In the last post we discussed our goals and how we got to the point of realizing that in order to build a homestead, the first step was to get out of debt. Again, this is where Bre saved me. If I were a financial advisor, I would have a lot of broke and unhappy clients. I’m just not very good at managing my income. I used to be a bartender, and I found myself living paycheck to paycheck. After rent and utility bills, there wasn’t a lot left over. Once I got hired for my career job, I expected that to change. I would be making double the salary I was used to, and there surely would be some extra money left over. Yet that was not the case. After buying a new truck and buying the house, those increased payments reflected in my net salary. I was still living paycheck to paycheck.
With Bre’s help, I was able to establish a financial plan. In order for us to purchase a homestead, a few very obvious things had to happen first. Most importantly, I had to get out of debt. This meant paying off my auto loan and my credit card. At the time, that was around $20,000. Since I was only paying off $500 a month combined, it felt like I would never get out of this debt, but that remained goal #1. Secondly, I had to have a realistic savings for a down payment. I hadn’t begun to research any properties and I had no idea what the cost of land was, but I knew that I had to have a substantial amount of money for a down payment in order for this dream to have a remote chance.
With those goals in place, I attacked goal #1. Now it’s recommended that if you are debt through several avenues that you pay off those that have the highest interest percentage first. That makes sense, because it saves you more money in the long run. However, I needed a win – desperately. I needed to achieve something so that I could see my progress and understand that I was inching towards my goal. Because my auto loan had less of a balance than my credit card, I attacked that debt first. I kept making the minimum payment on my credit card and focused all available resources towards my auto loan. Now, paying several hundred dollars a month with no visible attainment is depressing, to say the least. Normally, if you went out and spend $500 you’d probably have something nice to show for it. But when that $500 just disappears so that you can wipe out a little debt, well that just plan stinks. Fortunately though, it is necessary. And by doing so, I was able to pay off my auto loan. I had to wipe out my extracurricular expenditures in order to accomplish this – no more buying beer haphazardly, planning when to go out to eat instead of impulsively, and no more toys to purchase. By staying diligent and focused, I was able to pay off my auto loan within a year.
Now let me tell you, accomplishing this step was a HUGE win for me. Not only did this help me to understand and realize that I had to power to make this change in my life, but I could see that our dream was a possibility. This further encouraged me to buckle down and continue making strides to erase my debt. The next step was to pay off my credit card. Now, I still had around a $10,000 balance at this time. Seeing as though I had just paid off roughly the same amount on my auto loan, I knew that this would be do-able. I was able to reallocate the money that I had been spending for my auto loan into my credit card payment. Now I was paying off $600-$700 a month on average. Again, this would take almost an entire year of painstaking commitment, but I was also able to accomplish this goal. By the end of two years’ time, I had erased $20,000 of debt, and I was ready to begin a new chapter in my life. Now that I had achieved the first (and hardest) step of our master plan, I was ready to begin saving money for a down payment on some land. Let me tell you, saving money is a lot more fun than spending it to pay off debt.