On Tuesday we paid off all our debt, except out house. Definitely a good feeling.
I have to admit though, it came about because we pulled some money out of our IRA accounts. I found a tax clause that allows the owner to pull out their contributions, even for a rollover to Roth conversion, so we did it. Our accounts were almost 100% in cash between a money market fund and some CDs. The interest rate return was around 3% or so. It didn’t make sense to keep that money in there while paying higher interest in other places. After I found out I could remove this money with no taxes or penalties, it was pretty much a sure bet.
But, even given this, I think there are some valuable strategies that we employed that might help others with paying down your debt.
First, I read Dave Ramsey’s book about Financial Independence. It’s a good book, although I don’t agree with all of Dave’s philosophies. But, his cash envelope system to manage your budget is spot on 100% the best way to move from a check/credit card system to a system where you can put some serious limits on what you were doing. You are required to be serious about your budget and this cash system forces you to do that. You have cash, you can spend it. You don’t, you can’t. No slipping them the plastic!
Second, if you want to do it you will have to struggle. Many times we ran out of cash, so we just didn’t do ANYTHING. Even grocery shopping. There were plenty of times where we only ate what was in the pantry or the freezer. For a while I didn’t have enough cash to restock our freezer for meat products, so we went without quite a bit. It didn’t hurt us.
But, as most of you know we buy most of our vegetables and fruit in the summer and put them up for the winter. I was able to do this with our normal weekly spending, so it’s possible to do something like this and still eat local and organic.
Third, it takes a team effort by both parties. Rachael and I have been on the same page a lot of things for most of our marriage, but this changeover was quite hard for us even. We had plenty of disagreements about the spending. You need to know that going in. But, the adjustment was worthwhile, and we are comfortable with the cash envelope system.
Fourth, the changeover from using a credit card to using cash is an extremely taxing month. We had to pay for everything with cash while also paying the previous month’s credit card bill, which was our normal spending. This was a really hard month. I dipped into just about every source of cash I could find to make it through this month.
I’m not sure if I really offered any tips here, but let me know if you have questions or anything.
By the way, if you are on Facebook look me up. I’m listed under my real name. Facebook people found this out on Tuesday.