From Debt to Down Payment: How We Bought in Bellingham
As of this writing, I’m 38 and my husband (I’ll call him ‘hubs’ from here) and I are debt-free except for our mortgage. But just 5 years ago, we were buried under $104,000 of debt. I still remember how awful it felt to talk about it. Here’s what we owed:
$90,000 in graduate school loans (6 or 7 combined)
$12,000 on our Subaru Crosstrek
$2,000 on a credit card
At the time, we were dilly-daddling with money. My hubs came from a frugal background, and I was used to living within my means (thanks to watching my parents do the same). But we certainly weren’t budgeting or tracking anything, really.
Then we decided to buy our first home, and that changed everything. We realized pretty quickly from there that we had no business taking on a mortgage with our current reality.
Around that time, I remembered my brother and sister-in-law talking about Dave Ramsey years ago. It took me about 10 minutes looking through his content that we could do what he was teaching. So we bought his Financial Peace University and off we went. We didn’t follow it perfectly, but pretty close. And now, 5 years later, we’re debt-free (except the house). Here’s how we did it:
In steps 1-4, we were getting organized. Step 5 onward, we worked Dave’s Baby Steps.
Made a promise to each other no more debt, ever. We even planned to close every account, including the Alaska Airlines card with the companion voucher.
Started monthly budgeting to get our finances organized. Game changer. It got us on the same page about everything and improved communication in our marriage. This made our shared goals stick.
Followed Dave’s advice to pause retirement contributions. That freed up several hundred dollars each month. This was a hard pill to swallow (thank you, culture) but we knew it would significantly speed up our progress.
Hunted down every available dollar — e.g., forgotten cash in checking accounts and old company stock I got years ago. We sold the stock, moved the money and closed the extras.
Set aside $1,000 for emergencies (Baby Step 1) in a money market account and didn’t touch it. Done in 5 minutes. This was a small shield for us to use instead of credit cards.
Paid off all debt (Baby Step 2). We didn’t do this one perfectly. We tackled the credit cards and car loan first. My hubs was five years into the Public Service Loan Forgiveness program and wanted to stay the course on the $90K student loan. After many conversations, I agreed to let it go (for now). Luckily, the COVID pause kept that loan from growing. We knocked out the $2K credit card and $12K car loan in just 4 months, using the stock we sold, extra cash, and margin we found in budgeting.
Saved 3-6 months of expenses (Baby Step 3). This was the hardest for us because there wasn’t any sense of fun or satisfaction along the way, but we knew it was our shield from going back into debt. To speed it up, we decided to live a little more frugally and had what we wanted saved in 4 months.
Saved for the house down payment (Baby Step 3b). After budgeting a while and building skills in clearing debt and saving, we actually got through this step easily. It was just patience, consistency, and holding ourselves accountable to stay the course. This took 14 months, and we put 20% down to avoid PMI. We also made sure our mortgage stayed within a reasonable percentage of our take-home pay (around 28%).
And that student loan? We eventually paid it off in less than a year! We waited a while after moving into our house to face this debt. The government pause was still in effect, so we decided to act while there was no accruing interest. We had a new savings goal at the time, but my employer stock was growing fast. We ended up selling the stock, paused the savings goal, and funneled everything toward the loan. We didn’t even consolidate the 6-7 student loans - we worked them using the debt snowball method.
Now, we’re living debt-free in a home we love and can afford. Let’s just say there’s a lot of peace in this house.
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