I get comments all the time “You’re so lucky you get to stay at home with the kids!” My response is usually “Yea I am.” However, I’m actually thinking it wasn’t luck at all. My husband and I worked really hard for a long time to make it happen. Being able to stay at home and not be miserably poor takes discipline. Serious discipline if you are living in middle class America.
My husband and I paid off 65k of debt and saved 35k in the bank so I could stay at home. Money skills are not properly taught to Americans today. Honestly, I cannot tell you where I learned money skills. Sometimes I think it might actually be a personality trait verses a learned skill, but common sense says it clearly can be learned. I think I learned by trial and error. Plus out of curiosity, I read a lot about finance at an early age. I still make mistakes, but I know my husband and I are better off than any of our immediate family members. And many of them earn higher wages than we do. My father, sister, and brother have each foreclosed on homes. Each for different reasons, but still its not a good track record for my bloodline. I really do not discuss finances with family because it seems like a taboo topic of conversation. Why? I have no idea. I think if people talked about finances more often, people would be more educated on the topic.
Discipline is More Important than Method
Discipline is what makes great things possible. Maybe you think you are disciplined. You get up every morning and go into work, that’s discipline right? The discipline I’m talking about is more than that though. I’m talking about depriving yourself to the point of being uncomfortable for an extended period of time. I’m talking about never taking a raise and blowing it. I’m talking about making budget changes for the long term. Everyone’s situation is different. Maybe you think my income is high so that is how I was able to do it. The way I see it though, is a lot of people who earn more than us do not enjoy the financial freedom we do right now. They have so much debt and have made so many bad choices they struggle to keep their heads above water. It is common knowledge even millionaires can go bankrupt with bad choices. I will tell you my numbers, but please keep in mind if you are in the middle class, you have to be disciplined and anything is possible. It might take a little longer, but it is still possible.
We Started Early
I got married in 2001, I was 20 and my husband was 26. I took our finances seriously from day one. His 401k was already 5 years old. He had a decent amount of debt including a second mortgage and a 401k loan (which he used to buy a jet ski, smh). I dabbled in a couple of small frivolous loans along the way too, however, we never went totally crazy. We had a small home and reliable, but not fancy cars. We paid every single bill on time every time. I had an okay data entry job and had opened a Roth IRA in the year 2000. Like I mentioned, we were young and often young means you are just starting out in a job and have good potential to move up. I think we really started putting our finances in order around 2005.
Early Savings Timeline
- 1996 My Husband Started his 401k
- 2000 I Opened a Roth IRA
- 2005 I Landed a Steady Job and Started Thinking About a Plan
- 2005 Bought a 169k Home with 0% down
- 2005 Carried 10k Debt on 0% Credit Card
- 2005 5k in Miscellaneous Loans
Yay! New Job
I had started my job selling personal lines car insurance at the beginning of ’05. I started out making roughly 30k a year once I had passed my insurance exam. My husband is a computer programmer at an automotive company and he was earning close to 50k at that time. As I am trying to think of all the numbers it is actually pretty hard to remember, so these numbers really are rough. I remember that right away we upgraded one of our cars and bought a bigger home in a better location. These purchases did make our budget really tight. I was nervous about the big mortgage and we bought a home which was built in the early ’70s with an outdated in-ground pool. Needless to say we have had to make a lot of big updates over the years. In the process of purchasing our home, we chose to pay off our vehicle and finance our home with 0% down. We took out a first and second mortgage at the time of purchase.
Plan Plan Plan
There was quite a bit of downtime in my office. It would get crazy busy, then it would be absolutely dead sometimes hours at a time. I would work my financial numbers over and over again. I would figure out our budget down to every dollar that was spent. Then I’d put different numbers into a mortgage calculator seeing how much money we could add to reduce the principle. I listed out all our debt and the interest rates that corresponded to each. I would try to guess what our pay raises would be and I was often fairly accurate. Raises were coming steadily. I think I was getting about $2k increase a year and my husband was increasing approximately 3k a year. By 2008, I figured we could be debt free by the time I was 33 (Hey, that happens to be this year!) and no, unfortunately I am not debt free. Staying at home was not my end goal at this time. I really wanted to be debt free and not worry about money.
My plan of attack was fairly simple.
- Avoid All Shopping Other than Grocery Shopping (Stop Shopping to Pass the Time)
- Stop Going Out to Eat
- Look for Ways to Reduce Monthly Bills (Car Insurance, TV, Cell Phone)
- Vacations Only at Out of State Family Members’ Homes
Pay Down Debt
- Raises Go To Paying Down Debt
- Bonuses Go To Paying Down Debt
- Pay Highest Interest Debt First
- Snowball Money (After paying off one bill, use that amount to pay down the next.)
We had 10k debt on a zero percent interest credit card. I switched to a new 0% offer card every time our rate was about to expire. I think we had 3 to 4 other smallish items of debt like a furniture loan and school loan. I didn’t come up with this method of paying off debt on my own. I believe several of the big names in financial planning use this method.
