Update: HERE is an updated version of this post with an added tip as well. This has been one of my most popular posts, thanks to Pinterest. I wrote this 2.5 years ago and although I still recommend these 4 tips to pay off debt, I have some updated information. I still stand by these tips as recommendations to help pay down debt and/or live financially prudent.
I have been trying to come up with the perfect post that sums up our debt-free journey in a nutshell. The only problem was narrowing it down to just a few tips. But here you have it…
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TOP 4 TIPS TO GETTING RID OF DEBT:
How We Paid Our House Off in 33 Months
A Little Background: When my husband and I got married five years ago, we had $8,000 in car debt and $110,000 in house debt (put $40,000 down). It took us a little less than 3 years to pay it off and my income didn’t contribute to our household finances until a year after he bought the house (I was in college and student taught). We are both teachers in Texas, although now I stay at home with my 10 month old son, which is the reason we wanted to pay our house off so quickly. So, no, we don’t have fancy jobs nor did we inherit money. Simple living, hard working Americans. We did though find time and money to take several vacations and thoroughly enjoyed our DINKhood (DoubleIncomeNoKids). I say that to emphasize this is very doable if you’re willing to make a change now for an incredible change in the future! Dave Ramsey is our hero and taught us what to do during this process. We simply read two of his books (well my husband did…I read them later). I can’t recommend these books enough.
|Our son even likes the book|
There are many things we did to spend wisely, but I chose four of the more important tips we stuck to while paying off our house! I promise these will change your finances! I’ll start with important and end with most important!
1. GROCERY SHOP WISELY – Groceries is usually where a large part of a household’s income goes (along with mortgage and a car), therefore it is really important to keep this low! I know firsthand it is VERY easy to spend a lot on groceries – I love food and love cooking! I’m going to give you nine tips “in a nutshell” for cutting your grocery budget that worked for us:
- Shop at Walmart (assuming you have one nearby) – They are just plain cheaper! I’ve done my research and on a daily basis, they have better prices. Plus they price match, so if another store has an item on sale or cheaper, Walmart will price match it.
- Don’t visit Costco or Sam’s frequently – I love these stores and yes, we do shop at Costco, but ONLY for their items on sale that week. And we still make sure it’s a better deal than elsewhere. Even if you have a big family this is often not the best place to go. When I look back at our budget from the last five years, the months we blew our grocery amount, were the months we went to Costco/Sams.
- Plan your meals – I’ve now started adapting Danielle’s (Blissful and Domestic) method of meal planning and writing out a list. I love it and it’s certainly helped organize our meals and grocery list. We shop every week though.
- Go with a list – This goes with planning your meals. I now organize my list in categories and my trips to the store are so much faster and easier!
- Buy store brands. Don’t be a brand snob (I can say this because I used to be one). There are a few items I still get brand names, but most items are store brand. Make sure to look at all the prices though. Sometimes a brand name may be cheaper.
- Use Coupons – I probably do this the least due to time of planning, but it definitely helps and there are many websites with coupons you can print out. We usually use coupons for a few items we want to splurge on. Be picky though. Many couponers actually spend more because they’re “getting a deal.” Just because it’s on sale does not mean you need it.
- Look at Store Ads – This is important so you know you get the cheapest price you can on your items, especially meat and produce. We will briefly look through the ads, circle the items that we want that are cheapest, and make a list (item, price, store). This way when we’re at Walmart we can price match a lot easier. I know some of you are saying “Eww, Walmart. I can’t buy my meat and produce from there.” First of all, it’s not bad. Second of all, that’s fine, just go to the store that’s selling it cheaper and buy it there. There are some stores that we have to visit to get the item on sale if it’s that store’s brand (i.e. Kroger’s chicken).
- Don’t go with kids – If you can, leave the kids at home. I’ll sometimes go at 9:00pm. Kids at the grocery store can make you wanna poke your eyeballs out and they can really damage the wallet!
- Make a budget for the month – An important component of this tip is to write down what you spend after EACH grocery trip next to your budget (I’ll share an example below in the fourth tip). We typically budget $280 a month for groceries (usually spend $300 though). That’s about $75 a week. When we were paying off our house, we budgeted $240 (and we actually stuck to it). Therefore, budget low because you will spend whatever you budget, if not more! Aim to spend 5-10% of your household income on food (that’s dining out, groceries, etc…)…closer to 5% if you’re paying off debt. Like Dave Ramsey says, “Rice and beans, beans and rice.”
|Here’s an example of our template filled out! Below is a blank one you can download.|
|Grocery shopping with kids!|
|Looking through store ads is the most effective thing we do for keeping costs low|
2. DINE OUT ON A BUDGET – Telling you “I love eating out” is an understatement. I thoroughly enjoy it! I have to say, I think my hubby and I are pros at this by now! I can probably count on one hand how many times we’ve paid full price for a meal in the last five years. We budget about $100 a month for this. And I would say we eat something that’s not made in the “Snyder Kitchen” about 15 times a month, whether that’s breakfast, lunch, or dinner. Mmmm I love breakfast. Ok back to budgeting! Here are nine of our favorite tips “in a nutshell.”
- Buy and use an Entertainment Passbook – They cost $25-35 at the most and they have TONS of coupons/discounts for your area. One trip to a restaurant pays for the book. We used this book for almost every meal out back in the day! It allows you to visit really nice restaurants for half the value! Check it out! Sometimes, mama just needs a break from cooking.
- Look at the bottom of your restaurant receipts – Often times, they have free items if you complete a survey. Wait, I promise it’s not bad. It’s either an automated phone call or online. Takes maybe two minutes!
