Friday, July 02, 2010

My Two Cents On Budgeting: Paying Off Debt

Welcome back to my budgeting series!

If you are just tuning in, feel free to check out the other posts in this series.

Before The Bills Are Paid


Making A Budget


The Envelope System

Today we're talking about paying off debt.

This common subject really needs no explanation, does it? Almost all of us are much too familiar with debt and how difficult it can be to get out from under it.

Before we were married, we made the decision to not take on any debt for our wedding and honeymoon. At the same time, we decided to live debt-free as much as possible.

Now looking back, we can see that this was one of the wisest decisions that we've made. We do not regret this decision one bit.

However, we did have some debt that carried over from before we were married. While we haven't been in debt up to our eyeballs, so to speak, we do have some experience with it.

One of our first priorities after the wedding gifts had been opened and our honeymoon bags packed away was to get our finances in line.

We chose to pay off our debt rather quickly so that we could begin saving more aggressively. We listed the amounts in order from smallest to largest and paid off the smaller or most time sensitive debts first.

A good share of this debt involved family members, which can be an uncomfortable and delicate matter. I do not recommend borrowing money from family members if at all possible! We didn't have a terrible experience with this but the relationship was much more relaxed once the debt had been paid!

Don't know about you, but I'd rather not eat my Thanksgiving dinner knowing that I owe money to the folks around the table.

In order to pay off debt rather quickly, we adjusted and tightened the budget accordingly. We also sold a few things and had a yard sale to come up with an extra payment or two.

By doing these things, we were out of debt in just over a year.I remember how nice it felt to not owe any thing to anyone and how freeing it was not to have a 'debt category' in my budget notebook.

So if you are in debt, I encourage you to do all you can to start paying it off!

Tighten your budget to just the essentials to make room for extra debt payments. Sell things. Look for ways to make extra money. Do whatever you can, legally and morally, to get out of debt!

As Dave Ramsey says, "Sell your car!"

There is so much more freedom in the budget when you do not have debt. This is especially true if you have a smaller income.

A friend once said in regards to a time when his family of five was living on $1000 a month, " We didn't have the money to go into debt!" I thought that was odd at the time, but I now understand that the smaller the income the less room there is for extra payments and bills!

It's easy to get discouraged over the debt you have. It's easy to feel like there is no way out because it looks so impossible.

Instead of being discouraged and continuing to muddle through, barely making ends meet each month, make the decision to get out of debt and do something about it!

Attack it! Yes, it may take a lot of time to get where you want to be. Yes, it will be hard. Yes, you will have to sacrifice things you like or change your lifestyle. You may need to eat rice and beans for a while.

But it will be worth it!

**Next time my husband and I will be teaming up to bring you the last installment of this series: Finances and Marriage. We'll be talking about our personal experiences and what decisions have or have not helped us as we work together to glorify God with our finances.

**This post is part of Frugal Fridays!


Amy said...

I'm a big fan of Dave Ramsey's financial wisdom! I can't wait until I can say that we have all our debt paid off!! Thanks for the encouragement!

gail said...

great post! you and your hubby were wise. looking forward to your next post and hearing from both of you =)

Debbie J said...

Excellent advice! Your series is great and you are doing such a good job with it!

Suzie said...

That is so true what you said about paying back family members you borrowed money from. My husband owes his father money, and it was so awkward for me to hand my father-in-law a Father's Day card containing money to pay off our debt to him. A day that should've been happy was instead uncomfortable and felt more like a business transaction. It's definitely easier to not borrow in the first place!

DarcyLee said...

We are aggressively going after debt and one way we're doing this is having a yard sale in the next couple of weeks. And whatever sells is going on Craigs list. What I would like to get from you is any advice you can give on advertising for your yard sale since I know you had one recently. Thanks a bunch!