How We Live (Mostly) Debt Free

When I was a young, dumb and 20 years old, I left my podunk hometown of Wausau, WI., with the love of my life (and now wife!), Robyn. We ventured halfway across America to her hometown of Chico, California. With only $2,000 in savings and a chance, we scrambled our way from the depths of poverty and now live a happy, and (mostly) debt free life.

I’m not here to give you the magical sword that slays the great Debit-inator. But what I can do is help you find the knowledge, and courage to win your fight for financial freedom.

The power to be debt free remains solely in your hands, and your own perseverance. If you’re looking for a quick fix or a get-out-of-jail free card, you’re in the wrong place. Staying out of debt requires that you change unhealthy spending habits and take responsibility over your finances.

It might seem like it sucks giving up things we enjoy, but our hope is that these guidelines will help you live a debt free life… and still budget for your tasty lattes.

Step 1. Make a budget

Illustration of blueprint

Imagine for a moment, that you want to build a house. How would you go about doing this? Would you grab some lumber, walk out into the woods and start hammering away? Of course not! If you want to build your dream home, you begin with a plan.

Think of your budget as the blueprint your future home, it will layout all the information you need to build a strong and stable life. You’ll know what tools you need, learn what your financial limits are, and save you from the inevitable curve-balls life will throw your way.

How do I make a budget?

I know what you’re thinking, “easier said than done!”. I promise, it really is easy!

To start, if you’d like a step-by-step walk through, check out our guide on How To Make an Awesome Budget

Now, there’s a whole lotta’ options out there for this, so we’ll give you a rundown on how we structure our budget. No matter which route you choose, the basics are still the same.

  • Create a category for where your money is spent
  • Create another section for how much money you spent
  • Total up all of your money spent
  • Compare this to how much you make in a month

With those 4 simple steps, you’ll have the starting point for creating a budget. As with any budget, first you need to figure out how much money is coming in – only then can you make a plan for the money you’re spending.

Make it easy

When Robyn and I first began budgeting, we started as the cavemen once did – with pen and paper. While having a physical copy is fun and all, it wasn’t very practical for either of us.

After a few months of the old timer ways, we switched over to using an online tool – Google Sheets – for our budget. This gave us more flexibility when calculating our finances and turned a tedious task into something super easy.

Our favorite spreadsheets

Google Sheets is a powerful spreadsheet tool and is used by millions of people and businesses for budgeting and financing. That being said, it can be intimidating for first time users or those who aren’t tech savvy.

Microsoft Excel is a basic spreadsheet tool, similar to Google Sheets. Personally, I prefer to use Google Sheets as I find it easier to navigate. Whichever program you go with, using spreadsheets is going to be a whole lot easier than pen and paper!

Make it even easier

Now, if all of that sounds a little too complicated, check out You Need A Budget (YNAB).

YNAB is a helpful tool for those finding it difficult or time consuming to track every little detail about your budget. After a little bit of setup to get going, YNAB will track all of your accounts, and with a single click, will calculate all of your budget for you.

It’s a great tool for beginners and experts alike. The downside is that it requires a subscription to use after the trial period ends. I highly recommend using the free trial period for YNAB, and seeing if the ease-of-use is worth it. 

The first step to financial freedom is breaking down your spending habits and setting your budget. To build a great home, you need to start with a good blueprint.

Step 2. Build your savings

With your blueprint in-hand, it’s time to start building.

In the words of someone wiser than me, ”Never go cheap, what goes under your feet”. Much like the shoes you’re wearing or the tires on your car – the foundation of your home (and finances) is the single most important part of of the building process.

Your savings will be the rock solid foundation with which to build your future on, and the stronger you make it, the better.

Think of your savings not as a weapon, but as a shield to protect you from the scorching flames of the Debit-inator. Your shield must be strong and sturdy, enough to fend off an onslaught of financial attacks that you’ll suffer over the years.

Illustration of Savings Shield blocking Debtinator

As we all know, financial monsters (aka Check Engine Light) lurk in the shadows, waiting to strike until you’re most vulnerable.

How do I even start saving?

Start small, with a goal of $1,000 in savings. $1,000 sound intimidating? Start with $100. All you need is one small step in the right direction, and soon you’ll find yourself jogging down the green brick road of financial savings.

This tiny amount will save you from the small emergencies that will pop up. Emergencies such as a surprise visit to the vet because your dog thinks the cat-box is a buffet.

While $1,000 is a great starting point, don’t lose sight of the bigger picture here!

Don’t stop building

A general rule of thumb for finance freaks suggest 3 to 6 months of emergency funds. This means all necessary monthly spending for you to survive. Your car loan, mortgage, food, electricity, water, etc. And no, as much as we love them, beer and video games don’t count as “necessary” expenses.

Going through life without a solid savings is like climbing a mountain without a harness and rope. Some people make it work, but if you fall, it’s going to be catastrophic.

