Eight years ago, I found out there were people out there who did not live with debt. Not only that, but these were people who actually SAVED money, or saved up for big purchases, and even put away money for retirement. Even more, these were people who were MY age. Mind-blowing moment for sure. Once I got over the initial “are you serious?” and “how?” questions, I realized that I wanted to live that way, too. And so began my head-first dive into the world of Dave Ramsey, budgeting, getting out of debt, and saving money.
Here I am eight years later, a wife and mom of four children, debt free (except our house, which I’m hoping to pay off in 10 years or so), cash-flowing our home remodels, saving almost 50% of our monthly income, and building up our 4-6 month emergency savings fund.
I recently started Debt Free, Reno, NV on Instagram and Facebook as a way of sharing our process, encouraging others to jump in as well, and figuring out the next steps for us as a family as we learn to invest, save, and build our retirement funds now that we are debt free. My financial life was quite literally changed when someone simply shared this knowledge with me eight years ago. Yours can too. If like me, this is the very first time you’ve ever heard that people live debt free, here are a few of my typical “do this first” steps that I share with others.
1) There’s lots of financial advice out there. Dave Ramsey is who I recommend and follow. I suggest his book, The Total Money Makeover, as a great intro. If like me, however, you are too broke to even buy a book to get started (I’m telling you, we were in a really bad spot!), I suggest you head to his website and begin devouring his articles. I didn’t even get my hands on a copy of his book for a good year into our debt free journey, but I found more than enough on his website to find inspiration and guidance to get going.
2) Make a budget and stick to it. If you aren’t even sure where to start because you have no idea what you spend on things like groceries each month, take a month and write down EVERY SINGLE PURCHASE. Annoying? Yes. Helpful? Definitely. This will at least give you a starting point, and help you to see where you are bleeding money each month and where you can begin to cut back to pay off debt or add to your savings. When we were broke, digging out of debt, and had three small children, our monthly grocery/toiletries/dog food category was only $300/month. It was HARD. But we did it.
3) Get a basic emergency fund of $1000. This is actually Ramsey’s baby step #1. If you are trying to dig yourself out of debt and your washing machine breaks and needs replacing, you’re going to feel like it’s two steps backwards. $1000 is not nearly enough for a full emergency fund, but it’s enough to generally cover most unexpected things that pop-up to allow you to keep on track and not be completely derailed through the process. Don’t even have $1000 in savings? Find something to sell, get a side hustle, throw leftover grocery money there, etc. Get creative. We sold things on Craigslist to jumpstart our emergency fund.
4) Utilize cash envelopes (this is another Dave Ramsey thing which you can find on his website). Cash is weird. When you pay for something with cash, from an envelope that can definitely run out, you seem to think a little harder about whether you actually need it or not. Grab a stack of envelopes, label them for all your categories (grocery, fun money, kids, clothing, pets, hair cuts, etc.), and figure out what you can afford to put in each one on payday. Go the bank, get the cash, stuff the envelopes, and ONLY use money from the correct envelope to pay for things. When one runs out, it’s out. End of story. It might seem like an annoying process, and I would totally agree. But you know what? Our first time doing this, we had an extra $300 left over at the end of the month (even with our already extremely tight budget). I put many things back on the shelves. I reassessed needs vs. wants. This extra $300 then went into our $1000 emergency fund, and in the months following, any extra went towards debt.
5) Pay off your debt using the debt snowball. You might think paying off your debt with the highest interest rate first would be your best bet. But if you can’t stay motivated and disciplined long enough to see the reward of paying it off, you might just give up. Ramsey’s debt payoff ideas go a little more with the mental aspect. Start with the smallest debt, regardless of interest rate so you can celebrate a WIN. Winning is encouraging and will make you want to keep going. Then, take that payment and ADD it to the payment on your next smallest debt. This is the start of your snowball. Pay it off, and then add that entire payment to the next one; and so on and so forth. By the time you get to your biggest debt, you’ll have a HUGE snowball payment to apply each month. And hey! Once that’s done, you’ll be able to SAVE all that money each month instead of paying it to someone else!
This is obviously a big can of worms. There’s so much to learn and apply. Don’t feel like you have to do it all at once, but rather, start with something simple and begin moving forward with a baby step. You can totally do it!
If you have questions, feel free to reach out! If you’ve been on this journey, as well, I’d love to hear how it’s going for you and your thoughts on the matter. Living debt free is SO freeing, and I only wished I had learned these principles sooner.