Becoming Debt Free
I was so close to the debt-free land. I was just twenty-three thousand away. I could have been debt-free by the end of this year. Instead, I decided that my kids and I should be happy instead. I was struggling in my marriage and decided that ending it would be the best decision for all parties involved. Well unfortunately with no prenuptial agreement in place I had to fork out some funds to settle the divorce. While it was totally worth my happiness and freedom it is have put my debt-free behind schedule.
So first I need to rebuild my emergency/sinking fund back up. I have a beautiful chart that I am using. I am hoping to have this fund rebuilt by January. If I were to follow the Ramsey 7 steps I am technically out of order. However, I feel it best to continue to save for retirement during the build of my emergency fund and paying off my debt. Becoming debt-free is important to me because it allows for financial freedom. With less debt or monthly bills to pay you obviously have more freedom to work where you want etc. You don’t have to make a certain amount of income because you have a debt to pay. Ultimately, I would like to run my own small business helping others get out of debt and stay the course to becoming an everyday millionaire. That truly is one of my goals as well to become an everyday millionaire.
Following a budge and simple steps, anyone can get there. While making more money does help it is proven if you manage your money well and invest in good investments you can become an everyday millionaire. While being a millionaire would be great it is also important to just be able to live without worry of not being able to pay for things. This is also where living as a minimalist comes in handy. Having less stuff and less need to keep up with the Jones’ keeps more money in your pocket.
While the Ramsey steps are good to follow, I like to sometimes put a spin on them or go out of order a bit. Step 1 according to the baby step plan is to build a small emergency fund so that you no longer need to go into debt if something major happens. I do agree with this, but I think the one thousand dollars may just not be enough. I would increase this depending on someone’s individual situation. Step 2 is to pay off all debt except for your house using the debt snowball. I agree with this also to a point. I personally went out of order when I was following the steps. I technically should have paid off my HELOC first before my mortgage. My mortgage was lower than my HELOC so it made sense to me to pay off my mortgage first so that I could have more funds to put towards my HELOC to pay it down faster. So, I do agree that everything unrelated to a house should be paid off before moving to the next step. Step 3 build up the emergency fund to have three to six months’ worth of expenses. This is totally important to have. I personally just used my emergency fund to pay for attorney’s fees and to replace things that were taken during the move-out. It is there so that you don’t go into debt again. Steps 4, 5, 6 are done together. Step 4 is to place 15% of the household income into retirement funds. I think once you get here you need to speak with a financial advisor to see what type of retirement funds make sense for you and your family. Step 5 is to save for college for your children. I don’t know that I necessarily agree with this one. I was saving for my children but then thought what if they don’t use it or what if I could pay cash once they get there because I have no debt. I guess this also depends on the family. Step 6 is to pay your house off early. Totally agree with this for sure. Step 7 build wealth.
So, I am currently on Step 3 again. While I think sometimes you can go back to step 3 because not everything can be accounted for in life. While you are supposed to stop steps 4, 5, 6 while in step 3 I don’t plan to. I will continue to save for retirement during this time. Especially since it will not take too much time to refund my emergency fund. While technically I should be on step 2 I am considering my HELOC like step 6. I do have children so according to the steps I should be saving for college. I have decided to not do that in hopes that I will either be able to fund it with cash when it is time or there will be another way.
So now my journey continues to become debt-free I am hoping to help others. I hope I can get enough courage to start my own business of becoming a financial coach.
Tell your money where to go don’t look back at where it’s gone.
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