I’m unpacking the process we used to pay off our home mortgage before my thirtieth birthday.
We proudly live a life free of debt of any kind… we have no credit cards, not even ones we pay off every month, no car payments, leases, and even our mortgage is paid off. We vowed, together as a couple, before we were ever married, to pay off all of our debt, including our mortgage and we decided that once we did that we would never go back into debt. Today I’m going to share how we did that, things we do on a monthly basis to stay on top of finances and out of debt, and how we plan and invest for the future. Here we go!
1) We made becoming debt free it a non-negotiable.
Debt freedom, starting with any consumer debt and then paying off our mortgage in full were not an option. They were the plan. We made the plan. We lived and breathed the plan. We executed the plan!
I am a follower of the Dave Ramsey method, which you will hear me reference often. Dave Ramsey teaches a series of Financial Steps called the 7 Baby Steps. The 7 Baby Steps are
1 – Save $1,000 Emergency fund
2 – Pay off ALL debt except the house
3 – Save an Emergency Fund of 3-6 months of household expenses
4 – Invest 15% of your household income in retirement
5 – Save for kids college
6 – Pay off mortgage ASAP
7 – Build wealth and give
I had been a follower of Dave Ramsey’s teachings as a teenager and into adulthood. When Dan and I met I was getting ready to graduate from PA School and I couldn’t wait to have a real income to beef up my monthly budget, which had honestly previously just been living off savings, biding my time until the end of PA School when I’d start earning checks from income instead of writing checks for tuition.
We met and, in the early stages of dating, I loaned Dan a copy of Dave Ramsey’s book Financial Peace and told him that continuing to date me was contingent upon him reading it. It wasn’t an ultimatum as much as just a fact. I swear it wasn’t as harsh as it sounds! Dan read the book and immediately “drank the kool aid” as is often said about the Dave Ramsey plan.
We decided together that we would live our lives on a budget, within our means, pay off debt and then our home, and leave a legacy for our children that would be a blessing to them. We determined that living within our means was non-negotiable – it was something we decided was necessary to live the lives we dreamed of – living on less than we made was the ticket to paying off debt, being able to save and invest for the kids college, our retirement and wealth building, and to be able to give back to those in need.
This margin was necessary to make traction and so we decided this margin must exist each and every month. Even the months where we couldn’t make huge headway on paying off debt, we had to find a way to live on less dollars than we brought in that month.
2) We followed the instructions of a trusted advisor. We walked our way through the baby steps that Dave Ramsey teaches.
We had, together, decided on a course of action and agreed to stick to it.
During this time we practiced total immersion. We listened to his Podcasts, we ate beans and rice, we really trimmed our budget and lived on as little as possible.
We knocked off Baby Steps 1 & 2 as or just before we got married and immediately we saved 3-6 months of expenses so we could put a check mark beside Baby Step 3 as well.
During this time we facilitated a Financial Peace University course – we actually attended one as students before we were married, when we were seriously considering and talking about and planning for getting married – and then after we were married we offered FPU at our home church. We had a handful of couples and individuals who took the course with us and we remain friends with a few of them today. They say if you really want to understand something to teach it and being the facilitators of this course was very powerful for us as a newlywed couple. We hope to facilitate another course again some day!
Ok… so Baby steps 1, 2, and 3 were complete!
Baby Step 4 – Save 15% for Retirement. We chose to take advantage of company match for 401k, 403b investments at work and we each set our savings to 15% of our gross income. It’s important to note that we had paused or deferred these investments and the matches during the season where we were paying off our consumer debt and saving our emergency fund. We wanted to be singularly focused on moving the needle on that debt payoff and savings. As soon as we hit the 6-month of expenses mark of savings, we turned the investing back on.
Yep, I know you miss the opportunity for the “Free money” that is the employer match.
Yep, we knew that we weren’t investing for retirement at that time. We understood the opportunity cost of not adding to our retirement at that time but decided that being all in on saving to prevent future borrowing and paying off debt was more important. This required communication between us and entire commitment to the process. We decided that this plan, this journey we were on, that we were going to trust the process and that we were all in and all pulling in the same direction. In terms of our marriage this was a key component for us. It meant that we were agreeing that the outcome was worth it and pausing our investment was a sacrifice we were willing to make.
Baby Step 5 – Save for Kids college… at the time we “only” had two kiddos to be saving for so we worked backwards. We set a goal of dollars to have saved for each of them for tuition, room and board. We factored in for growth from investing the money and began automatically saving X dollars for each kid for college. We saved this into a 529 – which allows for tax free growth and for the parent to choose mutual funds to invest the money.
Baby Step 6 – Pay off the house… Here is it, the big one, the step where we paid off our home mortgage so we could become completely debt free (and never go back)!
You do Baby Steps 4, 5, and 6 simultaneously, so as we were turning the investing back on and starting to really beef up college funds, we turned our guns a-blazing to the mortgage. We tried to keep our living expenses as low as possible and we threw every extra dollar we could find onto the mortgage. We were, doing this, able to pay off our mortgage in 36 months!
Yes, we know this isn’t possible for everyone, but do you know what is possible? Being intentional about your finances. Setting goals, utilizing a budget and sticking to it. It’s the way that you make progress towards your financial goals.
3) We budget each and every month.
Each and every month, on paper, on purpose as Dave would say – we do something called a zero-based budget – this means that you put your income at the top of the paper. Every dollar that you are going to earn that month. Then you walk down each category – tithing or giving, saving and investing, household expenses, food, clothing, entertainment, vacation, babysitters, diapers… everything you are going to spend money on that month. Now, not all of these categories are going to be used each month… things like clothing for members of our family that aren’t me, vacation, homeowners insurance, disability and life insurance… we utilize sinking funds for these. This means that we determine when the bill is due, the trip is, the payment is being made and we divide that cost by the number of months. Say that our upcoming expense is $1200 and we have 12 months until it’s due, we create a sinking fund and put $100 a month into the fund each month until it’s due.
