Jul 09 2013

Update from Courtney: Part 10 DEBT-FREE!

See part 1part 2part 3part 4, part 5part 6 , part 7, part 8 and part 9

In March 2010, my friend Courtney started guest posting here updating her progress on getting out of debt. When she set out, she had several credit cards, two car loans, a student loan and a personal loan. And now, look at her! Here’s Courtney:

It’s been nearly three and a half years since we began the journey to end our debt! In many ways we feel like we have failed repeatedly, but the numbers don’t lie.

  • Kohl’s credit card: $395.20
  • Discover card: $537.15
  • Capital One: $725.45
  • Menard’s: $2,100
  • Visa: $2,530
  • Signature loan: $2,729
  • Discover #2: $5,400
  • Dodge: $3,295
  • Toyota: $11,503
  • Sallie Mae: $27,379

Total debt in March 2010: $56,595

Total debt in July 2013: $0!!!!

A LOT has changed since my last update in February of 2012! At that time we had a fully funded emergency fund and owed almost $20,000 on Sallie Mae. Shortly after that post, we decided to take $10,000 from our $12,000 emergency fund and pay down Sallie Mae. Then a couple months later we decided to move!

We moved from a 2 bedroom house to a 4 bedroom house. We weren’t able to put a full 20% down on the new house, so we do have the pesky PMI. We went for an adjustable rate mortgage (don’t faint, Kacie) because the rate is very low and because we plan to refinance in 3 years into the name of a trust for security reasons.

Then, we bought a boat (cash, no loan). I am recently pregnant and we have plenty of space for our family to grow (we plan on this being our forever home). Currently we have a $2,000 emergency fund and owe only on our mortgage as we made our last Sallie Mae payment this month.

We sold the boat for $500 more than what we paid for it, which enabled us to make one large, final payment towards Sallie Mae!

Our plan beginning next month is to contribute a portion of our money towards our emergency fund and a smaller portion towards the principal of our mortgage. We need to pay down the mortgage to be certain we can refinance in the name of a trust 2 years from now (you cannot have PMI if your mortgage is in the name of a trust). It will probably take close to three years before we have a fully funded emergency fund.

Hopefully it will go faster and we can put some of our ‘extra’ money towards the emergency fund.

We do not plan on funding college or retirement until we have our emergency fund complete; once that happens, retirement and college will become regular monthly items in our budget. For now, my husband is only maxing out his IRA ($5,000) each year with money from his second job.

I’ll be honest… if we had done this the true Dave Ramsey way, we never would have moved, bought a boat, taken a vacation or done a dozen other things.

But, we also probably would have been miserable. I am a firm believer that you have to do what works for you. Dave Ramsey was a great starting point for us, but we didn’t feel like it fit us to a T.

Through all this we have learned that it is all a balance–you want to enjoy your life, but it is not worth going into debt to do it! We know we could have paid the debt off faster if we had made different choices, but we made informed choices and are happy with the end result.

If I had any nugget of advice to give, it would be don’t give up! Know that you will fail. You will make progress and then life will happen and you will feel frustrated. Don’t. Give. Up. Just don’t, okay?

Here’s a very recent example where we felt hopeless, frustrated, and like giving up: February of this year our washing machine broke. While I wanted a matching and pretty washer and dryer, our dryer still worked so we only bought the washer. Guess what? We dried one load in the dryer and it broke. So, $2,000+ of unexpected home appliance costs came.

Then in March we had a free energy inspection from our electricity provider. Guess what they found? Almost $5,000 worth of mold! In two months we had $7,000 worth of unexpected expenses. Thankfully we put the washer/dryer on Menard’s with 6 months free interest and didn’t have to blow our emergency fund. Part of our emergency fund went towards the mold remediation and the rest went on our Discover card.

We still managed to pay it all off before we were charged $0.01 in interest thanks to some careful planning and my husband’s second job being lucrative. You will always have setbacks! That’s just part of the journey. But, if you stick to your guns and are able to avoid going into more debt, you will be able to do amazing things (even if they don’t happen a quickly as you want them to).

For our future, we hope to fund our emergency fund, retirement, and children’s college. It will be slow going, but we feel like we have a plan and a handle on our future! We’re so thankful that we have learned how not to live in a debt cycle and want to teach our children the same thing!

* * *

Kacie’s comments:

Wow. Seriously, amazing! I am so inspired by what Courtney and her husband have accomplished. They’ve paid off a lot of debt in a short amount of time, plus they didn’t completely give up the fun things of life in the process. I mean really, they had a boat for a year and enjoyed it, and then sold it at a profit!

In her intro post, she shared that she hoped to be out of consumer debt in five year’s time. Well, it didn’t take that long!

 

I’m confident they’ll have a hefty emergency fund soon, and a paid-down mortgage as well.

I can’t remember if Courtney’s husband is eligible for a retirement match, and if so I’d say forego the IRA and get that match instead…but it sounds like that isn’t available. Either way, he’s still contributing to retirement which is great.

Being Indiana residents, they are going to love getting to the point of contributing to their baby’s 529, since Indiana gives an amazing 20% tax credit off of state income tax. And — yay for her baby! What a wonderful financial situation to be in as they start out as parents.

Courtney, it has been so fun sharing your story here. Feel free to pop back in anytime for a guest post if you have something you’d like to share.

Readers — give her some comment love!



6 Responses to “Update from Courtney: Part 10 DEBT-FREE!”

  1. Congrats on being debt free!! Could you explain what a mortgage in trust is? I have never heard of that. What benefits does it give you over a traditional mortgage? Thanks!

  2. Way to go! I cannot imagine how great it will feel to send that final payment to Sallie Mae. We’re not there yet, but I dream of the day!

  3. I am wondering the reasoning for refinancing in the name of a trust? So your baby can inherit the property more easily if you and hubby pass?

  4. My husband’s side business is not an LLC which means that if something horrible were to happen (if he dropped a tree on someone’s house and killed their spouse or something) they could sue us for everything we have–including our house. Additionally, his other job is as a police officer. So, for security reasons, we’d rather not make it too easy for people he has arrested/had dealings with to find us! So, we plan to go a lawyer, get a trust agreement (there is no specific mortgage trust) and then refinance into the name of the trust. The trust will own the house, but we own the trust so we will own the house. Plus, with a trust, no one can sue us for anything in the name of the trust–i.e. the house! Here is an article that does a better job explaining that I’ve done: http://money.cnn.com/2004/07/09/real_estate/buying_selling/land_trusts/. I hope that clears some things up!

  5. Congratulations Courtney! I’ve been following since part 1 of your story. You’ve done an amazing job. Stories like this keep me motivated, something I lack lately!! Thanks for the link to trusts, that’s very interesting, and something I’m actually looking into myself.

  6. Congrats!!!!! This is so amazing. These are the stories people need to hear. People need to know that they too can get out of debt and each individual offers there own tips and struggles along the way.
    Congrats once again.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

I hope I can inspire and encourage you to improve your situation. See disclosure.

I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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