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The Debt Free Journey – How to Get Started

The road ahead

I am not a big fan of cliches, but this one just works.  Every journey begins by taking that very first step.  The journey to becoming debt free may be a very easy task for some, but also may be a very intense and sacrifice driven experience for others.

The first step to becoming debt free is to decide to be debt free.  Sounds silly, but this is the single most important step you need to take.  Becoming debt free is a big life decision, requiring a level of dedication most people are not willing to make.  How many people around you have car loans or leases?  How many people around you have at least one credit card or student loan they still owe money on?  Being in debt is normal in our society and it is accepted as commonplace.  Does this mean being in debt is acceptable and we should just abandon any notion of paying off debt?  I will modify an old saying one of my Navy chiefs used to use when a sailor made a mistake.  “Not in my Navy” or in this case, “Not in my Home”.

Debt is what keeps us chained to a lifestyle we do not necessarily find complete happiness in.  Debt keeps us from taking those life risks, which would allow us to do what we really love.  By becoming debt free, you release the burdens of having to stay in certain situations in order to sustain your lifestyle.

This was the journey we took and the steps we took to become debt free.  You may modify the steps to fit your specific situation, but each step we took was for a good reason and it worked for us.

  1. Make a family commitment to become debt free.  Your biggest step and the most difficult for a family, because it means giving up immediate gratification for something greater (freedom).
  2. Save an emergency fund of $1,000.  My favorite author on becoming debt free is Dave Ramsey and he proposes an important first step.  Life happens whether we want it to or not and by having this in place it prevents us from derailing in our progress.  The small emergencies do not become emergencies with an emergency fund.
  3. Make a monthly budget.  For some this is a difficult step and it is also the most eye opening step.  The monthly budget is where the rubber meets the road and expect you will need to do this every month, because your life changes.  The first step in this process is taking stock of every bill you have and all the money you spend (even those cups of coffee or lunches).  A commitment by the entire family needs to be made to stick to the budget no matter what.
  4. Pay minimum payments on all bills except for one.  Pick one bill to put 100% of your budgeted extra money towards and attack this bill until it is gone.  After this bill is gone, take all of that money and put it towards your next bill (target) until it is gone.  Continue to do this until all your debt is paid off.  The beautiful thing about this way of paying off debt is your shovel gets bigger and bigger with each debt that is paid off, because you have one less payment leaving your home.
  5. Once you have paid off all your debt, it becomes time to save for that rainy day.  This step is important, because it prevents hard times from hurting the family.  If you follow several different financial advisers you will see everything from 2 months to 1 year of savings being suggested.  My personal philosophy is to save enough for 6-12 months of living expenses (not salary).  By saving 6-12 months of living expenses you protect yourself and/or your family from any financial road bumps.
  6. My favorite step is here, because this is where you have accomplished so much and now it is time to do the other important stuff.  I view this step as a multi-step process, because it takes a long time and it is the more fun part of the journey.  In this step we are putting more money on the house to get it paid off early, saving money for retirement, but also having some fun.

Just remember once all the debt is paid off, cash is the only way anything gets purchased moving forward.  If you love nice vehicles then put some money away each month in an account for car purchases later on.

Remember this is a long road and for some it can take as little as 1-3 years and for others it may take much longer.  My wife is great at reminding me to enjoy the journey along the way and not just look to the destination, so celebrate even the small wins along the way.

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