Over the past few weeks, I’ve shared my story my story of how I landed $180,000 in debt and Maria told her perspective as she realized the debt would impact her life. Today, I am happy to reveal our plan to deal with the debt and begin our lives together debt-free.
Maria was the one to suggest that we watch Financial Peace University. I actually remember the moment pretty well. Maria seemed a little nervous to ask me; almost like she was afraid of offending me. Maria had already spoken to me a little bit about Dave Ramsey’s Baby Steps and I was tired of paying over $1,000 a month to my lenders, so I was interested in learning more. I also knew that finances were very important to Maria and that agreement on finances is key to strong relationship. So I agreed to complete the program with her. As we watched, we learned a lot together, engaged in some very meaningful conversations, and even had some tense moments when we realized we would have to make some sacrifices to achieve our goal of debt freedom. But, on the whole, the experience was a very rewarding process that brought the two of us closer together.
Our Plan
Phase 1 – Debt Snowball
The plan Maria and I put together has three phases. We are in the first phase right now, which is the straightforward debt snowball from Baby Step 2. I have two student loans, one for about $20,000 and the other for about $160,000. I am paying the minimum amount on the larger loan and I am throwing everything I can at the smaller loan since I can pay it off much faster than the bigger loan. I had been saving for retirement (a little bit, anyway), but I stopped doing that so I could focus on the loans. In the past few months, I have brought it down a little bit. I will continue this for the next few months and pay off as much as I can.
Phase 2 – Sell the House
Phase two gets even more ambitious. I am a homeowner. I bought my house in 2010 when the market was pretty much at its bottom. Since then, the value of my house has risen substantially. I will sell my house sometime this spring, and put the proceeds from selling my house toward payment of my student loans. That will pay off a HUGE portion of what I owe. Rather than buying another house, we decided that we will rent a house or a condominium for at least a year. It may seem crazy to rent for a year when we could be living in a house that we currently own, but we’re Dave Ramsey people. We make crazy decisions knowing that the future will be so much brighter once we are on solid financial footing.
Phase 3 – Repurposing Savings
Phase three is one of the main reasons Maria had a hard time with the reality of paying off my debt. Maria had been saving for a downpayment on a house for years. The rest of my debt will be paid off using money from a variety of sources, but the biggest chunk of it will be Maria’s house savings. This was a hard decision Maria made, but after a lot of discussion, we decided that it was the best course for us. Maria had also been saving 15% of her income for retirement, but those payments have halted as well. Like me, she is now saving every extra penny so that we can dig ourselves out of debt as fast as possible. We will resume our retirement savings later – just as soon as the debt is paid off.
Free Download – Debt Payoff Chart
Ever the teacher, Maria created a debt payoff chart to help us track our progress and stay motivated as we work to pay off my student loans. This editable “On Our Way to Debt Free” poster is available as a free download. It’s a PowerPoint file so you can easily edit the graph to suit your own debt payoff goals. Click the image below to download your poster today and join us on our journey out of debt.
If you look REALLY carefully at the photos of us with the chart, you can see that I have already filled in a tiny bit of the chart. It took a few months to rearrange my finances and plan for upcoming expenses, but little-by-little, we are on our way to paying off my student loans.
After all of this, we will have to start over with our house savings. But, we will be doing it without any debt to slow us down. And we will be happy because we will have done it together, as husband and wife. We’ll get to our dream house one day and we’ll do it the way we wanted to, with a little help from Dave Ramsey and Financial Peace University.
Update: Debt Payoff Plan Complete!
Since posting this, Maria and I have completely paid off $250,000 in debt (mortgage and student loans)! It was a heck of a journey and we worked our butts off to do it together. After it was all done, we decided to head down to Nashville and do a Debt Free Scream on The Dave Ramsey Show to celebrate being debt free. You can read all about that and how we got to meet the man himself Dave Ramsey in this blog post.
Our Debt Free Journey
If you would like to read more about how we paid off my mortgage and student loans, click on some of the blog posts listed below.
Good for you guys! You two are so cute together. I wish you the best of luck!
Thank you Carrie!
Congratulations on your upcoming wedding and being so wise in tackling your debts!Dave Ramsey is such a blessing to so many people! My husband and I started following his plan about 6 years ago and we love it! It is so empowering to save up money and buy a used car with cash! Being on the same page financially is so important! I wish his plan had been around before we got married 43 years ago!