2009 We Had a Baby
Baby’s change a lot of things. Finances are definitely one of those things. I felt I had to keep working, quitting didn’t even feel like an option. We were fortunate to have grandparents and a loving aunt and uncle to take care of our baby while we were at work. Our debt had come down substantially over the past 4 years, but we were still nowhere near being able to handle our bills without my job.
Mid Savings Timeline
- 2011 Obtained a Second Job
- 2011 Used Roth IRA to Pay Off 25k 2nd Mortgage
- 2011 Began Paying 3 Times Our Mortgage Payment to Reduce Principle
2011 I Really Started Looking for a Change
Staring at our finances every single day really made me want to accelerate our savings. I thought I wanted to write a children’s book and started looking for a paying writing job to get me started. Because I was looking, not just plain ole luck, I came across a job writing about car insurance. Perfect for me! After quite a bit of initial unpaid work, I got a part-time gig at About.com running the carinsurance.about.com site. I really can’t go into detail about how much they pay, but it absolutely helped. I worked after my son went to bed 7 nights a week anywhere from 1 to 4 hours.
This was a big turning point for our finances. At this point in time, we were able to start saving 100% of my insurance job wages. By saving, I mean using it to pay down debt.
Double Down Discipline
I mentioned earlier I had started a Roth IRA in the year 2000. The money we had put in had accumulated pretty well over the years, but because of the market downturn, our account was actually down from what we had invested. The value was approximately 25k. We decided to close the account and pay off our second mortgage. If you have a Roth IRA open for more than 5 years, you are able to withdraw the money without any penalties. Roth IRA contributions are not pre-tax. Since our account value was down from the amount we put into it, we didn’t have to pay taxes when closing our account (because we didn’t profit any money). I would not recommend anyone to pull money out of their retirement account. We did not make the decision lightly.
We’d been saving into my husband’s 401k plan at a higher rate than the Roth IRA. Our second mortgage was 5.25% interest. My account manager even said he couldn’t guarantee a return like that. Most importantly, using the money to pay off our second mortgage got us closer to our goals. Our retirement is still in pretty good shape.
Time to Re-prioritize and Refinance
In 2012, about a year after we started making triple payments to our mortgage, we really started to think about expanding our family again. We had already put our little guy into daycare part time because after two and a half years of totally relying on family, it became too much to ask of them. It was at this time I began to regret putting all of our money on our mortgage. It is not easily accessible there. It did not take long to realize we needed money in our bank account.
We spent 25k paying off our 2nd mortgage, and another 25k paying down our mortgage over the course of a year. We are still out of reach of me quitting my job. Way to many problems can pop up. We need a hefty emergency fund to feel secure. Refinancing is the best option for our new financial goals. We were able to go from a 4.6% interest rate to a 3.9% interest rate. We also extended our loan another 8 years. Not great, but we hope to accelerate payments again in the future. The combination of a reduced interest rate, a reduced principle, and a new 30 year term greatly impacted our mortgage payment. It went from a combined (1st and 2nd) mortgage payment of $1400 to a much more manageable $800 payment.
The Final Countdown
Early 2012, I didn’t know if or when our family would expand. I didn’t know if or when I would be able to quit my job. But, I did know we needed to start saving money into our bank account, I wanted our family to expand, and I wanted to be a stay at home mom. Once our home was refinanced, we began saving what feels like a ton of money each month. I found out I was pregnant with baby number 2 in August of 2012. Our bank account was growing rapidly. We decide for me to officially end my employment the last day of the year 2012. We had a total of 35k in our bank account. Our baby was not due until April, but I was super anxious. I worked right up until the day of the birth of my first son, and wanted to take this time to relax before baby number 2 arrived.
Final Savings Tally
- 2000 – 2011: 25k in Roth IRA (Used this money to pay off 2nd mortgage.)
- 2005 – 2011: Paid off 15k in Credit Card and Misc Debt with Snowball Plan
- 2011: Applied and landed a part time writing gig
- 2011-2012: Paid down primary mortgage principle 25k
- 2012: Saved 35k into bank account
- Jan 1, 2013: Quit my job!!!
As you can see, it did not happen overnight. It started with small steps and really took shape the last couple of years. In 2005 I thought I’d own my own insurance agency by now. Instead I get to stay at home with my boys. I think about money often, but I don’t stress over it. We are not saving at such an extreme rate now and have been enjoying a couple of small family vacations each year. I am happy and proud that we spent our money to free up our time. Not only do I have more time, but my husband does too. The ability to run errands and take care of some chores throughout the day, gives him more time to spend with the kids.
Having a goal is very important. It really does not matter what goal you set. Maybe you won’t even accomplish your goal, but working towards it could open up another opportunity you never thought possible. Remember that discipline is more important than method when it comes to paying down debt. Avoiding temptation and staying the course can give you the opportunity to bootstrap a start up, go after your dream job, or stay at home.