Financial Freedom - Paying of $70K in debt in under 3 years

Over the last couple of months I have been taking a long look at mine and my families financial future.  A lot of time has been spent looking at investments and how I can build a passive income that can provide financial support in retirement.  The deep I look at my finances and try to find more money to invest in my future the more I have realized that my debt is really an anchor.  

Debt is an anchor that can really limit your ability to build financial freedom.  Why do I say that, well just think about the amount of money you spend on interest each month.  If you haven't thought about the interest then take a few minutes to added up the monthly interest you are paying.  This is money that you are putting in someone else's pocket.  Have you looked at your credit card bills lately and looked at how long and how much it would cost you if all you did was pay the minimum monthly payment?  I have known for several years that I was carrying too much debt, and by the end of the month after making all the payments there was not a lot left over.  

I've known I wanted to be debt free for several years, but here is how things where going for me.  I would try to pay more than the minimum on several different credit cards to lower the balances.  I would be slowly moving the needle in the right direction and then BAM an unexpected expense and the balances go in the wrong direction.  It wasn't until recently after listening to some of the Dave Ramsey podcasts that I realized I was going about things all wrong.

Dave talks about 7 baby steps to financial freedom and step 1 is to have an emergency fund of $1000.  This made a lot of sense since it was those unexpected expenses that would cause my credit card balances to go back up, and having an emergency fund would allow me to stop using a credit card.  So I looked at my finances and figured I could put away about $70 a paycheck into a separate saving account.  I can happily say that I just recently accomplished my goal of setting aside $1000.

The next step in Dave's 7 steps is to pay off all debt minus your mortgage.  As recommended I started by writing down all my credit cards, personal loans, and vehicle loans and putting them in order of smallest balance to biggest.  As part of this step you would pay the minimum balance on all the debts except the lowest one.  One the lowest balance you would pay as much as you can over the minimum balance until it is paid off.  Then you would move on to the next debt and take everything you were paying on the first debt and apply it to the next debt on top of the minimum payment.  Pay off that debt and move on to the next all the while continuing to increase the size of your payments by taking what you were paying on the paid off accounts and rolling into the next one.  This creates a snowball effect as you continue to make bigger payments and pay things off faster as you go.  After putting all my accounts down on pay I had 10 accounts totaling around $70K.  That number seems daunting, but then I started doing some rough calculation and if I stick to my plan if nothing in my current financial situation changes I could pay off that $70k in just under 3 years.  That's right 3 years to pay off $70k in debt, but I want to see if I can get that all paid down in around 2 years.

So how do I plan to try and cut around 12 months off my time line?  I have a few things in mind that I can use to accelerate my time line and some of these may be available to you as well.  I normally get an annual bonus paid out from my company, so taking all of that bonus and using it to pay down debt.  The next thing I plan to do is take a look at things around the house that I no longer use or need that I could sell.  So as I sell those items off instead of just spending that cash I will roll it into debt.  This last one is kind of a side hustle as people like to call them, but I have taken my love of photography and used that to obtain a job as a team photographer for some local sports teams.  So taking any money that I make taking pictures will also get rolled into paying off debt.  The big thing is to take any unexpected income and put it towards paying off debt.  

So if I am able to follow my plan and pay off $70k in two years then I now have all this additional income that is no longer helping to make someone else rich.  Once that huge chunk of debt is gone it will give me the freedom to build up my saving to a level that will allow me to cover 3-6 months of expenses, which is step 3 in the 7 step plan.  The other upside is with all that debt gone guess what the amount of money that I will need to cover 3-6 months of expenses will be reduced greatly.  If I was to try and put away 3 months worth of expenses right now I would need to have around $7500 in savings, after paying off debt that number would drop to $3600.  So as you can see the same amount of money required to cover 3 months now could potentially cover 6 months.

For me concentrating on steps 2 and paying off my debt is going to be my focus going forward, and I can say that just by looking at what I owed and what I have in my bank accounts I was able to pay off my lowest balance account almost immediately.  This was a great feeling to be able to see a balance go to zero and now I can already start paying down the 2nd account.  So only 9 more to go and I have already started to put a dent into account 2 and it feels good.  

I will be looking to post monthly updates on how my debt payoff is going so make sure you follow, like, and share and I hope this will help to inspire you take a good look at your finances and start your journey to financial freedom as well.