- Sign up to your favorite restaurants email list – They send you coupons and discounts, especially for your birthday or anniversary.
- Know restaurants weekly deals – Many times restaurants have deals during the week (i.e. kids eat free, half price appetizers, etc…) to bring customers in the restaurant. We love Cristina’s Mexican Restaurant. They have $8.99 fajitas on Wednesdays, so we’ll go and share that. Then we get to splurge on chips and queso or their apple pie…or both. Ok, usually both!
- Drink water when you dine out – it’s healthier and $2-3 per person adds up fast!
- Share a dessert – We used to not order dessert when we were first married, but if we do, we split it! Again, healthier and dessert is really expensive!
- Don’t drink alcohol when you eat out – I can see the eyes rolling on this one! We are not big drinkers, so this one is easy for us and saves us a TON! If you must have a drink, find out where the deals are. Or save your drinks for home. You can make it much cheaper at home.
- Limit your restaurants to places that require a tip – For example, when we order pizza, we always go get it. Usually one of us is already out and about, so we’ll just grab it on the way home. Did you know pizza places charge $2-3 for delivery, plus a tip? That’s $5-10 more just to have it brought to you.
- Use a cash system – We don’t do this, but if you have bad self control or don’t check your budget, set aside cash and when you’re out, you’re done eating out that month.
|This is the Entertainment Passbook. Click to go to website. Often times, high school kids will sell these for $25 for a fundraiser.|
|Free food? Yes please!|
|Cash Envelope System|
3. EVALUATE YOUR CAR SITUATION – Let me say that this tip is really, really important! I promise! I have SO much to say about this topic, so if you want better information, click on the link to get more details. We follow Dave Ramsey’s financial advice, so these tips are from his teachings.
- I’ll start with a quote from Ramsey. “Taking on a car payment is one of the dumbest things people can do to destroy their chances of building wealth.”
- You need to get rid of your car payment. I know you can’t do this tomorrow, but this is something you must eliminate quickly, whether you pay it off soon or trade it in.
- The best way I can explain why you should get rid of you car payment is this: If you have a $378 car payment (which is normal) your entire life (also normal), you just gave up $4,447,084 in investments! Is a car really worth that much money! Here’s what Dave says – “If you invested $378 per month from age 25 to age 65 (a normal working lifetime), in the average mutual fund averaging 12% (the 70 year stock market average), you would have $4,447,084.01 at age 65. Hope you like the car!”
- How do you get a car without a payment? Basically, pay cash for a junk car, save, then trade it in for a slightly better car, save, then repeat until you have the car of your dreams. This video does a great job explaining smart car payments (which is NONE)!
|This is what my husband bought in cash once we paid off the house and had some extra money (no kids).|
4. MAKE A BUDGET – This is what I get asked about the most. I saved this for last because it is the foundation to paying off all your debts and living like no one else! I have to say, my husband is the brains behind the budget. He came up with this awesome acronym for the word B-U-D-G-E-T. Can you blame him, he’s a teacher!
- B – Borrowing is BAD! Proverbs 22:7 states, “The rich rule over the poor and the borrower is slave to the lender.” Do not borrow your way out of debt. It doesn’t work. Get rid of your credit cards! Use cash or a debit card. Did you know 60% of Americans do NOT pay their credit card amount on time?
- U – Unity! Your spouse must be on board for this to work! Finances are the #1 thing couples fight over and 57% end up in divorce over it. Marriages have better success with honest communication. Pray and work together for maximum wisdom!
- D – Discipline! Every month have a finance meeting and put everything on paper before you make purchases. Hold yourself accountable to the written plan. You will want to give up, but give it 90 days to form a habit!
- G – Giving! No matter the hardships you face, continue to tithe (giving at least 10% to your church). God will bless you and your family. He is the creator of money. Trust that he will provide. This will probably be the hardest thing to do when on a tight budget.
- E – Education! Seek wise counsel. Dave Ramsey’s “The Total Money Makeover” provides a simple plan to pay off debt. It’s the best $10 investment we’ve ever made! Also, read what Scripture says about money. It will provide a peace of mind when things get tough.
- T – Time! The bigger the debt, the longer it will take to get out of debt. Stick to the plan and remember there is light at the end of the tunnel! I cannot explain to you the freedom we felt October 2009 when we wrote that last check for the house! I’m living my dream now of being a full-time mom to my baby boy at age 27!
Where to Start? Look at these recommended percentages to know how much you should be allocating to different areas of your budget.
Example of Budget – Many people ask to see what our budget looks like. I’m happy to share! You would probably be really surprised to know that we WRITE IT ALL DOWN! Old school, yes, but it works! We find that if it’s digital or on your computer, you’re less likely to visit it! If it’s written down, it can go everywhere with you! You and your budget should be best friends! Plus, it’s super easy to thumb through previous months and compare. But whatever works for you, use that system. That’s just us personally. We use a 3 subject spiral since they’re thick! Below is a picture of our budget, but I’ve also created a digital version here so you can see it better and use if you wish. To understand the budget, I’ve included a ton of notes above the document when you click on it. I’ve also included a blank template you can download and make adjustments to fit your needs.
This is exactly how we write our budget:
This is a typed version of our budget with detailed notes: Click HERE
This is the blank template: HERE
I want to end with Dave Ramsey’s famous one liner: “Live like no one else now, so you can live like no one else later!”
Will people think you’re crazy for living a more frugal lifestyle? Possibly even make fun of you? Probably. But that is a very good sign you are on the right track! I hope these tips help you financially. Feel free to ask me anything!
I wrote this post as a guest post on Blissful and Domestic, but wanted to have the actual post directly on my blog as this is one of my most important financial posts!