Next steps

Since becoming debt free, I’ve had two questions come up regularly by people I know and readers of this site. One of the questions I’ll address in another post, but this post is about the other question I’ve heard a lot: “Now that you’ve paid off your debt, what will you do next?”

My family is following Dave Ramsey‘s baby steps plan for our finances. In Baby Step 1, cultists followers save $1,000 — and only $1,000 — as a type of baby emergency fund to take care of problems that could arise while working the way out of debt. I have found that this step is often the most misunderstood of all the steps.

Yes, $1,000 isn’t enough to cover a major emergency. If something goes wrong that means you have to get pretty creative in figuring out how you can overcome the obstacle without going deeper in debt if possible. This is a difficult feat, and I’ll be the first to admit that for some major emergencies, you might end up with an expense that cost more than $1,000. But our experience has proven that most of life’s emergencies can be covered with $1,000 or less. In those cases, you use your baby emergency fund, press pause on paying more on the debt, and then rebuild the $1,000 as quickly as possible.

This baby emergency fund is not supposed to make you feel comfortable. In fact, it’s quite the opposite. It serves as a kind of cushion between you and minor emergencies, while also making you feel the pressure to quickly get out of debt so you can move on to a more robust emergency fund. I’ll cover that in a minute.

In Baby Step 2, you are supposed to go kind of insane. You buckle down, get really serious about paying off the debt, and then list all your debts from smallest to largest regardless of the interest rate on each debt. So, if you had $5,000 in credit cards, a $400 line of credit at the furniture store, student loans of $40,000, and a car loan of $10,000 the debt payoff would look like this:

  1. Line of credit: $400
  2. Credit cards: $5,000
  3. Car loan: $10,000
  4. Student loans: $40,000

This method is called the debt snowball, because once you pay the smallest loan with everything you have and then make the minimum payments on the rest. Once a debt is gone, you take what you were paying on that debt, and then apply it and any other money to the next debt. You keep going up the list until everything is paid.

I know what you’re thinking: it doesn’t make mathematical sense to disregard the interest rates and do it that way. However, the psychological wins you get from the debt snowball gaining momentum helps to keep you moving forward. And as Ramsey likes to say, “If we were doing math we wouldn’t be in this mess to begin with.”

So now that we’re here, what do we do now? Now we’re on to Baby Step 3.

In this step, we save three to six months of expenses — a real, actual, grown up emergency fund.

Whether you decide on three months or six months is more of a personal choice. Do you have a steady job that you feel has a reasonable expectation of being there for awhile? Do you have a household where both spouses work? In those cases, you might be fine with three months of expenses. Is your job volatile? Are you working on a contract basis or self employed? Then you might want to shoot for six months of expenses. It’s really up to you.

The great thing is that once all your debt is paid off, your monthly expenses will go down quite a bit. You end up needing less to sustain you in a Big Hairy Emergency. That’s where we are. We’re now in Baby Step 3, moving forward with socking money away for a potential emergency, which I promise you will come eventually.

I can’t think of a time in my adult life when we have had an actual emergency fund. Sadly, I can think of plenty of times where we have needed one, which ended up being handled with adding more debt rather than taking on extra jobs or working with service providers to get a payment plan figured out.

After we made our final debt payment, I was thrilled. However, since then I’ve felt a little lost. The process was such a huge part of our lives for awhile and now it’s … over. It sounds strange, but it’s almost like losing an old friend (even if it was one that I didn’t really like).

So now the challenge is this: we need to keep our intensity up. Now is not the time to start spending like crazy people. We’re still in The Year of No, but instead of our money going to some other bank, it’s now coming back to us. The danger is the possibility of lost intensity, but we will keep pressing on to our next goal.

Getting out of debt isn’t the end. In fact, it’s only the beginning.

We’re debt free

Free at last, free at last. Thank God almighty we are free at last. – Martin Luther King, Jr.

On Friday, June 15, 2018, my family officially became debt free.

We have no credit card debt.

We have no student loan debt.

We have no car debt.

We have no debt on appliances, electronics, or any other item.

And even though it’s not debt, we don’t even have any outstanding medical bills.

We’re currently renting, so we don’t even have a mortgage.

After almost 15 years of marriage, my wife, Amy, and I have finally returned to zero.

It’s been an amazing day. It started off with a nice morning walk, just me and my headphones. By the time I returned, the kids were already getting ready for the day. I grabbed Amy and said, “I need you to do something.” I logged in to the student loan providers website, set everything up, and said, “I want you to make the last payment.”

Amy pays the final debt
Amy makes the last payment on the remaining debt — the student loans.

She pressed the submit button, and closed the window. I am man enough to admit, I cried. Then, she cried. We hugged each other. She said, “You did it, babe.” I corrected her, “No, we did it.”

The wait began.

