In April, I gave y’all the first glimpse into our journey to become debt free with a post summarizing the debt we are paying off and the steps we began taking in February and March to get there.
We made big strides those first two months, and I am happy to report that we made an even bigger impact on our financial freedom during April and May.
This might sound counter-intuitive to most, but we bought an older, used Land Cruiser (which is in perfect condition) for my husband in May. We were able to take money from savings and pay cash for the vehicle.
Doing this gives us the freedom to sell his 3-year-old Toyota Tacoma and eliminate that monthly auto payment — saving us approximately $600 each month. Once we sell the truck, we can either put that $600 into a high-interest savings account each month to quickly recoup the money we spent on the Land Cruiser, or we can spend a few months using that “extra” $600 to pay more toward our debt.
Plus, a vehicle that we own outright is more valuable than one that the bank owns and we make payments on. While I never included that auto loan or our mortgage in my original plan to become debt free, it will be nice to get rid of that monthly payment.
Our credit card debt only decreased by $400 for April and May, but that is because I strayed from my original plan to pay more toward those high interest cards.
Instead, I paid more toward the secured loan I mentioned in my last update to pay off the remaining balance quicker.
As a reminder, that is an extremely high-interest loan secured with my car. Ultimately, it is a title loan. You can read about why we opened that account here.
We want and need to get the title of my vehicle back as soon as possible, so paying off this loan is critical. Plus, we pay $300 each month for this debt. Recouping that money will be huge for us and our ability to put more cash into savings (which is overall financial goal).
At the end of March, the remaining balance on this loan was $1,260. As of May 31, the balance is $716. You can imagine how good it feels to not see a comma in that number.
If I continue with what I have been doing, that loan will be completely paid off in July.
I do want to reiterate that we are able to pay extra toward our debt each month because our housing cost is well below our means. The best advice I received when Justin and I were going through the home-buying process was to live below our means. And we have taken that to heart.
I talk about living below your means a lot because I think it is so important to hear. Your mortgage or rent is likely the most expensive (and most important) bill you pay each month. Just because you are approved for a certain amount when buying a home does not mean you should max out that purchase price. Doing so is a really easy way to get yourself into financial trouble month after month.
When we bought our first house last year, we knew it would not be our forever home. So, we bought a fairly small ranch home (approximately 1,400 square feet) that would allow us the freedom to spend the next several years saving for our dream property and home.
While we are fortunate enough to be a dual-income household, we actually bought our house as if we are a single-income couple. We are only two people right now and don’t need a lot of space (nor do we want it). And god forbid, if one of us were to become unemployed, we could still afford to live comfortably.
I want to wrap up this update by saying that paying off our credit card and loan debt before the end of the year is our goal, but we still have to live and enjoy life.
Yes, I could dump much more into our credit card payments each month, but right now I am comfortable with the payment amounts because it gives us the ability to calculate entertainment, date nights, and travel savings into our monthly budget. And let me tell you, those three things are far more important to the health of our relationship week after week than paying a little extra on a credit card.
After I first posted about our debt-free journey, I received a lot messages from you all saying you’re in a similar stage of life. I hope that these posts on what Justin and I are doing to dig ourselves out of debt continue to be helpful to your journey as well.
I’ll have another update for y’all in August!