Our Vehicles are Officially Paid Off!
So I know this isn’t a financial website. And I know that money is a sensitive subject for people. But I’m not going to let that interfere with how genuinely happy Colleen and I are to be without a car payment. This is obviously a huge deal as we are expecting a baby soon.
We are not financial superstars, nor are we mega-wealthy, in fact, we are just your typical “Americans”. I admit to buying a brand new 2002 Chevy Blazer ZR2 with it’s off-road upgrades when the odometer read 000007 miles (a single digit!) in 2001. Colleen, being smarter, bought a used 1998 Nissan Altima in 2003. These car payments added up to $850/month of expenses for us! And to think the US Government doesn’t think slavery in America exists today. Pfffffft! That’s a lot of days work just to pay for the hunk of metal to get us back and forth to work.
I forget who said it, but I believe the quote goes something like, “The typical American has an expensive car loan so they can drive back and forth to the job they hate so they can pay for their home that they aren’t in.”
No wonder everybody is stressed out!
Say what you want about financial counselors, but if there was one that existed that actually made sense I believe it would be Dave Ramsey. Sure, mathematically his “Baby Steps” won’t get you out of debt the fastest, but when it comes to money I think emotionally getting a few quick wins is important. (And there’s the small little footnote that it worked for us)
Dave Ramsey’s Baby Steps
Baby Step #1: Pay the minimum on all debt until you are able to save $1,000. This is the starter emergency fund.
Baby Step #2: Pay off all personal debt except the home. Get mad and stay mad until you get out of debt.
Baby Step #3: With no personal debt, it will be easier to save three to six months of your expenses and fully fund your emergency fund.
Baby Step #4: Save 15 percent of your gross household income in retirement plans/mutual funds.
Baby Step #5: Start saving for your kids college expenses.
Baby Step #6: Scrape any extra money to pay off the mortgage early.
Baby Step #7: Build wealth and give it away.
With Baby Step #2, you pay off your smallest debt, regardless of interest rate, and once it’s paid off, you take that money and snowball it into your next lowest debt, and snowball both of them into a bigger debt snowball for the third smallest debt and so on. Eventually you’re paying off huge chunks of payments at a time.
Like I said before, it’s not mathematically going to get you out of debt the quickest because that would involve no emergency fund and paying off the highest interest debt first, but by getting a few quick wins you become more confident that the system actually works.
Again, it isn’t easy, and it involves writing some big, hairy checks…for instance our last check to GMAC was $1,723.61!
I’m not saying that number to brag or show off in any way. I’m just trying to give hope to people who don’t think getting out of debt can happen. Now with no credit card debt and no vehicle payments it’s onto Colleen’s student loan!
We are trying to get mad at our debt so that come July we are in the best position possible for Colleen to stay at home with Baby and not have to work.
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Congratulations Matt and Colleen. Having control of your debt is an excellent, EXCELLENT thing. We’re all proud of you here, for sure.
I don’t mean to sound contrarian, and I love Dave Ramsey to death, but I want to challenge you to do something, after you’re comfortable and confident about your expenses for a while.
Remember the book “Rich Dad, Poor Dad”? Re-read what Robert Kiyosaki has to say about the difference between “good debt” and “bad debt.” Debt can be a very powerful tool you can use to work for you, and of course it can be a terrible force when it is working against you. The trick is to learn how to control it at all times, so that YOU are DEBT’S master, not the other way around.
I am not telling you to go out and get back into debt. I am telling you to remind yourself about a powerful tool you might need one day in your business toolbox.
If debt were only bad, then successful businesses would not have any. The fact that they do should be an indication that, when used properly, it can be a good thing. Debt of some kind is usually a “given” when starting a business. Without people willing to invest in business plans, a lot of successful businesses would never have gotten started.
But enough of sounding like your dad (apologies to Rick).
Congrats on paying off your truck especially. Car payments suck, don’t they? Don’t buy new, buy used (yay Colleen) – Kathy and I paid cash for all of ours. They’re old and not much to look at, but, hey, they’re paid off and they get us around reliably
All the best. We think about you guys all the time.
With love,
Mark and Kathy (and Megan)