I had my favorite drink — Sugar Free Rockstar (which I like to call “cold coffee”) — and had the kids work on a sign that read “We’re Debt Free.” They colored in the letters with enthusiasm. They have been part of this process, and my family tree has been changed. They will grow up being taught to stay away from consumer debt, how to build savings, and learn how to give.

Amy had an activity planned with our kids, but my son was sick today so he stayed home with me while she took our two daughters to have some fun. The Boy and I hung out at the house. I chose to the take the day off today, because I wanted to be off for this special occasion. I cleaned and did a little house organization. I ordered my youngest daughter’s birthday gifts with the money we had budgeted. There’s no more credit card purchases here; everything is paid in full. I did anything to keep me busy while we waited for the official word from the student loan provider that the money had been processed.

My plan for today included meeting a dear friend of mine, David, to have a celebratory lunch. Since my son was sick, he agreed to bring lunch with him to my house and we enjoyed our meal at our kid-abused, paid for kitchen table. I had Chinese food, and savored every bite.

Food tastes better when you aren’t making payments on it.

My son wanted to play outside before going to the doctor, so we did. I relished my time with him. We went to the doctor; he’s fine and just needs to work a little virus out. He’s not contagious, so we are a “go” for celebrating more later tonight.

And then, more waiting. As has been the custom for this process this year, I knew the student loan provider wouldn’t have anything definitive until after 6 p.m. I checked anyway. “Processing,” it read. The wheels were in motion. I admit, I was nervous. “What if it doesn’t go through today? What if there’s some problem?” The borrower is truly slave to the lender.

We cut so much out of our budget this year. I took on a second job, utilizing the skills from my main job to aggressively accelerate our debt payoff. Amy helped run defense with the children, and kept the household functioning at somewhat normal levels. She was excellent with the budget when grocery shopping, finding things for the kids to do on the cheap, finding clothing, and so much more. For several months, I was doing 50+ hour weeks. It was so hard when we were going through it, but today it feels like a distant memory.

More waiting. And then, at 6 p.m., I checked again. The moment had finally arrived. The balance was shown as $0.00.

Our progress has been measured visually with a debt chain that has hung in our front room since January, the start of The Year of No. Each link represented $1,000 of debt, and we started the year with around $20,000 left to go.

I cut the next to last link in the chain, then had Amy cut the final one. It read, “Debt Free.”

Amy cuts last debt chain link
Amy cuts the last link in the debt chain.

Today was all about Amy. The last of the debt was hers, and today we fulfilled a goal I had made when we became engaged. I wanted us to be totally free, and now we have broken the chains of debt. When we started The Year of No, my deep-in-my-heart goal was to be out of debt by our anniversary. We beat that goal by one month. Our anniversary is July 26.

We have celebrated little milestones along this journey with something cheap and fun, and today was no different. We packed up the kids in our 18-year-old, paid-for, hanging-on-by-a-thread minivan and headed to a local frozen yogurt shop for a calorie-laden “dinner.” There no place for healthy food choices today; we celebrated our freedom with decadence, paid for with a debit card.

Debt free froyo
Celebrating being debt free with a family outing for froyo.

Froyo tastes better when it’s not attached to an annual percentage rate.

Today is day zero. Tomorrow is the first day of our debt-free life. I am beyond grateful to the many people who have helped on this journey, and have provided encouragement. I have even loved the haters, because nothing drives me more than “You can’t do that.”

We have followed Dave Ramsey’s plan as outlined in his book, “The Total Money Makeover.” I am here to say that we are proof: it’s a simple plan that works. I love it when a plan comes together. You can either wallow in your misery, or get angry and take action. I pray you chose the latter.

Our official debt payoff since starting the plan in full is $34,076 of debt paid off in 21 months.

Someone recently told me, “I wish I could be like you.”

You can.

The spiritual side of getting out of debt

Note: This post is religious in nature. If you’re not interested in that, I totally understand.

It’s not in my typical purview to discuss religious things in an open forum. While I have no problem discussing it in a one-on-one setting where reason, debate and healthy questioning can flourish, it seems that modern discussion of such things online often deteriorate into misunderstanding and hostility, of which I have no interest in participating.

However, I would be remiss if I didn’t discuss the part that my faith has played in our journey in becoming debt free, so I wanted to share my story. Everyone believes in something, but this is my journey. If you choose to follow down a debt-free path, I hope you share your experience as well.

There are many Judeo-Christian texts that highlight the importance of knowing how to handle money. I’m not referring to the gross prosperity gospel — a belief that God will reward you financially if you are obedient — but rather practical, ancient advice on how to handle financial matters.

