For my husband Tony and I, money was by far the biggest point of contention for the first few years of our lives together. Tony and I could not have a conversation about money without it escalating into an argument. We were raised in different environments and our parents’ monetary ideals and values were very unalike growing up.
In this previous post I talk all about our debt free journey and how it changed our marriage. In 2012 we paid off all $36,000 of consumer debt, which was a car loan, credit cards and student loans.
Of course the hardest part of living a life of financial peace was the initial consumer and student loan debt pay off. Today, I am sharing the principles we still use in our day to day, even after being debt free for five years.
- Pay cash for everything
From the small things like groceries and clothes to the big things like vehicles, home projects (most recently our new deck), vacations and Tony’s master’s degree.
Every pay day I make a trip to the bank to withdraw a set amount of cash. Did you know the average consumer spends 17% more on purchases when paying with a card than they do with cash? We use cash for groceries, gas, restaurants, entertainment, gifts, home goods, gifts, clothes, lunch money and babysitters. The kids often come along and watch me physically take cash out of our checking account. (More on the impact of our debt-free journey on our kids in a later post) The best is when they fill the envelopes up for me and see how much money we spend on groceries, gas, etc. They are often involved with grocery shopping and know how much is in our envelope at the store and are helpful in making budget-friendly choices.
- Regular budget meetings
Our budget meetings are some of my favorite times together. When we were paying off our debt these meetings were weekly. Now they are bi-weekly to once a month. We usually have a beer and snacks after the kids go to bed. If they are up, they know that they cannot interrupt our budget meetings. The reason I love doing these is because we are working together as a team and usually working towards a savings goal. We go over our retirement savings status, our kids’ college savings accounts and dream about the future together. Often we are also planning a home improvement project or a vacation. I love date nights out with Tony, but feel even more connected during our at-home budget meetings.
- 15-year mortgage.
The one debt that we do carry is our 15 year mortgage. Our goal is to eventually live in a paid for house. This meant house shopping well within our means in our move a couple of months ago. Banks are willing to lend more, but we had to resist temptation to over extend ourselves and stuck to a budget of a house payment under 25% of our take home income.
Here is a math breakdown of a 15 yr vs a 30 yr mortgage I took straight from Dave Ramsey’s website:
A 30-year mortgage on a $225,000 home with 6% interest has a payment of $1,349. On that same house with the same interest, the payment on a 15-year mortgage would be $1,899. That’s a $550 difference!
That may not seem like much, but take a look at the bigger picture. When you pay $1,349 a month for 30 years at 6% interest, you are actually paying $486,000 for your $225,000 home.
Now how do those numbers work for a 15-year mortgage? A monthly payment of $1,899 for 15 years at that same interest rate will equal $342,000. So if you go with the 15-year mortgage, you’ll save yourself $144,000 over the life of the loan!
Before our recent move to Virginia, we lived in the same house for nine years. That house was more than we could afford with a 30 year mortgage when we bought it in 2009 and we were house poor. Until reading the book and implemented these principles, we didn’t realize that we had bitten off more than we could chew with our house payment. Those first couple of years as a new couple with a growing family was already stressful. Looking back, I now see the negative impact that being house poor had on our relationship.
As our income grew, we refinanced to a 15 year mortgage. Friends and family often told us it was time to buy a bigger or nicer house in a better neighborhood. It felt like everyone around us was doing this and sharing their opinion on the subject— especially each time we announced another baby was joining our family!
Instead of taking on a bigger mortgage, we finished our basement, adding 1/3 more square footage, a bathroom and 2 bedrooms — all paid with cash and keeping our mortgage small.
Especially when we started this journey six years ago, a lot of people made fun of us (and sometimes still do!). A co-worker once laughed, “What do you even make? Minimum wage?” while pointing at the 20 year old car Tony used to drive to work. Family members joked, “What does Dave Ramsey say about spending $150 on your hair every month?” (By the way the answer to that is: as long as it is budgeted for—though one time in a budget meeting Tony suggested I become brunette and I cried).
In our experience, it has been absolutely worth every laugh, passive aggressive comment and judgmental look.
The best part is that if we can do this, anyone can do this.
Whenever there is a sale on The Total Money Makeover books, Tony and I buy a handful to give away to friends when they show interest or ask us questions. I know I’ve mentioned this before, but I get so excited to share this with other people that I would like to give away five books to my readers.
To be entered, subscribe to my email list here. That’s it. Join my email list in the month of June and 5 new email subscribers will receive a book in the mail courtesy of me. No catch. I just love introducing people to my BFF Dave!
As Always,
Anna
I love this post! Thanks for sharing about your journey and being so open about your decisions. Something Sam & I need to start thinking about.
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