It was early January of 2010 when we decided it was really time to tackle our debt. We were throwing money at credit cards left and right, but things just kept popping up. We we’re doing well with this, but didn’t have a real plan. We managed to go from $86,000 in the hole to $72,500 from January to September. That’s when Autumn was born. Luckily for us, we’d stock piled cash over the summer to pay for medical bills and maternity leave. By November we already back down to $78,000 and by December we fell another $3,000+. So for the year of 2010, we only increased our net worth by around $5,000.
- Dave Ramsey.
With the new year came a new plan. Maribeth had been talking about Dave Ramsey for some years here and there. We looked into it and decided to give his plan a try. We liquidated all of our savings down to $2,000 instead of his $1,000 (we wanted a little bigger cushion than he suggests). We were back down to $78,000 by the end of the first week in January. There were a couple of hiccups along the way with a trip to Minnesota and tuition, but the tuition was reimbursed later. Other than those couple of bumps in the road, its been pretty smooth sailing. Even with the last tuition payment in November of 2011, we only lost about $40 of ground. Our debt snowball had grown to $422 and would be nearly $500 if not for another baby coming along in May of 2012.
Speaking of a new baby. We are currently saving, again, to cash flow the medical bills and maternity leave. This will boost our net worth for awhile, then we’ll see it fall again. But, we are more optimistic this time around. With only $2,600 saved to our goal of $8,000 we’re sitting pretty, as long as we reach our goal of $8,000. Our net worth as of 12/1/2011 is around -$66,000. Take away another $2,600 and add in nearly $2,700 for tuition reimbursement and bonuses and we’re right at the same spot. With December’s payments made we should be right around -$63,000 January 1, 2012.
So, the math for this year turns out to be $78,000 – $63,000 = $15,000 in debt paid off in 2011. I’m happy with that number given our choice of lifestyle. Once baby number two is here and we’re settled into having two children the debt snowball will pick up momentum once again and we should be able to knock this debt out in just under three years.
THREE YEARS! Yeah, we know that seems like a long time, but each time a debtor is paid off, there an energizing sensation that gets you pumped to get rid of the next one. This is the beauty of the baby steps, progress comes more quickly this way than paying a high interest high balance off first. The little bit of extra interest paid is well worth the gratification of ridding yourself of your debtors.
You can follow our progress in the sidebar of the website under the debt calculator.
