I remember paying rent on a credit card as a young Sergeant (E-5 type). It was humiliating and scary. We got through it by moving on post and reducing our utility bill costs, but this was only a band-aid.
We needed real change. However real change wouldn’t come until I finally had my “epiphany” sitting in a cold tent in Afghanistan as a newly promoted Staff Sergeant (E-6). We needed to become debt free.
Bottom Line Up Front
For those who are struggling right now, I’ll give you the “cliff notes” version up front. Here’s the main things we had to do in order to get out of debt:
- Make a budget.
- Pick a plan (we used Dave Ramsey’s The Total Money Makeover book).
- Quit overspending!
- Start saving (using money we used to spend on debt).
I know enlisted folks don’t make a ton of money, but you can live a good life. You just can’t be sloppy about it. You also can’t have everything you want. That comes later. Just know, I’m rooting for you and you can do this!
Our Debt Free Journey
We were stationed in Germany when we finally made the decision to become debt free. I remember the conversation with my wife like it was yesterday. I told her we needed to become debt free, and she asked, “How will we ever buy anything nice if we don’t take out a loan?”
We kind of joke about it now, but that was a real, serious, and very valid question for her to ask. We’d never saved up for a big purchase before. Actually, I don’t remember saving for anything before. We had a long way to go.
Becoming Dave-ish
Like I said, we were living in Germany, so there were numerous travel opportunities available. We instinctively knew we were in the middle of a once in a lifetime opportunity. We’d never be childless 20-somethings living in Europe ever again. This altered our plans to become debt free slightly and I’m glad we didn’t get too “gazelle intense.”
Getting on the Same Page
We read The Total Money Makeover together chapter by chapter. After we each read a chapter, we’d discuss what we thought about it, research anything that didn’t make sense, and then decide what we would implement.
I think it took us two weeks to get through the book together and start coming up with a plan. We were also heavily influenced by the blog Get Rich Slowly. That blog is actually where I really got started learning about personal finance. When we made our emergency fund (Baby Step 1), we used the online bank recommendations from GRS.
Walking Through the Baby Steps
Once we read the book, we got started right away. We opened our emergency fund, made a budget, and got cracking.
Really, the first step is to get on a budget even though the first baby step is setting aside a starter emergency fund of $1,000. It’s really hard to get started building an emergency fund when you’re barely making your minimum payments each month. There’s no magic wand for the military to clear your debt either – we had to get some traction somewhere.
You really have the choice of making more (might not be possible) or spending less (definitely within your control). Regardless, you’ve to get a foothold somewhere. Luckily, I got promoted while I was in Afghanistan, and we hadn’t adjusted our spending too much or taken on new debt yet. Trust me, we would have found something to spend the “extra” money on. Instead, we now used the money to start going debt free.
Regardless, we had to get on a budget to control our monthly cash flow. We started with a simple Excel spreadsheet. We still use a similar spreadsheet to this day. Here’s a free, no strings attached, copy of what we currently use below.
Emergency Fund
Once we got on a budget, we were able to get the emergency fund built up fairly quickly. I think maybe within a couple months, but I can’t remember. We definitely didn’t just have it sitting around.
We opened an online savings account and started putting money in it. We’ve had this same account ever since (bank name has changed because they were bought out).
Paying off Debt
I don’t remember exactly all the debt we had. I think we had a few credit cards (Military Star card and probably 5 other cards with varying balances), my wife’s small student loan, the truck, and maybe something else?
I wish I’d kept better records of exactly what our net worth and list of all our debts were back then. If only I’d known I would be writing my own personal finance blogs someday. If you’d like to keep track of everything better than me, here’s a copy of my simple net worth tracker we use now to get you started.
Everything but the Truck
We cut out a lot of spending. We rarely ate out anymore and I seem to remember playing a lot of Playstation 3 (Red Dead Redemption and Dead Space for those who need to know) for entertainment on the weekends. We were clipping coupons, looking out for any events with free food, and walking or biking everywhere we could instead of driving.
Little by little, we knocked out almost all our debt – everything except the truck. All said and done, I think the process took us about two years to get to that point. We tried following advice of Dave Ramsey and selling the truck at a loss (I don’t recommend this now anyway), but contrary to popular belief, Germans will not pay huge sums of money for your American truck.
Dave Ramsey often says to take out a personal loan and sell a vehicle at a loss, but this is terrible advice in my opinion. To me, it doesn’t make logical sense to take out more debt to get rid of debt. Unless there’s a situation where this would drastically reduce my overall debt payments (much lower interest rate), I don’t see how this is helpful. Debt is not the answer, proper budgeting and cash flow is.
I had a good interest rate on my truck loan, and I actually still needed a vehicle regardless. I was upside down on the loan too, so I couldn’t just sell it outright. It was just going to take time to pay it off.
Getting Rid of the Truck
We did eventually get rid of the truck. We had decided we’d wait until we got back to the states, continue saving up (skipped to Baby Step 3 to build up our emergency fund), and deal with it later.
When we got to Kansas City, we bought a house (with a mortgage). Then we turned our attention to the truck situation. We had sold the second car we had in Germany and then used that money plus a little extra (from our DLA for moving) to buy a second vehicle in cash – a Suzuki Grand Vitara with 185,000 miles on it (her name was Suzi).
Then we started looking at trading in the truck. We eventually got a good offer from CarMax to buy it outright. We sold the truck, used that cash to write a check for a Jeep Compass for my wife. Not long after (because we’d save a lot in sales tax), we sold Suzi to my brother-in-law and bought an older truck for me (in cash using a wire transfer this time).
We Were Finally [Mostly] Debt Free!
At that point, we were debt free – except for our mortgage. It might not seem very climactic, but it was a huge deal for us. I still think it was a huge milestone worth working toward. Plus, it felt really good for my wife and I to accomplish a long-term goal together!
We eventually sold the house and are currently renters, so we’re technically 100% debt free currently. We’re saving up for our future and look forward to building wealth over time – something we never could have done without eliminating debt and overspending from our lives.
We’ll probably take on another mortgage at some point to purchase a home. However, we’re never going back to financing cars and other depreciating assets (clothes, tools, etc.) on a credit card. If we can’t buy it in cash, we don’t need it.
If you’ve read this far in our story, thank you! Please consider signing up for the twice-monthly Enlisted Money newsletter. I wish you the best of luck on your own journey to becoming debt free or whatever your next personal finance goals are!