I’m happy to present my first guest post by a non-blogger! I found Bethany on Twitter where she talked about having paid off all her debt except for a little more on her Student Loan. I wanted to take some of the focus off the ‘older’ voice (me) and get some insights from a younger person who has a lifetime ahead of her. I’ll let Bethany take over…
Hi, I’m Bethany and I am almost DEBT FREE!! I am 26 years old and graduated from Central Michigan University in 2009 with a Bachelor’s degree in Business Administration. I majored in Marketing and luckily I’ve been able to find a job in that field. I am also a photographer and enjoy shooting both landscapes and portraits. I especially enjoy photographing children, they’re just so innocent and carefree. Check out my albums on www.facebook.com/BethanySuePhotography.
I have been blessed with an incredible family and hope to have one of my own someday. As an adult, I did the “normal” thing in life and opened credit cards and took out student loans to attend college. Then the constant thought/fear of paying of debt for the rest of my life opened my eyes. I hope the tips below help you in your journey to becoming debt free!
My debt free journey began in September 2012 when I attended a Dave Ramsey Financial Peace University course.
To start from the beginning, I really didn’t know how to manage my money. Money came in and money went out without me telling it where to go. I wasn’t ridiculously in debt. I had two credit cards with a combined balance of about $2500 and student loan debt of around $17,000. Doesn’t sound bad, right? I mean student loans and credit cards are just a way of life. WRONG!! The credit cards are for emergencies only… HA! That idea didn’t last long.
Fast forward to February 2013:
- NO credit card debt,
- less than $1800 to go on my student loans.
I will share with you a few things that have helped me get to where I am today.
Create a monthly zero-based budget.
Now I do not like math or accounting, but creating a budget isn’t that deep. Simply start with how much you make each month, budget your expenses, and the goal is to end with zero. Your expenses should include EVERYTHING: mortgage payments, utilities, water, taxes, gas, a little pocket money for you, bills, healthcare costs, savings, etc. Some things are a little tricky like a water bill. Mine comes every 3 months so I take my total water bill (about $100) and I divide by 3. So every month I set aside $34 so that I can easily pay that water bill when it comes in the mail. Creating this budget will take you maybe 30 minutes and your first few budgets won’t be right. You’ll realize you need more money for groceries, or less money for gas, but you’ll eventually get it right.
Another amazing thing that takes place is you actually see how much money you are spending on crap! I was able to see it anyways. When you actually sit down and write out how much money you make and then write down your expenses it becomes obvious where you DON’T need to spend your money. For a zero-based budget template, go to http://www.daveramsey.com/tools/budget-forms/ and download the “Monthly Cash Flow Plan”. The Financial Resources page on this site has some great information as well
Focus on your smallest debt and pay that off first. Don’t worry about the interest rate! People like/need instant gratification. In some cases, that instant gratification is what gets you into debt to begin with, so now use that to your advantage! Children do what feels good, adults devise a plan and stick to it! When you create your zero-based budget put as much money as you can towards this smallest debt and pay just the minimum payment on all other debt. Once that smallest debt is paid, take those monthly payments and roll it over to the next smallest debt. So now you are paying the minimum payment PLUS what you were paying on the old smaller debt. Make sense? You keep doing this until your debt is paid off.
Attitude and lifestyle changes.
I think what helps in your journey to become debt-free, is the desire to retire with money! To be able to rely on your own money instead of hoping the government will be able to take care of you when you’re older. I want to retire a millionaire! So I need to do all that I can so I can start fully funding a Roth IRA and investing in mutual funds and/or property, and the path to do that does NOT include paying off credit cards or student loans for the rest of my life.
Becoming debt free is a total lifestyle change. People will think you’re weird, say you don’t have a life, try to convince you that student loans and car notes are just a way of life and “everybody’s got ‘em”. Don’t listen to them! Living with cash is possible! Vacations paid by cash are possible! Buying a car with cash is possible! You just have to save first! I am going to take a trip to Japan in 2015 because I have a cousin stationed over there. I am saving now so I can take the trip with cash. You have to make a commitment to yourself to change your lifestyle so you will have a debt-free future!
Be prepared for emergencies.
Things happen! Before you start paying off your debt, put aside $1000 just for emergencies. After you get your debt paid off you’ll want to have 3-6 months of expenses set aside for emergencies. I recently found out that my transmission is shot in my car and it will cost me about $1600 to fix! Yeah that sucks, but it could be a lot worse if I wasn’t prepared with that $1000 cushion. Now I’m in a situation where I can get it fixed with cash and hopefully negotiate a better price because I’m paying with cash. I’ve done some research and discovered that I could sell my car for about $4500-$5000, so I will save another $5000 so I can get a nice used vehicle. Notice I did NOT say I will finance a car! That is not an option for me because I am living debt-free. Cash is king, so again I will use that to my advantage and negotiate a better price.
One other thing I should mention is that my living Grandfather put a trust together for each of his grandchildren. This money was put into a trust for me when I was around 10 and that helped me with my student loans. I am mentioning this last because I didn’t want you to read this and think that I didn’t change my way of living or I had an easy way out of debt. This money from my Grandpa obviously helped, but it wasn’t the only thing that helped me on my journey. I could have easily taken that money and bought a new car, gone on vacation, put a down payment on a house, etc. I CHOSE to use the money towards paying off my debt.
I hope my story inspires you to start your debt free journey. I highly recommend attending a Dave Ramsey Financial Peace University course. It gave me the confidence and knowledge that living with cash is possible! If you don’t have a course near you then I would recommend reading his book The Total Money Makeover, which is equally inspiring. GOOD LUCK and follow me on Twitter @bettyloula for encouragement during your journey and updates of my own.
Thank you Bethany for a great story! If you keep up this focus and intensity, you’re going to do fantastic! In addition to her book recommendation, feel free to check out my (less expensive) book “We Got Outta Debt: A True Debt Free Journey“
Please feel free to contact her on twitter or Facebook.