It is inevitable.

You being to make progress on a goal, or make major life changes and “Murphy” comes to visit.

Dave even mentions Murphy in his Financial Peace University.

Murphy is the guy who, right after you get your baby emergency fund done ($500-1,000), makes your car suddenly need $400 in repairs. Or lands your kid in the emergency room with hundreds of dollars in hospital bills.

I hate Murphy!

For us Murphy decided to show up BIG time within a couple months of me leaving my job and us now living on half the income we were used to.

In the span of about two months the following things happened:

• The dishwasher died – $400 to replace (deciding to invest in a good one)
• The Mazda repairs began to outweigh it’s worth; purchase new used car – $3,000 (added to the $1,500 we sold Mazda for)
• Went on paid for vacation to Hawaii during which there was an accident w/ the rental car – $1,500 (deductible plus rental agency “admin” fee)
• Dog got huge cyst on tail for the gazillioneth time, it burst, tail had to be amputated – $1,500 vet bills

If you do the math that’s a little over $6,000!!

In one of the FPU lessons Dave talks about the “security gland” women have that goes into overdrive when they start to doubt their financial security. Let me tell you, the security gland coupled with post-pregnancy hormones IS NOT PRETTY! I pretty much lost it in the parking lot of the vets office while writing a check for $1,500 for Mark to take inside.

Thankfully, after I calmed down, I realized how blessed we were that NONE of that money was going on a credit card. It was all covered by our emergency fund. Yes, it severely depleted it but at least we did not have that debt hanging over our heads.

On our smaller income it took some time to build the emergency fund back up, but once again God showed us the rewards of being faithful by providing some freelance work for me to do that helped.

So consider yourself introduced to Murphy. I hope that when (notice I didn’t say “if”) he visits you he is less brutal and that you are well prepared. Don’t be discouraged by his setback but keep plugging away.

• Part 1:  The Early Years: In Love and In Debt
• Part 2: Joining Financial Baggage
• Part 3: Driving Our Debt Around
• Part 4: The Baby Years: Baby Steps, Baby Boy
• Part 5: The “B” Word: B-U-D-G-E-T
• Part 6: The Envelope System – It Makes Your Budget Work
• Part 7: The ever-important emergency fund
• Part 8: Dumping Debt
• Part 9: Freedom to Make BIG Changes

So last week I talked about HOW we got out of debt – this week you get to hear about how it began to radically alter our lives. At the time (2002) this change was huge. Now I can look back and see that it was JUST the beginning.

After we paid off our debt, we turned to Baby Step #3 and built up a savings account of 3-6 months expenses – at the time about $10-12,000. With no debt other than our mortgage we had freed up around $1,200 a month that we funneled to savings, accomplishing our goal in a little less than a year.

At the time Mark was teaching at a Christian school and working part-time for our church. I was working full time for the state university (an hr commute each way). Noah was 2 and going to daycare 5 days a week. I was pregnant with Natalie who was due in November.

I don’t remember exactly when it was, but sometime during the spring/summer of 2002 I began to realize how little time I actually got to spend with Noah. I literally counted up the non-sleeping hours and it hovered around 35 hours a MONTH. He must have sensed my contemplative nature because suddenly he was crying every morning when I would drop him off at daycare and really playing on mommy’s already frazzled emotions.

Mark and I began to talk about whether it was even possible for me to stay home when Natalie was born. At the time my salary made up for 2/3 of our income and included benefits at a lesser cost. It seemed impossible.

We went over our budget with a fine-toothed comb. Where could we trim expenses? How could I bring in some income and still be at home? We did lots of praying and calculating and finally decided to take the leap. And God showed up BIG TIME!

First, Mark was offered a full time position at the church which paid a bit more than the teaching job. Praise #1.

Then in mid-October I went to my boss to tell her that I was going to resign when Natalie was born. At the time the state was under a huge budget crunch and the university had been trimming positions in lots of places. So I made a proposal. The mission-critical parts of my job could be done in about 10 hours a week. And I could totally do them from home, working around our family schedule. Would they be interested in exploring a contract or part-time position?

I totally didn’t know if they would bite but they did! I basically went to a 25% time job. My salary was reduced accordingly and I lost my benefits but it meant an additional $1,000 in income a month. Praise #2.

By then we had been engaged in the baby steps for 3 years and so honestly, we were used to living on less. It didn’t seem like a huge shift in lifestyle to get us to the point where I could stay home with my babies.

