We’re Debt Free!

Conor Muirhead
Nov 7, 2013 · 5 min read

Katie and I have finally done it. We had a massive push this last month to get ourselves out of debt completely, and we did it!

Just 21 months ago at the end of January of 2012 I remember having to tell Katie that she should try not to spend any money because we were low on funds again. It was always a miserable feeling when I had to do that. I’d beat myself up thinking: why couldn’t I just provide enough money for our family?

How did we get here?

We’d moved to California the previous summer for a great new job and we were making more than double the income we had in Colorado but we were still struggling to have money left at the end of the month. Of course the cost of living is higher in California, but outside of rent it certainly wasn’t twice as high.

We made a great income, we had never been extravagant spenders, we ate almost all our meals at home—cooked from scratch by Katie, we owned our car outright, and we didn’t use credit cards. We even tried on so many occasions to make a budget. These factors already put us in a more optimistic situation than many young families, but simply weren’t enough to keep us out of money troubles.

We had made a series of unfortunate (but common) decisions with our money, here’s a few of them:

  • We accumulated a bunch of student loans
  • We took out a mortgage for 96.5% of the cost of our home in Colorado all the while relying on student loans to finish school
  • We borrowed money from my parents to help us fix up that house in Colorado which was in worse shape than we thought
  • We moved out of our house in Colorado too early and had to pay back our first-time homebuyers tax credit
  • We financed a furnace for that (as you may have guessed by now) dreaded home in Colorado
  • We tried turning our home in Colorado into an “income property” by renting it out

An experiment

Katie and I sat down to figure out what we could do to remedy the situation, we came up with an experiment we wanted to try. For one month we’d only spend money on the things we really needed—no eating out, no treats, no new clothes. It was a tough month, but the learnings were remarkable. It turns out we really didn’t need to spend all the money we made, and that we could make some serious headway if we put our minds to it. We were able to squeak out $4,000 of leftover cash by the end of the month.

What a breakthrough. We finally saw some of our financial potential, if we could do that once, we could do it again. What would we do differently in our life if we didn’t feel stretched and stressed with our money at the end of every month? Would we be kinder to each other? Would we be more generous with others? Would we dream bigger? Would we do more? Would we be able to pay for our children’s education?

We realized our potential was thrilling.

What we did about it

Fortunately someone I knew had casually mentioned Dave Ramsey to me years before so when I saw his podcast in the featured list one morning I started listening to it. It turned out this guy had a ton of useful advice and a simple plan to achieve freedom from debt. After listening to his podcast I purchased his book The Total Money Makeover and devoured it. So we made a plan, it wasn’t extravagant, it wasn’t complex, and it certainly wasn’t easy.

The plan could be summed up by saying we chose to spend our money with intention, but I’ll give you more detail than that.

  • We stopped spending money on stuff we didn’t really need
  • We took every dollar we could scrimp and threw it at our debts
  • We focused on paying down one loan at a time
  • We chose to prioritize by starting with the smallest loan first
  • Once one loan was paid down, we’d take the money we were using to pay it off, and put it toward the next smallest loan
  • We scrimped about $3,000 per month by creating a plan each month that specified where every single dollar would go
  • If we didn’t plan a purchase, we didn’t make a purchase
  • We told lots of people what we were doing, to keep us honest, to find support, and in hopes some might join us in the journey
  • We took it one day at a time and tried our best to be consistent

We were nowhere near perfect in executing the plan, but we generally made massive strides each month. We also had that darn house in Colorado which accounted for about $121,000 of our debt, and we didn’t think it made much sense to hold onto that much debt in exchange for a couple hundred dollars in supposed “profit” after our mortgage expenses when renting it out. It was a long hard process, that cost of thousands of dollars, but we eventually sold our house, and it felt incredible to be done with it!

What we’re doing now

Our current focus is saving up 6 months of expenses to sustain us in times of unexpected hardship—that way we’ll never have to turn to debt for help again. Once we have that emergency fund in place we’ll beginning investing for retirement, saving for our daughters’ educations, and saving for a down payment—hopefully this time on a much better considered home purchase.

We still make a plan for every single dollar every single month so that we can continue to spend our money with intention, so we can have meaningful conversations about money, so we can minimize surprises in our finances, and so we can dream big and nail it!

What I wish we had along the way

Along the way we’ve learned a lot about personal finance. We’ve learned that it’s really hard, and that the tools for managing money and making plans kinda suck. We’ve learned that despite the difficulty of personal finance and it’s tools, it’s still possible to win—we’re doing it.

I’m hoping to take these lessons and share them, I want to help others drop the debt they have, to spend their money with more intention, to have dreams and actually achieve them. I want others to have the kind of help I had along the way, and so much more.

-Conor


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    Conor Muirhead

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    I’m a designer at Basecamp working to build software that helps people.

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