Wednesday, July 16, 2008

Going Debt-Free

Homesteading is not cheap. At least, not in the beginning. There are seeds to buy, alternative energy sources to fund, animals to feed, etc, etc, etc. Yet, one of the dreams or goals or sometimes realities of every homesteader I know is to live debt-free.

I know what you're thinking. Aren't homesteaders that crazy bunch of people who do everything themselves and can rig up just about any invention from scrap PVC and recycled aluminum cans? Don't y'all get everything you need by patiently waiting it out on freecycle? Ummm, maybe there are some homesteaders out there who do just that, but I've yet to see solar panels listed on our local freecycle and I'm not nearly enough of a genius to rig them up myself from... anything. Shhh! Don't tell The Husband.

So while I've been pondering and fretting over all the steps we have yet to take to become more self-sufficient and more evironmentally friendly, I've been ignoring the number one step in becoming more self-sufficient: getting out of debt completely. No mortgage, no credit cards, no nothin'. That's right. I'm using double negatives. I mean business, people!

Once upon a time, before we had kids, The Husband and I were completely debt-free. We even discussed purchasing a house with cash. Then I got pregnant with twins and The Husband lost his job and I had to quit my job when I went into premature labor so that I could do three months of hell bedrest at home. The inheritance I'd gotten from the early death of my mother was soaked up in an instant. House money? Gone. I think we even had to borrow a bit of money from The Husband's mom to get by until The Husband got a job... when the twins were 4 months old. Then came the student loans when The Husband went back to school so that he could get a better job, which never happened. Anyway, you get the picture, right? We're knee-deep in it.

We do have one thing under control. We have no car payment. I paid cash for the car that The Husband drives to work each day. It's a 1990 Carolla, and we bought it from a little old lady who used it once a year. The other vehicle, which we use only for the rare family outing, was an even trade for our pre-baby car. Other than that, we're pretty average in our debt.

Now the question is, how do we get out of it? There are a million financial gurus out there, each with their own plan for becoming debt-free. Most that I've seen are pretty much the same. There are small differences here and there, but the basic premise is the same: control your spending, pay off your highest rate debts first, pay more than the minimum, and build an emergency fund quickly that makes up 3-6 months worth of living expenses.

One of the currently popular plans for relieving yourself of debt is Dave Ramsey's 7 Baby Steps. It's a good place to start, but there are things I disagree with. Nevertheless, I'm going to use a slightly tweaked version of it to get the ball rolling here. I recommend that you tailor any plan you choose to follow to your individual needs and personality. This is going to be my primary focus for quite some time. Getting out of debt and living life oweing to no one else can be a very long process, but it really is, in my mind, the most important step in self-sufficiency.

3 comments: said...

Id recommend that whoever is better with finances take control of them. In my case, my wife is awesome with finances and we got out of debt pretty quick. It would have never happened if I was in control :) If neither of you are good with finances, you should get some professional help.

We still owe the mortgage on the house. That worries me, but someday it will get paid off. Someday!

If you have a bunch of credit cards and dont know how to get out of that mess, try using a credit management agency. (I did this before I got married).

CareOne (formerly Genus) will help to lower all interest rates and help consolidate your debts and design an easy plan to get them paid off. Worked good for me. I had a couple cards that were around 19% interest rate and they got one down to 8% and the other one NO interest! It makes paying them off much quicker.

We also liked the Suzie Orman books. Some great info in there.

One of the biggest things to paying debt off quicker is to buy less. The less you buy, the less you need to work. We dont use cellphones often and have limited ourselves to the "pay as you go" phones. We pay $23 for 3 months of service, which is much better than $1200 a year in a contract. We really scrutinize the stuff we buy and if we REALLY need it or not. Could I buy a chainsaw for $400 or borrow my brothers? Or rent it for $30. Read a book instead of going to the movies. Go to a minor league baseball game instead of a major league one. Minor league games are fun too and cost a lot less. My preference is Major League soccer instead of baseball :) 90 minutes of non stop action, injuries, near misses, awesome goals, etc.

Mist said...
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Mist said...

Thanks for all the advice, shirtees!

We're actually okay. We just needed to get our butts going on paying down this debt we'd accumulated. It's nothing drastic, but it is more than zero which means it's too much! Well, I guess the mortgage is pretty drastic. We bought our bungalow cheap though.

Already we spend next to nothing on "extras." We have no cell phones, I buy the few clothes we need at Goodwill, and I try to get everything else we need there as well or in some other second-hand manner. Mostly we just do without.

Now's the time to focus though. We've been content to just pay minimums, knowing it would take years to pay down everything. I'm no longer okay with that. All the money I get from selling stuff on eBay will be going to our small emergency fund for now (something we've been lacking for awhile).

Suze Orman cracks me up! Is it just me, or does she always seem to be telling someone to get a divorce? :D