Hi Kathy! Thank God for Dave Ramsey! Rob and I always talk about how we will never again purchase a new car and we will only pay for it with cash. If one of us loses a car today, we have enough saved in our sinking fund a car. It is such an amazing feeling!
Love your plan! I wish, wish, wish my husband and I had heard of Dave Ramsey before we got married. We were married 8 years before we were introduced to it and started. We now have been doing Dave Ramsey’s program for two years. We have followed his plans pretty carefully and have since paid off over 30K in debt! This month, we are finally able to say we are debt free and have a nice amount saved for a downpayment on a house we are building this spring. Hubby and I joke around all the time about our buddy Dave when we are making financial decisions. I should probably frame his picture and hang it up with the rest of the family photos, lol! His financial steps have completely changed our lives and saved our family financially. How wonderful that you guys are doing this together now..think of how much stress you are saving yourselves for the future! Prayers for you guys as you strive to reach your goals together! You’ll meet them before you know it!
Hi Becky! Thank you so much for your encouragement. I completely agree about your attitude towards Dave. Rob and I talk about him all the time just like he is a family member in the trenches with us. Congratulations on going debt free! Rob and I can’t wait to reach that milestone ourselves. Blessings! Maria
Maria- I am a huge follower of your Kinder-craze blog, and love everything you create for your classroom. I am teaching first grade this year after being in 3rd for 10 years. My husband and I are also following Dave Ramsey and I have committed to going to the class every time that it is offered at our church until I am debt free. Currently finished with time #4! Thank you for the chart. I added the names of the bills that we were attacking along with the goal amounts (5k, 10k, etc). I am really looking forward to the day I can say I am in bondage to debt no longer. It will change our lives and the lives of our children and grandchildren. Good for you for getting smart about money way before I did. You will be a blessing to the world!!
Hi Karen! I am so honored to hear that I can be of service to you inside of the classroom, as well as at home. Like you, Rob and I are so excited to be making our way out of debt. It truly is amazing to think about the repercussions that a debt-free lifestyle will have on future generations of our families. Let’s keep working to pull ourselves out of debt – we can do it!
Hi! I’m a first grade teacher and follow your kindergarten blog.
Five years ago (and three months pregnant with our second) my husband dropped the news to me that he had major debt. All the times that I thought he was paying cash (for furniture, trips, etc,) he was charging. We were almost $100 K in debt (including our two cars). We made the very tough decision to sell our house, which actually cost us a couple of thousand, and move to an apartment. We’ve been paying off the bills for four years. Our monthly expenses have grown (two kids now –but only a few more months of pricey daycare!) and I haven’t received a raise in five years (thanks Alabama!). But, we’ve put all of our trust in God. He has provided for us when times were very hard. Each month we seemed to make it, even though there were only a couple dollars left before payday. I can happily report that we made our last payment in September. We are debt free!! Now we start the process of saving for a house and building up a retirement fund and savings.
You can do it! It takes determination, but it will happen. Good luck to you both!
Hi, Lauren! That’s incredible. I’m so happy that the two of you were able to work through that very tough time together. I can’t wait for us to be in the position you are in, saving for a house, our children’s education, and retirement. Thank you very much for you kind words and good luck to you and your family, too!
Oh my goodness Lauren, what an incredible story! You are a testament that God does provide, even in our darkest moments. What an incredible obstacle to overcome in such a short amount of time. Thank you for sharing your success story. You are an inspiration!
Hi Dave and Maria!
I have a Ramsey question for you. I’m in the process of switching to a “mainly cash” budget, and I can’t find a divided wallet that I like. I can’t imagine Maria using plain old envelopes, so I’m wondering…do you have any recommendations?
Thanks :)
OMG OMG
I had just talked about my cousin Dave when I wrote my previous comment. Did I write ‘Hi Maria and Dave’?? I have a mental image of that…praying I didn’t…how embarrassing!!
Anyways…any wallet recommendations for this slightly distracted reader would be welcome!!
~Kimberley
Hi, Kimberley! Yes, you did call me Dave, but it’s ok. As Maria will tell you, I’m HORRIBLE with names. I mix them up all the time. I think of it as a family tradition. My parents often called me “Mike John Rob” or “John Mike Rob” growing up, running through my brother’s names first before finally getting to mine.
Maria is going to follow-up with you to talk more about her wallet, but I wanted to let you know it’s ok. Good luck!
I wish I had that debt payoff when we first started paying off debt. We did the old method where we wrote our total on our bathroom mirror. Each month, we updated that total. Worked for us :)