About 10 years ago we were drowning in debt. Car loans, student loans, credit card debt-you name it. When our church decided to offer Dave Ramsey’s Financial Peace University class we were hesitant because spending $100 on the kit to find out how to get out of debt sounded a little backwards to us. But we were already in over our heads so what was a little more? We decided to give it a shot.
Wow. We felt like we’d been given a lifeline. Learning how to budget our money with the 7 Baby Steps made everything seem attainable. We had a plan! Over the next few years, we paid off our debt, even through selling our home and purchasing another one, having two more babies and purchasing a van for our growing family.
But we made three BIG mistakes that kept us from staying out of debt long-term.
Why We Didn’t Stay Out of Debt Long-Term
1. We didn’t use the cash method.
It’s a pain to use cash for everything. Gas stations, grocery shopping (I do mine online), etc. It was inconvenient. So we didn’t do it. But there really is something psychologically when it comes to card vs. cash. Countless times I’ve looked at our bank account and gone, “Where’d it all go?!” A $5 coffee here, a happy hour Sonic stop there and before you know it, you’re over budget!
2. We weren’t consistent in replenishing our emergency fund.
When an emergency would arise, we’d use our emergency fund and then refund it when it was convenient. If we wanted to use the money for something else that month (usually buying something we didn’t need), we’d do that instead. Which meant there was no emergency fund when an emergency came. So it went on a credit card. At this point, we justified it because we were out of debt and would (hypothetically) have the money to pay it off next month. Which takes me to the third mistake:
3. We didn’t cut up our credit cards.
We thought we could handle it and tried to justify it by arguing that it was a valuable tool. You earn points, miles, cash back-whatever. Our weakness was also the “0% for a certain period” credit cards. But it never fails. You think, “I’ll have the money to pay it off next month.” And then next month comes and the car breaks down or you need some expensive dental work, etc. and the money you planned to use to pay off the card needs to go to something else. We’ve learned the hard way that we just can’t do it. We’ve been completely out of debt (with the exception of our mortgage) twice now since we started 10 years ago only to right back into it because of this mentality.
Whether you’re us 10 years ago and just trying to figure out how to fix the debt mess you’re in, or you’re us today wondering how you’re still in a mess when you feel like you’ve tried to take steps to get out, I hope you can learn from our mistakes whether you’re using Dave Ramsey or something else.
Stick to your budget. When disaster strikes, replenish your emergency fund. CUT UP THOSE CREDIT CARDS!!
We are back at square one. Saving for the emergency fund. Starting our debt snowball. And it stinks. I wish we’d learned our lesson the first or second time around. But ya know what they say the third time’s a charm. We’re learning to go without. We’re learning to be content. We are teaching our children that it’s good to be a saver and if you don’t have the money, you don’t buy it. You wait to go on vacation. Which will be a valuable lesson for them when they’re older and making their own financial decisions.