Debt-Free for 1 Year: Progress Report
Today it's been exactly one year since we paid off our last student loan and became debt-free (except for our house, which we are trying to sell). It's been a great year and being debt-free undoubtedly provided additional peace in our lives. We've made some great progress toward our next baby step, which is to save 3-6 months worth of expenses for a fully funded emergency fund. Dave Ramsey leaves it up to each person to decide exactly how many months worth of emergency fund they want to have.
Our goal was to have five months expenses in our emergency fund. We are currently 75% of the way toward our goal, but we would be lying to you if we said we have followed Dave's advise to a T. We've discovered that his baby steps are exactly what we needed, but when life gets in the way, we may need to tweak some of his teachings to fit our situation. This is not to discredit his teaching at all. If you are able to stay on course and never waiver in your financial decisions, you have a stronger will than we do.
It's not that we completely fell off the Dave Ramsey wagon, we were just a little selfish with our discretionary income this year since we were debt-free. Here are a few examples:
Things Dave Ramsey May Not Have Approved of This Year
- Multiple vacations: We decided that before we have a baby, we wanted to visit our friends Garrett and Lauren in South Carolina. When our good friends Brenna (Garrett's sister) and Justin said they were road-tripping to see them in the summer, we jumped at the opportunity to tag along. (Little did we know, we got pregnant before leaving on the trip!) We also attended the Texas Style Council's blogging conference in Austin, TX in March, and spent a week in Okoboji (something we budget for every year). We also spent Thanksgiving in D.C., which was graciously paid for by Kelsey's parents.
- New technology: We justified buying the new iPhone 4Gs in November by calling it our early Christmas present to each other, but we never spend $200 on each other for Christmas. After my college desktop computer crashed we also bought a new iMac this year. We claimed this as a necessity, but really it's a luxury that we enjoy dearly, and helps us be efficient bloggers.
- Investing in our 401(k): Dave says to wait until after your emergency fund is completed before investing into your 401(k). This has been a thorn in my side since we began our trek toward financial peace. When we were in FPU, we stopped our 401(k) distributions to focus all our efforts on our debt snowball. I simply couldn't take it any longer and because we have three months expenses saved up, at the end of December we decided to start contributing again to take advantage of our company's match.
Did these decisions break the bank? No! We paid cash for everything we did in 2011. It's an amazing feeling. But we no doubt slowed our progress toward our fully funded emergency fund by spending thousands of dollars on the items above (mostly vacations). Those were conscious decisions we made throughout the year.
I think that's the biggest advise I can give at this point. As long as you are stepping back from the situation and weighing the consequences of your financial decisions, don't beat yourself up. Make the decision and move on. Ultimately it's your money, do with it what you want, but be informed of the consequences--the things you will be giving up by making that decision.
This year with baby in tow, we should be able to polish off our emergency fund, invest even more for retirement (up to 15% of our income) and start saving for baby W's college, which she will probably be starting in a blink of an eye.
If our house sells, we will start saving for a large down payment of another and if it doesn't, the leftover money will go toward paying down our existing mortgage.
How about you? What are your financial goals in 2012? (Come back later today for lots of photos from our Christmas Vacation!)