Step 3. Learn to use your tools

Illustration of toolbox

To build a house, you’re gonna need some tools.

Responsible use of credit cards can be a fantastic financial tool at your disposal, so long as you understand how to use one and don’t fall into the very trap we’re trying to avoid – debt.

Much like using a circular saw, many people fear the consequences of using a credit card the wrong way, as apposed to the benefits of using it right.

Well, it’s time to put your boots on and kick that fear in the butt. With a little bit of education, and a heaping dose of personal responsibility, it can be one of your most used, and helpful, tool in building a sturdy financial home.

Your credit cards should be working for you, not against you.

  • Pay your balance off, in full, at the end of every week
  • Treat your credit card the same as cash
  • Don’t buy things you can’t afford right now

With a good credit score, you’ll be setting yourself up for success and avoiding one of the greatest pitfalls of debt – bad loans.

Think of your credit score as a bargaining chip when dealing with contractors. If you want to strike a good deal, you need to negotiate from a position of power. A high credit score will allow you to apply for better, low interest loans and help keep your head above water.

Just don’t make the mistake of obsessing over it. Pay your loans on time and don’t carry a balance on your card, you’ll have a great credit score in no time.

New to credit cards? Want to learn more? Of course you do! Check out our handy guide on how to use a credit card, the right way.

Step 4. Know your limits

You wouldn’t erect a 10 story building as your home, and you wouldn’t build a shed to live in as a family of 4. Much like when your friend brings a dozen Krispy Kream donuts to work, knowing what your limits are is an important part of the building process.

Take a good hard look at your spending habits; are you buying a $5 coffee, every single day? That’s over $100 dollars every month, in just coffee!

By cutting that daily ritual down to twice a week, you can easily save over $60 dollars per month. Within a year, you could have $720 stashed away for when your car breaks down, simply from buying a few less drinks a week.

Illustration of calendar with coffee

You don’t need to completely sacrifice your guilty pleasures to save money, you just need to learn what your limits are.

If you apply this strategy to every aspect of your finances, you can easily scrounge up hundreds, if not thousands of dollars a month. Think of all that as “wasted” money, that could be better spent building your savings and paying off those pesky debts.

Step 5. Have a plan

So, you’ve got your blueprint, your foundation is laid, and your home is starting to look good. What’s next?

Now, we have to tackle that gaping hole in the roof, and stop the weather from destroying everything you’ve built.

My opinion on debt is to treat it like you’ve got a dangerous flu, and you need to get better as quick as possible. Any debt we owe is a problem, and it’s time to fix that problem. 

Debt can feel like a mountain that’s impossible to climb, but with a simple plan of action and a little commitment, you’ll be on your way to conquering even the greatest of peaks. Just remember to keep that harness on.

What sort of plan, you might ask? Here’s the two most popular methods for tackling debt, and why they work.

The Avalanche Method

Illustration of avalanche method

This is my personal favorite, because I prefer to start with the most difficult part and work my way down, ending with the easiest. The avalanche method uses a simple guideline, focusing on the interest of your debts.

  • Organize your debts by interest, from highest to lowest
  • Make the minimum monthly payments on all of your loans
  • Start with the highest interest and focus all extra money into that single debt

This works great for people with a can-do attitude. As you pay off the most difficult loans, a huge weight will quickly lift from your shoulders. The burden of those high interest loans are usually the most challenging part, and eliminating them will greatly embolden you to finish paying off the rest of your debt.

This strategy works well for people who want to set a goal, and pay off their debt within a strict time frame. You’ll see significant progress more quickly, though it will require strict budgeting and more investment.

The Snowball Method

Illustration of snowball method

The snowball approach is a similar concept done in reverse. It focuses on the balance of your debts, paying them off from smallest to largest. Use this method if you prefer a more relaxed way of paying your debts.

  • Organize your debts from smallest balance to highest
  • Continue making the minimum payments on all of your loans!
  • With your extra cash, pay off your debts with the smallest balance first
  • If two balances are close to the same, pay the one with higher interest

Personally, I’m not as big of a fan of this method. It’s costing you more money in the long run because you’re not paying off the high interest loans first. That being said, the satisfaction of conquering smaller battles to win the war works well for many people.

Whichever method you chose, stay on track and you WILL be debt free in no time.

Stick to the plan

Everyone’s going to have some debts in their life, whether it’s a home loan, student loans or getting a car, it’s pretty much inevitable. The difference comes from how you handle those debts, and why you have them. There’s no excuse for irresponsible debts, such as credit cards or cash advance loans.

Make a budget, build a solid foundation of savings, have a plan for your debt, and don’t buy things you can’t afford. By following those 4 simple rules, you’ll be on the right path for living a (mostly) debt free life!

  • Create a budget blueprint
  • Build a strong foundation of Savings
  • Learn how to make your financial tools work for you, not against you
  • Find your limits on what you can really afford, not what you want to buy
  • Pick a plan, and stick with it

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