  He knew that something beyond him need to happen if we were going to make this marriage and our financial future work.

And it did.  Dave Ramsey.

We had never heard of him until my parents took Financial Peace University through my mom’s work.  My parents were so on fire about busting the financial myths they’d been taught (and taught us!) and bought into, that they wanted to share it with all of their kids.

Thanks to their generous gifting of the audios CDs, Eric and I (we were engaged at this point) were primed, ready and desperate to hear anything he had to say.  The appeal for me is that he’s Christian and focuses on charitable giving and tithing.  He also teaches that we are just stewards of our time, talent and treasure on earth; a radical thought for both of us.

After rapidly listening to half of the CDs, I was finally ready to listen to and act on advice from (financially sound) friends and family, and Eric.  We also laid out our written plan beyond that advice to really get our finances in motion.  But it wasn’t easy. We had budget committee meetings that ended in tears.  My free-spirit felt tamed by his inner-nerd.  His inner-nerd couldn’t recognize my free-spirit’s need for fun. There was tension and fear of change, but for the first time in our lives and relationship we both had a peace that we were headed in the right direction, together.

As our engagement continued we learned so much about each other in talking through our financial plan.  We discovered our priorities, likes, dislikes, true colors, long term plans, goals, dreams, visions, hopes, ideas of family, kids, work ethics, etc.   Working through FPU as an engaged couple was the best wedding gift we could have given each other.

As our wedding rapidly approach, Eric picked up the pace with his own debt payments: re-paying his parents for the car, and the “loan” he used to buy my engagement ring.  He didn’t want me having to pay for my ring later. What a sweetheart :)

Our wedding day came and off we went on our honeymoon, budget in hand.  It was so nice to have our first vacation not follow us home....

Week after week; month after month of our newly-wed life we’d reevaluated our budget, spending habits, and goals.  We learned that talking through purchases was our best defense of over spending, as we each brought a different set of eyes and emotions to the purchase.  Sometimes it even took a (trusted) third person to help us see the right choice more clearly.

As we approached our final year of paying off debt we did become a little more relaxed and a little more on auto pilot.  I did have a few bad spending days here and there, but came home to loving accountability from Eric.  As anyone with a compulsion problem would tell you...you’re never fully recovered, you’re always a work in progress.  It’s true!  Thank goodness for forgiveness!

There is a saying in the dieting world, “nothing tastes as good as skinny feels” and I’d say the same for the financial world. No toy, gadget, trip, car, outfit, etc can buy the same freedom and happiness as being debt free.

This post was going to contain a bunch of our practical, emotional, and mental tips on how we got out of debt, but it got too long, so look forward to some fun posts this weekend.  In the meantime, if you have any specific questions for us, ask away and we’ll try to include answers to them this weekend! Oh, and there is a surprise tomorrow....stay tuned!

3 comments:

  1. We've completed paying off debt except for house and almost done with the emergency fund... maybe $300 left of that to fund.  ALMOST.  We've also paid for cars in cash and have a for real budget.  My husband is so happy to be on this financial route... I feel really blah about it.  We paid off my student loan two months ago and really, I didn't feel that FREEDOM!!! feeling.  Any insight into this?  Maybe the lifestyle I had before just wasn't lavish enough in comparison? Maybe I haven't fully bought into this life yet? Maybe since I don't always have income it feels like its all out of my hands?  I am excited to read more of your stories, especially about negotiating car or home insurance.  We are looking for an extra $200/month without having extra work hours, so perhaps this is an area to find hidden money!

    I will say though that since we paid off the student loan we are able to do more with giving and that does make me feel happy!  I got to choose the ministry I want to support each month, and I found that exciting!

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  2. Here's a question... do  you have a "mad money" category in your budget? Or some online discretionary spending category?!  How can you avoid shopping amazon or cotton babies or woot??  Those are tricky for me!

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  3. Whoooo!!!  Way to go :)    I am having a lot less excitement with the "debt free" feeling than I thought I would.  I think it's partly because we've been on this journey for so long that it feels normal to me now...and partly because I know we still have work to do to save for a house and furniture for it!  And by then it'll be time for school tuition for the kids.  So yeah, it's not as exciting as I thought, but at least I have peace in knowing we're taken care of and we aren't living pay check to pay check any more.  It's also nice to have that chapter behind us and ready to focus on the future instead of past mistakes.

    Which ministry did you choose? (If you don't mind sharing)

    As for negotiating insurance, the best we did was talk to our agents about things like good driver discounts, etc.  We both use the same agents since we were 16 so we have a decent rate.  Since Eric bikes to work most days and we use my car for long trips, we put his car on part-time driver status which saves us a few hundred a year.  We were also able to bundle our renters insurance, and my ring insurance in with the cars for additional savings.  Other than that, I don't have much advice.  We're actually looking for help in learning how to purchase life insurance now that baby is almost here!

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Thanks for reading! We'd love to hear from you!