At the time I didn’t know how long the arrangement with my job would last but I figured God knew and he would work it out. Turns out that I continued in that role for 5 years! Even now that amazes me. By the time it ended, I had already been contemplating leaving.

I cannot begin to explain the incredible feeling it was to be ABLE to quit my job when we felt like it was what we needed to do for our family. I know there are probably lots of other moms & dads who dream of this opportunity and maybe think that it can never happen.

Maybe it can.

THE REST OF THE STORY

• Part 1:  The Early Years: In Love and In Debt
• Part 2: Joining Financial Baggage
• Part 3: Driving Our Debt Around
• Part 4: The Baby Years: Baby Steps, Baby Boy
• Part 5: The “B” Word: B-U-D-G-E-T
• Part 6: The Envelope System – It Makes Your Budget Work
• Part 7: The ever-important emergency fund
• Part 8: Dumping Debt

So on to baby step #2 and the real reason that most people are looking for help.

DEBT.

We think it’s normal. It’s part of life. Everyone has a car payment. Everyone has student loans. Everyone has a Visa bill.

Well, we were tired of being normal.

Dave Ramsey has a saying “Normal is broke. Be weird!”

I can’t remember EXACTLY where we were on our credit card debt when we first began this journey but our debt looked something like this:

• credit cards – $2,000
• student loans – $5,500
• Mazda 626 balance – $3,000
• Ford Explorer balance – $10,000
• TOTAL – $20,500 (not counting our mortgage)

We took a hard look at the biggest debt first. We owed $10,000 on our Explorer and it was worth about $10,500-11,000. We quickly made the decision to sell it before we got upside down. The plan at the time was to scrape together a few thousand dollars, even if we had to finance part of it through the bank, and get a VERY used car. We put in an ad and had the explorer sold within a few weeks.

Right about this time, my Grandmother died. She had a 1991 Buick Century with about 60,000 miles on it. Pristine condition. A true “grandma car”. We asked my mom and my uncle if they would sell it to us. Since no one else was interested in it, they gave it to us. A true blessing.

New debt total = $10,500

There are lots of theories about how best to prioritize what debt you pay off – highest interest rate, etc. But Dave Ramsey’s Debt Snowball has you list the debts in order from smallest to largest. So our list had three things – visa, car and student loans. In that order. For a lot of people this list is much longer – small department store cards, gas cards, etc. Whatever your debts are, list them out smallest balance to largest.

Then, make minimum payments on everything except for the smallest debt. Throw everything you can at the debt. Squeak every extra penny you can out of your budget.

When you have that first debt paid off you take the amount you had been paying toward that and add it to the minimum payment on the next debt – in essence growing your debt snowball.

So for example, the minimum payments we had were:

• Credit Cards: $200 (I’m guessing at this one.)
• Car Payment: $336
• Student Loans: $115

So we paid the minimum payment on the car and student loans and through as much as we could at the credit cards. Now remember that for the few months prior to this we had been funneling all the “extra” money into the small emergency fund. So we took that money and added to it the amount we had been spending on the Explorer payment.  Without too much work we were able to throw about $700 at the card, getting it paid off in just 3 months.

Next was the car. Well in the 3 months it took to pay off the credit card we had also paid down that debt some – around $800 – so we had $2,200 balance. We took the $700 we had been paying on the credit cards, added it to the car payment of $336 and paid about $1,000 a month to pay that off – took us 2.5 months.

Now we had $1,000 a month that we could add to our student loan payments of $115. Again, we’d made 5 payments while paying off the other debt so we hovered right about $5,000. Paid off in 6 months.

That’s a rough timeline for illustration purposes. I’m sure there were some missteps along the way. When we had a car repair come up, we paid for it out of the emergency fund and then refilled the emergency fund the next month (lowering our debt payment that month).

We’ve counseled tons of people through FPU and financial matters and I can totally vouch for the effectiveness of the debt snowball method. By giving yourself “quick” wins (knocking off the smaller debt) you will be energized and motivated to keep attacking the debt as you see the list get smaller and smaller.

If you want to see how long it will take you to pay off your debt, you can use this form to list it out.

Paying off our debt completely changed our lives and allowed me to do something I never thought I would do.

I’ll tell you what next week.

THE REST OF THE STORY

• Part 1:  The Early Years: In Love and In Debt
• Part 2: Joining Financial Baggage
• Part 3: Driving Our Debt Around
• Part 4: The Baby Years: Baby Steps, Baby Boy
• Part 5: The “B” Word: B-U-D-G-E-T
• Part 6: The Envelope System – It Makes Your Budget Work
• Part 7: The ever-important emergency fund