Many years ago, The Husband and I took Dave Ramsey's FPU through our (old) church. We worked the steps, got out of debt, and started aggressively contributing to our retirement. Then we decided to remodel the kitchen at our old house. We fell deeply into debt, all on our credit card and haven't been able to get out of debt since then. Not only that, but our debt has increased.
Like most people, I am so ashamed of our debt! And although I have had nothing but support from this blog and site, I'm still uncomfortable disclosing the actual amount of our debt because I am so ashamed.
However, today as I was reading different blogs and articles about getting out of debt, I remembered that we have done it before and we can do it again! I'm feeling motivated to get out of debt in a way I haven't felt motivated for years!
This time will look a little different for many reasons. First of all, we have much older (and more expensive) kids. Secondly, we make a lot more money. Thirdly, we aren't comfortable with a $1000 emergency fund, so ours will be larger. (Sidenote: we already have our emergency fund saved up, so we pretty much get to start at Baby Step #2.) We also give to our church regularly (and have for three years!!!) and we have felt so blessed being able to do that that isn't something we would ever change! (This is the first time in our married life that we have given to our church REGULARLY and we are so glad that we can!) And lastly, we are choosing not to stop contributions to our retirement accounts. We have done that before and already feel like we are playing catch up, so we don't want to fall farther behind as we aren't getting any younger.
As far as point three goes, we do have an emergency fund, but we do have some upcoming expenses, so we still need to add to our savings. We need to add $2500 to cover some costs we have coming up and then we will stop adding to our emergency fund/short term savings account and put that money towards our debt.
Regarding my last point, we contribute a lot towards retirement. As I am a teacher in California, I contribute 10% automatically towards my pention, but I contribute and additional 15% on top of that. The Husband contributes 17% and his employer gives a 3% match plus 6% profit sharing. Totally, we contribute about 25% of our pre-tax dollars towards retirement, but we are playing catch up!
Even while adding to our savings we will be paying off debt. We should be able to save the money we need for some upcoming expenses by The Husband's last paycheck in February (2/18/22) and then we can start aggressively paying off debt.
I have not had anything but positive feedback and support from this site so please wish us luck and send all the good thoughts our way as we tackle getting out of debt following Dave Ramsey... again!
December 9th, 2021 at 01:51 am 1639014677
I too was debt free and fell off the wagon, doubling what I had previously paid off, now I’m working to become debt free again.
Just like you, I kept contributing to my EF and 401(k), while I worked the snowball. I’m also thankful that I am contributing to church regularly. I say all this to say, it happens, you’re not alone and you got this.
December 9th, 2021 at 12:19 pm 1639052382
1. Review your credit card and other bills and look for recurring costs like subscriptions. See if you can cancel streaming services, food box deliveries, whatever.
2. Look at your wireless bill. Are you paying for more services than you need? Would changing providers save you money?
3. Look at auto and homeowners insurance, and see if you can lower the cost there. If you have a good fund, can you increase deductibles a little?
4. Are you over withholding on taxes? A big refund costs you money if you are paying interest on credit card debt. Owing a small amount to the government in April costs you nothing. Reset for 2022.
5. Call your credit card company and ask for a reduction in your interest rate. If you have decent credit, apply for a zero interest card and transfer as much debt as you can payoff during the mono interest period.
6. Look for bank promotions where you can get a one time cash bonus.
7. If you have a cash back credit card, and the discipline to do this, clear that card and then move all monthly recurring charges to it but religiously pay them in full every month. If you can trust yourself, do this with everything you spend - but only if you can truly clear it every month.
8. Are you using an HSA or FSA for health expenses? If so, make sure you maximize it. The tax saving here is 12-25% depending on your bracket.
9. If you have high interest debt, consider front loading credit card payment to the first six months of the year, then back loading retirement. The more you pay down the debt, the more of each payment reduces the debt. Yes, you might miss out on market growth for six months, but the market is a risk - reducing interest is a guaranteed win. At year end, you will have contributed the same amount to retirement, but your debt will be less than with an even spread.
10. Take a few days to prepare for the holiday influx of gifts by looking around for what you can sell (or donate). This will raise cash, declutter your space, and perhaps remind you that you need ‘less.’ Plan gifts of time rather than ‘stuff’. If it is too late to change gift giving this year, really evaluate how gifting/getting feels and talk with others about changes for next year early.
11. Switch your daily spending to cash and look for the leaks. Remove the things that are habits that don’t bring you joy. Keep things that help you, but perhaps reduce frequency.
12. Make a list of low/no cost ways to celebrate success, and a list of goals to celebrate!
You can do this.
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