As open as I am about most aspects of my life, I haven’t shared this yet on the blog. Talking about money and finances typically makes me uncomfortable, especially in a space this public, but I really think what I’m about to share here is important to hear.
In February, Justin and I committed to becoming debt-free this year.
We have some long-term personal, financial goals (over the next 2-5 years), as well as more immediate goals (this year), and for those to be attainable, we need to focus on completely paying off all credit card and loan debt at this time.
I solely manage the finances for our household — paying bills, making our budget, moving money to savings, making large purchases, etc. — and when I added up how much we spend each month in credit card and loan payments (not counting our mortgage or Justin’s truck), I was disgusted. To put it into perspective, paying all of this off will free up about $800 (or more) each month for us. That is insane.
Here’s what we are paying off to become (nearly) debt-free:
Note that I do not include our mortgage or Justin’s truck.
Balance in February: $4,400
Before Justin and I got married, we did something incredibly stupid and financially irresponsible. We took out a loan to help pay for our wedding, and we used my car to secure the loan. Essentially, we took out a title loan on a car that had been paid off for over a year. If I could go back and remake that decision, I would do everything differently.
In February, we had been living under the burden of this loan for nearly 2 years. And while we could easily afford the monthly payment, I was tired of paying it. It is an interest-bearing loan with a high interest rate, so even though we have been chipping away at it for 2 years, we hadn’t even put a dent in the principal owed.
My No. 1 priority for this year was to pay off the remaining balance of this loan and get back the title to my vehicle.
Luckily, in February, we were able to allocate our entire federal tax return to paying down 70-percent of the balance on the loan.
Just drastically paying down this loan feels like a weight off my shoulders. The remaining balance doesn’t feel so intimidating and is much more manageable.
With proper budgeting, we will be able to completely pay off this debt by July 15.
Total combined balance in February: $5,600
We started paying down our credit card debt by completely paying off the card with the lowest balance ($400). It was a Care Credit card we used last year to help pay for our senior dog’s emergency oral surgery. It had 6 months 0% interest that was up in January, so the timing for paying it off was perfect.
With that paid off and the title loan paid down, I felt really motivated by seeing our total balance drop. For March, I put my focus on paying down the credit cards with the highest interest rates.
In only two months, between the title loan and our credit cards, we have been able to pay down almost $3,800 in debt.
What I did these first two months to pay down debt:
- Tax return: As I mentioned above, I used our federal tax return to drastically pay down the balance on the secured loan we have. By far, this was the wisest financial decision we have ever made.
- Budget: I created a new household budget for February and March that allowed us to reallocate money from one area to go toward paying down the credit cards and paying off the Care Credit card.
- Timing: I made large credit card payments on payday every 2 weeks. I discovered that paying these first and getting that money out of our account ASAP was best so we wouldn’t be tempted to spend it.
What I’m trying in April & May:
- No-buy months: I’m kicking it up a notch this month and next and am doing no-buy/low-buy months — something I had never heard of until my sister-in-law Serein and Katherine from My Eclectic Grace started talking about it. My goal for April and May is to drastically curb our spending on things we don’t necessarily need — eating lunch and/or dinner out every day, Starbucks, random Target runs (that kind of stuff). In March alone, Justin and I spent a total of $1,032 eating meals out and getting coffee to-go. And, no, that does not include money spent on groceries. That money alone could have (almost) paid off the remaining balance on the title loan. With a reduction in our auxiliary spending, we can put that “extra” money toward our credit cards.
- Focus: I want to focus my financial energy on those high-interest cards. Right now we have 3 cards that are killing us with their interest rates. I would love to get one of those — the one with the lowest balance ($700) — completely paid off in April and May.
- Budget: I mentioned above that with proper budgeting, we can pay off the remaining $1200 balance on the title loan in 4 months. I created another new monthly budget to reflect an increase in the monthly payment on this loan so that the 4-month payoff goal is possible. Once that is paid off, we will be able to reallocate the money we spend each month on that debt to go toward our credit card payments.
- Cash budget: Not only did I put together a pretty strict household budget for April and May, I am also putting Justin and I on a strict cash budget to keep us from using our debit cards so frequently. Each week, we will each get $20 to do what we want with. We will start there to get us in the habit of not using our cards and look at expanding the cash budget in June and July.
That’s the progress we’ve made so far on our debt-free journey. I am pretty proud at what we were able to accomplish in only the first 2 months, but I am physically ill looking at how much we spent eating out in March. Justin and I actually just had a coming to Jesus moment about that number, and we will be adjusting our spending habits accordingly.
Of course, I will continue to keep you updated on where we’re at with working toward a debt-free life.