We have a pretty unusual situation when it comes to managing debt in our family. Or at least, I think so. We were able to pay off a crazy amount of debt early on in our marriage, with very little to go on. We currently are able to own a house and a relatively new car because of the way my husband has managed our finances. He does it because while I wish I could say I was good at it, I have no head for it. I can’t keep track of the numbers, nor do I want to. I am so grateful he does.
This is us in front of our house, which we are paying off, so obviously we are not currently completely out of debt. But by applying the same principles, we are consistently paying it off so we don’t end up owing more than we should.
I know a lot of people out there struggle with paying off debt, so I invited James to guest post today and share with you some of his simple, but straightforward tips. Our lives show the results of following these tips. I hope they are helpful for you!
After exiting college, I was fortunate enough to find a godly woman and the love of my life. College and marriage are amazing experiences if you get the opportunity to do one or both. But the reality is that these adventures are not cheap. My wife and I had $60,000 in debt. I was working at Starbucks, and she was working daycare, so we netted a household income of $24,000.
The stress of how to conquer our next couple of milestones (like buying a home, having kids, purchasing a car, and other adventures) was daunting, to say the least. However, we were debt free in two years (!), and I would like to share with you three principles we started then, and still try to live by.
Life will get tough, and if it hasn’t yet, you may not be setting the bar high enough for yourself. In this day and age, sitting on the sideline and living comfortably is not the norm. You will almost definitely have to fight for the career you want. Maybe one that will give you more freedom with your family, one that will pay you more, or one that meets the needs of others.
God gives you the opportunities, and it is up to you to figure out how to use them. You can always send out fishing lines and seek better employment. But you can also take advantage of learning opportunities right where you are. I have fought and fought to keep learning, because I am aware of where I want to be and where I want to go.
2. Break it
You will want newer, cleaner, and prettier stuff, but it’s just not practical when you’re paying off debt. This is hard to tackle because it takes considering what is important and what is optional. We have used, cheap furniture, which includes 15-year-old furniture gifted from my grandmother. We have the cheapest house on the block, and until last month, both our cars were were over 10 years old.
The point is that if you don’t need it, just wait until it breaks. Sometimes this is frustrating or seems daunting, but be faithful, pray, ask. Matthew 7:7 tells us that God takes care of our needs (but not necessarily our wants). Save the shiny and new for when you’ve paid off your debt, to celebrate.
3. Avoid Credit Cards
We have never owned and do not plan on owing a credit card. Whatever incentive they offer you to get a credit card isn’t worth it. It is just too easy to get behind, which is their goal. Instead, we use debit cards, sometimes gift cards, or preferably cash, which is easier to keep track of. If you are having trouble fighting credit card companies, ask for expert advice.
Bills will not go away on their own and they can ruin your credit, which you need to help keep future payments down. Deal with the bills you have by calling the companies and asking to negotiate the payments, or see if you can pay in full for a discount. Most billing will take $50/mo for your bills. We have one currently that is going to take 5+ years to pay off at zero interest rate.
You want to pay off the highest interest rates first. Jenn had a higher interest rate of 6%, or so, and mine was 3%. So I was paying twice as much for them to hold her loan than mine. Focus on the interest rate first. Credit cards and other loans can be in the 25% range; you will need to eliminate these.
Bonus tip from Jenn –
After I graduated college, I was “winging it” in terms of money. What I mean is using up savings to pay rent here, buy clothes there, and not concerning myself with paying back loans. But luckily James is my finance guy, and he helped us establish a budget early in marriage to pay off this debt. I would probably still be swimming in it if not for him.
Our budget includes what we can spend on groceries and other household items, kids’ needs, our house payment, our car payment, insurance, travel, and also “allowances” for each of us. We have a certain amount we can spend just for things we personally want. It sounds silly, but it helps me to know what I can and can’t spend. Sometimes we’ll save up our “allowances” for big ticket items, other times, we us it to treat ourselves to lattes or lunch out.
We currently have probably the tightest budget yet. It can be frustrating to not have money as easily accessible. But it also gives us the chance to be more creative in how we spend and save, more conservative in what we use up, and more practical about what we really need.
Any questions? What tips do you have for getting out of debt, both personally or as a family?