We utilize the Everydollar Budgeting App – it’s created by Ramsey Solutions – available on computer, iPhone, or Android. There are both free and paid versions. We used the FREE version for about a year and recently invested in the paid version – the benefits of the paid version are that it links directly to your bank account and sync’s your purchases and income and they pull directly from your bank into your Everydollar app.
From there it’s super easy to drag and drop the purchases and income into the proper category. We can see how much we’ve spent this month in that category, how much remains, and they just made an update with some pretty cool analytics on investing, earning, saving and spending that you can run, if you’re a super nerd like me!
Here’s how the budgeting works at our house – I’m the nerd so I make the budget each month – Dan and I sit down before the month begins and we review what happened last month – wins, savings, things that we spent, etc… and we look at the budget for the upcoming month. What we are going to earn, what we are giving, saving, investing and spending, what sinking funds have what amount of money in them and we review upcoming expenses. We do this each and every month.
4) We live on less than we make & we don’t borrow money, ever.
I mentioned this earlier… each month the budget has to balance. It has to be a zero at the bottom of the page. We don’t spend more in any month than we earn. Yes, there are things we’d love to buy, but we don’t buy anything unless we have the cash saved. We don’t borrow money for anything, ever and we’ve committed to never go back into debt ever.
If we want to upgrade our house, re-do our kitchen, purchase a bigger home, buy a new car, go on vacation, or send our kids to college, we have to have saved the money before we make that purchase. Ultimately we know that this is the best way to building wealth and leaving a legacy that is a blessing to our children, our children’s children and their children. We truly believe that debt isn’t a blessing to anyone but the folks we owe money to.
5) We’ve had to let go of keeping up with the Joneses.
Ok… data says that 7 out of 10 Americans are living paycheck-to-paycheck. That means that when you leave your home and drive to work… of the 10 houses that you pass, 7 of those families would be scrambling to pay their bills if they lost an income or had an emergency.
The Joneses… are broke. They are living paycheck-to-paycheck. They are in your neighborhood and they are on your newsfeed with shiny cars, fancy vacations, pricey clothing and… likely boatloads of money. If you want a life of “big hat, no cattle” as they say in Texas… or lots of status symbols that make you appear to be doing well, living the life and to be rich by society standards… you should try to be like the Joneses. But… if you want a life where you have the financial freedom to have choices, to build savings, invest for the future and create wealth… you should avoid all similarities to the Joneses.
6) We’ve had to let go and let God.
For me, this one is the hardest one. The Bible tells us so many things about debt, being indebted to others, and how to live our lives in a way that is going to be a blessing to others. The best way to bless others, to be able to live and give generously is to put yourself in a position where you have that margin. You can’t change the World if you can’t make rent. It’s so true.
I once watched a segment where they talked about money and holding on to money with a tight, closed fist vs. an open palm. If we live with an open palm, money flows in and money flows out and we are simply the messenger. The money isn’t the root of the evil, as The Bible is often misquoted as saying, but rather the love of money is the root of evil. If we see ourselves as the steward of God and like this money, this home, these kids, are ours only for a moment in time and the best possible thing we can do with them is to raise them, treat them and use them for the glory of the Kingdom… it will change the way we manage our finances and the way that we raise our kids.
I love control, planning and spreadsheets. Years ago I served as the Stewardship manager for our church and, in serving in that role, did a lot of research and soul-searching about what it meant to be a good steward for God and his blessings. It was a real growth experience for me. God doesn’t want us to stockpile wealth, more and more, so that we can live and die on a pile of money… he wants us to build wealth to bless others. What if, instead of seeing it as selfish and greedy, we saw the accumulation of wealth as an act of service… and we aimed to use that wealth for the good of the order.
Every day in my Start Today Journal I write 10 things as though they’ve already happened… one of them is “We travel to see and serve the World.” I see a future in which we travel the world to share it with our children, and along the way we find ways to bless those in the destinations we choose. That we combine vacation adventures with service trips and in this way our family can experience the world while helping those that live near and far.
Another thing I write is “Our lake house is a place of joy, peace and making memories that brings our family together.” You didn’t know about our lake house? Oh, that’s because it only exists in Dan and I’s minds. We talk about it often and we can see it in our minds – a place where, someday, I’ll be recording podcasts in the Summertime.
We have a clear vision for what our future holds. We talk about it with our children. We have shared age appropriate information with our older kids, particularly as it relates to college application and selection. Money is something we talk about regularly as a couple and as a family.
Our journey has been far from perfect, but we are growing together as we fail forward in an attempt to leave a legacy of financial freedom for our family. I am so passionate about this information. I love sharing about our journey. If you are interested, I’ll include the link to the Youtube video of our debt-free scream on the Dave Ramsey show, in the lobby in Nashville TN. We look so much younger and well-rested. Colby is only 18 months old and Archer was a wisp in my belly at the time!
We are DEBT FREE and I want to shout it from the rooftops… but not so much as I want to share with others how we were able to do it and what a blessing it’s been since that time. We are loving living Baby Step 7, which is to Build Wealth and Give it Away.
Do not worry if you are on baby step 1 or even on baby step zero. Let this serve as a kick in the pants, a pat on the back and a gentle nudge that it’s time to get healthy financially!
There you have it – how we paid off our home mortgage in the first three years of our marriage.
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