About eight years ago, my husband and I were like swans: looked pretty good on top, but were paddling away like mad under the surface. We had a nice house (mortgaged) two new cars (loans) two income properties (after the loans on those, no income), you have seen this many times, I’m sure. My nephew gave me a strange (to me) gift for Christmas: your book, Financial Peace. I love books, and have read many on money and finance, including Suze Orman, Robert Kiyosaki, The Millionaire Next Door, etc., All have good advice, but yours really hit me, like no other, because of the Baby Steps, that anyone, at any level of income or education, could follow. On New Year’s Day 2008, with the economy tanking and everyone in panic mode, I sat down with my husband and we went through everything to figure out how much we owned versus how much we owed. Wow, that was rough. We had always put maximum away in 401ks and IRAs, but we had no other savings, and the payments on our debts were almost exactly what we were bringing in after taxes! We resolved to follow your plan. We saved $1000 (that was easy) then we made a budget (draconian, needed revision a few times), and we stopped using credit cards. We went after the credit cards, that was done in months. We tackled the car loans, and with the new budget, had those gone in under two years. Brought the savings to six months living expenses. Then, disaster. My husband was diagnosed with multiple myeloma, needing a stem cell transplant. I closed my gift shop, and we worked together to try to save more. His stem cell transplant was very rough, he needed two tries before it took, and he was off work for six months. I did not have an income since I had closed my business, and that emergency fund came in very handy (he did keep his job, but the disability pay he got did not even equal our mortgage every month). Before he came home, I put in a new water filtration and treatment system (we live on a well) because his immune system would not be up to normal for many months afterward. That finished the emergency fund, but we paid cash for it. We live in a rural area, and jobs were scarce to nonexistent near me (even the pizza parlors had more drivers than orders!), I did find seasonal work at an apple orchard, and used every cent I made to start building up the emergency fund to six months’ expenses while Bob slowly got back up to working fulltime again. Long before, we had kicked pay TV, the health club, and subscriptions out, baked our own bread and packed lunches, I sold off lots of stuff, all the steps we could to keep going. We keep another savings account, which we call the YTY (year to year) fund, where we put a fixed amount every month for the big expenses we knew would hit us (property taxes, insurance, Christmas) every year. We kept that separate from the emergency fund for clarity. The tough one was the income (NOT!) property, which had plummeted in value but not in expenses, and we were losing tenants because they could not pay even modest rent. We ended up basically supporting those buildings, and could not sell them in that climate even for much less than we owed on them. And, the five-year balloon mortgage on them was approaching the end. Well, this may have been dumb, but it was in desperation: Bob was just over 62, so at least taking out of his retirement funds would not have an added 10% penalty. We took lots out of the IRAs, and took the maximum loan on the 401k we could, and burnt our emergency fund (again) and paid those buildings off. That year taxes took a real bite, but we now had some cash flow from the buildings, which meant we weren’t supporting them. We were able to fix some things on the buildings, got them fully rented again, and began (again) to build up the emergency fund. I was working at least seasonally, and took my skill at making jewelry to a profitable side line. The emergency fund meant that car repairs, or having to travel to help elderly relatives out of state were not excuses to fall into credit card debt. We just cash-flowed it and kept going. We recently received some windfalls, tragically due to people we love having passed away. Instead of blowing those on vacations or other stuff, we were able, in 2016, to pay off the house, and, on Dec. 30, 2016, paid off the 401K loan. We now have that six months’ expenses in the bank (although, since we have no mortgage or car payments, is probably enough for a year or more), NEXT year’s YTY expenses in the bank (which we will continue to replace as we use) and are starting two new bank accounts: redo roof on house, and replace cars. We have loosened up on spending a bit, allowing a restaurant meal line item on our budget. Our medical costs have increased hugely, as Bob continues to have to have chemo and several monthly doctors’ visits, which co-pays run about $700 – $1000 per month, but he continues healthy, thank God for that, and our many blessings. We have continued some tightwad stuff because we either enjoy it or don’t miss it: watching tv is DVDs from the public library, and we still bake all the bread we eat. Long post, use it or not, but we are thankful that we were able to use Dave’s Baby Steps and are now, DEBT FREEE!!!! We are a childless couple, now 64 and 62 years old.
Bob and Sherrie Ludwig.