Get on the debt-free boat

{UPDATE: We are doing a debt-snowball but we are no longer following Dave Ramsey’s plan. I talk a little more about it in this post.}

First,  thanks for your comments on yesterday’s post.  Your encouragement & kind words reminded me that there is much goodness in this world.  Thank you.  You are the reason I blog.

♥♥♥

I am excited.  So, excited.   I have been waiting my whole life to get to this point.

There’s been so much uncertainty the past 4 years.  While Joseph was in law-school, debt kept accruing & I didn’t like it, but there wasn’t much we could do about it.  I worked, which greatly helped reduce the amount we had to borrow, but we still took out the max amount allotted for financial aid.

Now, Joseph has a job–a bona fide career.  And one that he really likes.  I keep pinching myself, waiting for the other shoe to drop, but no–we have a steady, better-than-average income & it’s not going anywhere (at least for the next 4 years).  We’re never going back to the poor, debt-ridden student days. It’s thrilling.

But.  We also have a lot of debt.  Just saying that is heavy.  Debt.  It’s a heavy word.

After I shared this recent post on living-debt free, Joseph & I had a conversation about how much we should share on our blog about our finances.  After some discussion, we both agreed we felt fine about being completely open & transparent about our getting out of debt journey.  There’s so much shame in talking about debt, money.  And that is a shame.  It’s our hope that in sharing our journey, others can  be inspired & know that they can do it, too.

So how much debt?

Here’s the quick & dirty run down:

credit cards:  $18K
consolidation loan:  $24K
2nd mortgage :  $19K
(actually a grant that now has to be repaid since we are now renting the home)

sum-total:  $61K  

Add student loans:  $110K
& our 1st mortage on our home (now a rental):  $139K

TOTAL debt:  $310K

Yikes!

I know.  Depressing, right?

But there’s good news.

We’re doing the Dave Ramsey, cash-only, get out of debt program.  It’s awesome.  I think his program is the best for true financial prosperity because it’s built on solid, tried & true principles.

With our new budget & debt-snowball (here’s the free downloadable calculator I used to figure out our debt-snowball payments–I love the “debt-snowflake” payment feature, too!) I have so much confidence & hope for our future.

I know we’re going to get out of debt.   And not just get out of debt “someday” but get out of debt, soon!  We could take a little longer, & live more comfortably, but life is short & I am so ready to never be in debt again.

We will have all our debts paid off (except for our 1st mortgage), by March of 2015.  That’s only a little over two years from now.

We have a little jump start on the process since I’m living with my parents until December (this has enabled us to save $5K!).  We also get a good chunk of “extra” money through various military stipends related to Joseph’s training & since we moved/are moving ourselves (rather than having the military move us), we will earn a bit of money on that too.  We’re also due for a big tax refund in February of next year (more like, a EIC return).

All of this combined amounts to about $21K.

We’re going to use this to:

♥  repair our mini-van ($1700)
♥  buy Joseph a solid & trusty used commuter car for work ($7,500)
♥  stock our $1,000 “emergency” fund
♥  pay for security deposits related to renting, utilities  ($1800)
♥  random furniture & household items we’ll need once we move into our new place  ($800)
♥  fund next year’s “celebration fund” (birthdays, anniversary, & dates)  ($3K)
♥  pay for alt summit SLC (1/2013) expenses ($700)
♥  & use the remaining to throw extra payments at our debt

Joseph’s salary isn’t much to drool over.

He started out at $40K, in a few months it will be bumped up to $45K a year.  Not much, compared to other attorneys, but when you weigh in the benefits it’s a very competitive income.  They give us a generous monthly housing allowance, so we don’t have to worry about paying rent.  Joseph gets a stipend for food each month.  Both the housing & food allowances are tax-free.  Also, we have full medical benefits, good dental coverage.

And the biggest help?  They will repay $65K of our student loans.  The rest will be covered under a program for public sector employees, so with the help of the AF & this program, our student loans will be taken care of.  A huge relief.  When you factor all the benefits & allowances & debt repayment, his job brings in over $80K.  Not bad for an attorney starting out.

In the next 27 months, we’ll pay off $61K in debt.  This does not include the student loans (which as I mentioned before, we don’t have to worry about).

After the $61K in debt is taken care of, we’ll begin building up a 6-month savings, save for a new mini-van so we can buy one in cash (we’re hoping & praying this van will last us a few more years), start saving for retirement, & the most exciting of all–pay off our rental house.  Once we’re debt-free & have our 6 months savings, we can start adding extra payments to our mortgage each month, & have it paid off in 3 years after that.

All told, with a steady, reasonable (although not exorbitant) income & budget, we can live a comfortable, but frugal & disciplined life AND:

♥  be debt-free (besides the 1st mortgage on our rental) in 2.3 years
♥  be debt-free & have a 6 months savings, a newer (used) car paid for in cash in 3.9 years
♥  start paying towards retirement in 3 years 
♥  have our rental property paid off, therefore being 100% debt-free in 7 years

Getting out of debt & getting into a good place financially is much like losing weight.  It takes a lot of discipline & many of the principles are exactly the same.  It’s a long process, but as Dave says:  “live like no one else, so you can later live like no else.”

♥♥♥

 P.S.  Now I just feel like I completely spilled my guts–this is way worse & more soul-baring than sharing my weight!   Hopefully once I press the publish button I won’t regret sharing all the nitty gritty details of our finances, but as I said before, any discomfort I may have, I hope is made up for the fact that you (or others) may be inspired to get debt-free too.

♥♥♥

I’m going to feature a money/budget/debt-free living post every now & then & share insights into our journey.  What would you like to know about?  Questions you have about what we’re doing, learning?  

I’d love to know your thoughts so I can better tailor-fit the posts to meet your needs.  Thanks!