Debt Free - or at least on our way.
Yes it is possible. We are not there yet, but we are on our way. We first started attempting to pay off debt almost 3 years ago. We learned about Dave Ramsey and his program about 2 years ago and are now following his plan. With this years tax return, we feel like we are debt free now! Although we aren't actually.
In the Dave Ramsey plan, first you set up emergency funds (he recommends $1000 for that) so you don't have to use a credit card for the unexpected things in life.
2nd, you cut back and put everything you can into paying off debt, from the smallest to the largest, rolling the payments from each thing you pay off into the next debt. He recommends paying off everything except your mortgage here.
3rd step is to get 3 to 6 months worth of income into the bank for a fully funded emergency fund.
So far, we have our emergency fund, and have gotten rid of $42,000 of debt!! It's horrible to admit that we ever had this much debt, but $15,000 of it is what insurance didn't cover from our kids being born. Now, all we have left is our low interest consolidated student loans! Credit cards, car, medical bills, and 1 student loan are all dead!
Now is the decision part. With the unstable economy and having kids that we are responsible for, we need to decide if we are going to now stray from the original plan and get our 6 months of income in the bank, or if we are going to continue onto the mammoth debt of our federal student loans ($42,000). Including tax returns, I believe if we put everything we have into it, the student loans would be gone in less then 5 years. But Thad was just unemployed for 4 months and I have a hard time with the fear that this will happen again.
According to Ramsey, you should include a 2nd mortgage in step 2 if it is less then half of your annual income. Since our student loans are more then half of our annual income, and at a lower interest rate then most peoples mortgages, I think we are leaning towards savings account next.
In the Dave Ramsey plan, first you set up emergency funds (he recommends $1000 for that) so you don't have to use a credit card for the unexpected things in life.
2nd, you cut back and put everything you can into paying off debt, from the smallest to the largest, rolling the payments from each thing you pay off into the next debt. He recommends paying off everything except your mortgage here.
3rd step is to get 3 to 6 months worth of income into the bank for a fully funded emergency fund.
So far, we have our emergency fund, and have gotten rid of $42,000 of debt!! It's horrible to admit that we ever had this much debt, but $15,000 of it is what insurance didn't cover from our kids being born. Now, all we have left is our low interest consolidated student loans! Credit cards, car, medical bills, and 1 student loan are all dead!
Now is the decision part. With the unstable economy and having kids that we are responsible for, we need to decide if we are going to now stray from the original plan and get our 6 months of income in the bank, or if we are going to continue onto the mammoth debt of our federal student loans ($42,000). Including tax returns, I believe if we put everything we have into it, the student loans would be gone in less then 5 years. But Thad was just unemployed for 4 months and I have a hard time with the fear that this will happen again.
According to Ramsey, you should include a 2nd mortgage in step 2 if it is less then half of your annual income. Since our student loans are more then half of our annual income, and at a lower interest rate then most peoples mortgages, I think we are leaning towards savings account next.
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