As you may already know my husband and I became debt free in February of 2014. And I get a LOT of questions on how we did it. A LOT of questions.
It's no secret that we are huge fans of Dave Ramsey. But I cannot totally say that we stuck to the baby steps 100 percent of the time. However, I just want to add the disclaimer, that I think he's right. I think his advice is spot on and he has helped millions of people. Listen to what he has to see and then apply it in a way that works in your real life.
For example, Dave says to list your debts smallest to largest and pay off the smallest first. This creates a sense of accomplishment and motivates you to keep moving forward. Yes. I agree whole-heartedly.
But when Jason and I listed our debts we realized that some of his student loans (yes there were more than one) were smaller than our credit card debt. However, we also knew that if worse came to worse we could defer paying his student loans.
The entire time we were paying off our debts I was either pregnant or caring for a small baby. We felt it was more important to get that credit card payment out of the way because if something happened we could hit the pause on the student loan payments. Student loans you can defer. You can't defer feeding your kids.
Just a note, I don't recommend deferring student loan payments unless there is an emergency situation. There are two reasons for this. The first being, I really believe it's better to just tackle the situation and get things done. I personally never want debt hanging over my head.
The second reason I don't recommend it is because in most cases interest will continue to accrue during a deferment. Just keep those things in mind.
After we paid off our credit cards and Jason's car we hit the pause button on paying any extra to anything. I was pregnant and so we began saving up money and continued to live very frugally. We really wanted to pad our emergency fund.
We just wanted a safety net that would catch us. All of us.
Ten months after our second child was born we finally made the decision to call up Sallie Mae and kick her out of our house.
We also put priority on paying off our car before the student loans. We owed way more on Jason's truck than it was worth and this began to make me irrationally angry. Once that payment was gone I felt like such a weight had been lifted. And of course we had extra money to throw at debt or pad our bank account.
I whole-heartedly support the baby steps, but there is also room for life within them. You can still follow the basic principles and find a path to financial freedom that might be a step different.
And yes, it might mean it takes a little longer. But chances are it took you more than one day to get all this debt, it's going to take you more than a day to get out of it. It's not going to happen over night, but you can get this done.
What about you? What plan do you follow?