For example, here are a few things that Judeo-Christian text warn about with regard to finances:

  • “One who lacks sense gives a pledge and puts up security in the presence of his neighbor.” – Proverbs 17:8. This is a clear warning not to co-sign for others. It’s literally saying you’re stupid for doing so.
  • “The rich rules over the poor, and the borrower is the slave of the lender.” – Proverbs 22:7. Fairly clear cut advice, that borrowing money makes you a slave to the one who loaned it to you.
  • “During the seven plentiful years the earth produced abundantly, and he gathered up all the food of these seven years, which occurred in the land of Egypt, and put the food in the cities. He put in every city the food from the fields around it. And Joseph stored up grain in great abundance, like the sand of the sea, until he ceased to measure it, for it could not be measured.” – Genesis 41:47-49. Here we see a warning to take advantage of prosperous times save for the inevitable bad times that will come.
  • “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it? Otherwise, when he has laid a foundation and is not able to finish, all who see it begin to mock him, saying, ‘This man began to build and was not able to finish.’” – Luke 14:28-30. Put another way, “Failing to plan, is planning to fail.”

And so on, and so on, and so on.

Two years ago in 2016, I felt a spiritual calling to move to a different city. I wasn’t sure how much this would positively impact my life, other than I was tired of commuting 50 minutes each way. I certainly knew plenty of people who did the commute from the city I lived in to the city I worked, and considered it “just the way it is.” But I could not escape this tug. I told my wife about the urge to move, and she reluctantly agreed. Like myself, she didn’t really want to move from the city we lived in (we loved it dearly), but she agreed we should follow this “call.”

Our house sold in six days. We moved two months later, and things haven’t been the same since. Within a week after moving, I was officially converted from a contract employee to a full-time employee, giving me benefits, more take home pay, and a solid foundation to make progress on our debt. We attended Financial Peace University, which is rooted in religious principles but is certainly not exclusive; if you have no religious affiliation you’re more than welcome to attend. We made a commitment to go all-in on our debt payoff, and on Sept. 11, 2016, began to work diligently on becoming debt-free.

From the upbringing of my youth, I remembered there was a passage in Proverbs that read, “Dedicate your plans to the Lord and you will succeed.” Well, I thought that was a bunch of hogwash. See, I had been committing a fair amount of plans and nothing was coming of it. It was only until I re-read that passage in late 2017 that I realized my mistake: I had completely misremembered it. The real passage reads like so: “Commit your work to the Lord and your plans will be established” – Proverbs 16:3.

You see, there is an important distinction between plans and work. It’s pretty easy to think your planning is the same as action, but it’s not. It’s the beginning of action, but not the follow through. It’s interesting how these passages can have both a spiritual and a practical value to them. The revelation of my mistake hit me hard. So, I decided to give it another shot. I wrote that verse out on a piece of paper with a challenge written underneath: “Are you there, God?”

Things changed.

My wife and I changed course at the beginning of the year. We doubled down on our efforts. “If we did this, this, this, and this, we could be debt free by the end of October 2018,” I told her. She was in.

But October wasn’t my real goal. My actual plan — the one I wanted to see established (you can read that word as “to be made true”) was that I wanted to be out of debt by July 26, 2018. That date is our 15-year anniversary, and I couldn’t think of a better present. While we were dating, my wife revealed to me the extent of her debt. I brought some to the marriage, but hers was twice the amount. Getting a master’s degree all on student loans can do that. Realistically, I had a choice to make: do I walk away from this, or do I saddle up and see what happens? I obviously chose the latter.

I had my actual plans, but how could that work? I looked at the possibility of taking on another job. I was content to do whatever I could get my hands on. Amy agreed to take on extra kid-rearing duties while I worked extra, so now I just had to find something. I inquired into possibly being a pizza delivery driver, a janitor, or even security at one of the nearby casinos. But another opportunity came that fit me perfectly. It was almost too good to be true.

Using the freelance website Upwork, I secured a gig that had me doing something I know pretty well:

  • I did web development work (what I do full-time),
  • for members of the United States House of Representatives (I previously worked in government for nine years),
  • in a web software called Drupal (which I also work in full-time and have for many years),
  • using a tool called Coda to complete the job (which I happened to write about five years ago, but haven’t used it much since then until this year).

To top it all off, my duties changed at work about a month before my side job, began, allowing me more freedom to work two jobs without getting completely burned out.

Everything just fell into place, just like that. I have never had so many positive things line up so wonderfully than it has this year. And it all worked: we are going to be out of debt by, early even, my desired goal of July 26, 2018.

So what’s the point of this discourse? As I said, we all believe in something. I’ll leave that to you to figure out what. But when it comes to achieving Big Hairy Goals, especially paying off debt, I don’t believe it’s all numbers. There’s psychological, spiritual, philosophical, and other factors that come into play. I would encourage everyone to look deep at what can help motivate them, to guide them, to drive them.

I am a deeply flawed, very imperfect human being. But my faith has played an important role since started this journey in earnest 21 months ago. And fortunately for me, it’s grown stronger for me this year for the better.

I hope you find your strength as well.