Paying Off Debt | Saving & Investing

The One Simple Way We Overhauled Our Finances

March 9, 2015

The One Simple Way We Overhauled Our Finances

Nine years ago this month I hired myself to make the most of our family’s finances.

What does that mean, exactly?

Although I couldn’t have articulated it this way at the time, I had hired myself to stop using our income to qualify for payments, and start using it to build wealth for our future.

We’ve had a lot of success since that time. We’ve paid off a ton of debt, we’ve put one kid through college with cash and are working on the second, and we’ve upped our emergency fund and retirement savings.

But everything that’s happened can all be boiled down to this:

We paid off debt and funneled that money into savings.

That’s it.

Of course deciding to do this leads to all kinds of noise in your head:

  • In what order should we pay off our debts?
  • Is mortgage debt okay?
  • Should we keep donating to charity while we’re paying off debt?
  • How about contributing to our 401(k) or IRAs?
  • How big should our emergency fund be?
  • What about the kids’ college? Should we even pay for that?
  • How should we invest our retirement money?

 

Those are all worthy questions, of course. I’ve written about many of them on this blog.

But mostly? They’re just distractions.

When I start to overthink things (as I have a tendency to do) I remind myself that it all comes down to this:

  1. Pick one debt and start paying on it.
  2. Put every dollar you can spare toward it until it’s gone.
  3. Then pick another one. And another.
  4. Then start saving.

 

Use your income to build weath not to qualify for payments

It doesn’t really matter in what order you pay off your debts.

As you move through the process you’ll figure out if you want to keep donating to charity (we did) or contributing to your 401(k) and IRAs (we didn’t) as you pay off debt.

And as you get to the end of the debt payoff process, you’ll know for yourself if mortgage debt is okay.

Would you like to help put your kids through college? Start an account for that.

Confused about how to invest for retirement? Do some reading. Take a class. Ask good questions of people you trust.

It’s a journey, and you’ll figure out a lot of things along the way.

But you have to get started.

Pay off debt and funnel that money into savings.

Don’t let the distractions get in the way of the doing.
















  1. Excellent post. The only tweak I made to this system was paying off the highest interest debts first. But you are correct that whether it is high interest or not, the most important step is making debt payment t a priority and even put it on auto pilot so it goes to the debt automatically at the first of the month ( harder to spend what you never get your hands on)..

  2. Well said, Julie! I was nodding my head in agreement as I read your post. It is so easy to be overwhelmed with the bigger questions and end up stalled making no forward progress. I have always tended to over complicate our finances. Keeping things simple and straightforward works the best! It took me quite a while to learn that but when I did we really started to get traction.

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