On September 4, 2020 we made our last payment after working about 11 years paying off close to probably $180,000! You can read more about that journey in detail here. Now that we’ve reached this milestone we are looking toward the next step. It’s strange to have money now to actually have the freedom to DECIDE what to do with it instead of knowing that it was just going straight to our debt. So, here’s the details on our next steps.
Goal #1: Break the Cycle
We thankfully haven’t had to live the “paycheck to paycheck” life to the extreme at any point in our marriage (think rice + beans every night). We’ve tithed, been able to pay our rent and utilities, get adequate groceries (by being thrifty), put gas in our cars, and gone on the occasional trips here and there. Oh, and also added four kids in the last 8 years!
We started our marriage with us both working full time, and I continued to work until the day our second child was born. As I talked about in our debt free journey post, we made the decision for me to stay home at that point and worked towards finding my husband a job closer to extended family. Thankfully we were able to find another job for him fairly quickly, and it replaced some of the income I gave up to stay home and has given him more opportunities. We found the job and were moved to a new state within a month’s time! We made sure not to rent a house that was out of our price range, kept our utilities basic, also went on a family plan with siblings to cut our phone cost in half, and really cut back on anything unnecessary while keeping a close eye on groceries and eating out. It wasn’t always perfect, but we really tried to pay attention to where our money was going.
Having said all of that, because we’ve been using anything “extra” every month (and any annual tax refunds, very occasional bonuses, etc.) to pay off our debt, we don’t have savings. Just a small emergency fund. Our next goal is to get a month ahead in our budget and break that paycheck to paycheck cycle. What do I mean by that? Basically we want to be using our current month’s paychecks for future spending. Not for the current month when we receive that income. When a paycheck comes in, the goal is to put it towards future month’s expenses and savings. How do we get there?
All the “extra” funds that in the past would have gone to our loan payments, will now be placed in the following month’s expense categories in our budget until those are all fully funded. For instance, we will essentially PRE-fund the following month’s rent, grocery expenses, dining out budget, utilities, insurance payments, monthly mobile bill, fuel expenses, and any other normal monthly expenses until those are fully funded for a month ahead. Once that is done, we will have successfully broken the proverbial “paycheck to paycheck” cycle. We won’t be living off of the current month’s income anymore. The next month will always be fully funded before we get there!
We will continue using YNAB to track our budget. I’d like to say this will take us a couple months to do, but things happen so I am keeping my expectations realistic. It may take us three months. I really don’t know for sure. Once we get there though, we will move on to the next goal.
Goal #2: Buying a House
Now this. This makes me SO anxious and nervous. I know that some of that is normal, but because we have never bought a house before I have another level of anxiety over such a big decision. Our reasoning for not buying a house until being debt free was mainly because we couldn’t afford the cost of home ownership. Yes, we could afford a reasonable mortgage payment because we could pay rent, but the rest of the cost of owning a home, not so much. We couldn’t afford the maintenance, any renovation costs, and unknown expenses that would inevitably come up. There wasn’t any margin for that. At one point our monthly debt obligations (minimum payments) totaled more than our rent! So, everything else was going towards paying off our debt. That was a choice we made, because in the long run, that would end up hurting us more if we put off paying them in full.
At this point, we feel comfortable saving up about 3-5% of our max home budget in order to be ready for upfront costs of purchasing a home. It would take us forever to save 20% to avoid paying PMI right now, so we will just plan to refinance to a 15-year loan when we can. As first time home buyers I know that there are certain programs available to us, but I want to be ready for any situation. I see it taking us until probably spring/summer of 2021 to get to this point. I also really don’t want to buy a house and then not be able to make some immediate smaller renovations like paint colors I can’t live with (sorry, reds!) or change out some flooring (strong cat pee smells anyone?) BEFORE we move all of our stuff in.
Alternate Goal #2: Moving Overseas!
Another dream of ours is to be able to find a way to live overseas for a few years while the kids are still young. It would be amazing to have that opportunity to show them the world and to really see things up close in such a way. I mean, what if we just saved up for the next two years so we could travel the world with our kids? We can dream… who knows? Maybe something will come up. I’m not above praying for the desires of our hearts. God alone knows our future!
Goal #3: Building Up The Emergency Fund
Nothing complicated here. Just want to be able to save up 3 to 6 months’ expenses. Goal #1 is part of that, so I would say an additional 2 to 5 months to add that extra padding to our cash flow.
These are the immediate goals. There are goals past this point (i.e. saving to pay cash for our next van or increasing investments), but this is where we stand right now. I’m forcing myself not to look too far into the future and just to focus on the present.
What are your financial goals right now? Are you working on becoming debt free? Are you looking to buy your first house? Are you getting ready to move overseas?? (Jealous!) Comment below! I would love to hear from you!
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