Two weeks ago we were wondering if there would be a house to pay off this week as we had planned. The house is still here and we paid it off this week. This is the story I’ve submitted to Dave Ramsey’s website (we’ll see whether it gets published).
This week we paid off our house and can officially say we are once again debt free! I’ve heard Dave ask, “Have you ever been debt free before in your married life?” Yes, we have. The first month we were married. We were straight out of college (no college debt thanks to sacrifice by our parents and both of us working half time during the school year and every summer). We had paid cash for what we considered a very nice wedding. We owned one 1962 VW bug which Guy had paid for with money made from summer jobs in high school. Then “disaster” struck. We walked out one morning headed for work and the car was gone. It was old enough there was no insurance to replace it. And so we started our nearly 25 year journey through debt.
We always thought we were fairly cautious when it came to finances. We paid off credit cards at the end of each month, we always paid our bills on time, we waited 7 years to start a family so we could afford to have one of us home with the kids at least part time (it became full time when the second came along), we put money into our retirement fund to at least get any matching funds, we had at least a loose budget and we put money into savings. However, we still had a dangerous mindset. A raise would come along, and we’d say we can afford the payments on whatever the next item on the want list might be.
So why did we decide to work toward debt freedom 26 months ago? Our priorities have always been a little different from most of the people we know. Since early in our marriage we have tithed no matter how tight things appeared and we have donated to other projects or charities as they came along. You can’t out give God, we firmly believe the promise in Malachi 3:10. We also believe very strongly in Christian Education and it isn’t inexpensive. We have paid tuition for our two boys since day one (now they commute over 120 miles round trip per day for high school), and college was looming in the not so distant future. We have some money saved for each boy, but not nearly enough. Our church decided to sponsor Financial Peace University, but our response was, we’re already doing pretty well, and the timing wasn’t great. We didn’t sign up for the classes but the person leading them said, “I thought I was doing pretty well, but I’ve learned things in FPU.” Just to see what it was all about, I got Dave’s books from the library and read every single one they had. I would just read bits to Guy or tell him what I’d read. It wasn’t long before we decided to jump in (we’d already been debt snowballing a little). We were always a team, there was never a question about wanting to do this, just how are we going to do it.
We sat down and did a serious budget every month. This was the first time we had both an emergency fund and another account we set up and called working savings. Before we saved, but a big bill would come along like insurance and we’d dip in to savings. With the detailed budget, we now had money set aside especially for those bills when they came along and didn’t touch the emergency fund. It didn’t take long to pay off all our debt except for the house and then build up a fair sized emergency fund. We had listened to the debt free screams on the radio and felt like we really hadn’t paid off that much. We knew we were supposed to be investing for college (already had a reasonable sized retirement fund), but it didn’t make sense to pour money into Mutual funds since we had less 3-1/2 years until we needed to use it. So while we are putting some money away for college, we decided to go ahead and focus on the mortgage to free up money for college later.
We financed our house in 1999 when we purchased it with a 30 year fixed mortgage at 7.5%. In 2001 interest rates had dropped and the house had appreciated so we decided to refinance to the lower rate and to get rid of PMI. Guy was thinking, “Great, we’ll have lower monthly payment”. Instead, I convinced him we should go with a 15 year fixed with a 6.25% interest and a higher monthly payment. Two years later the interest rates had dropped even more and we refinanced again to a 15 year fixed with a 5.25% interest rate. This time there was no expectation of lower payment. We kept the payment the same so the mortgage would be paid off early. We were on schedule to have the mortgage paid off during the second year of college payments. We kept playing with the budget and decided we would go really crazy and include the mortgage in the debt snowball.
So here we are nearly 25 years from the beginning of our journey through debt, we’ve paid off $110,000 in 26 months and we have one more school year before college payments start. WE’RE DEBT FREE, and looking forward to budgeting next month when there is no house payment. Thanks Dave for the common sense advice.