We are Finally Debt Free!

Posted by Mrs Money on October 6th, 2010

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It feels like it’s been forever, but we are finally debt free! We have paid off our student loans, credit cards, and even a car loan we had to take out. It feels fantastic to just have our mortgage as our only debt. With this freedom comes a new responsibility: handling our money carefully and figuring out what financial goals we want to accomplish next. Truth be told, this next era scares me more than the debt repayment period.

When we were in debt, we had concrete numbers that we knew we had to work towards. It was easy to look up balances at any time and see how much we owed. Those goals were tangible, and easier for me to work towards than an unknown goal. I think now we need to create new goals that have numbers attached to them so that we’ve got that same financial focus.

I feel overwhelmed in the fact that I’ve got so many things that we could be saving for: retirement, replacement cars, emergency fund, future kids, paying on the mortgage, etc. Don’t get me wrong, I am so thankful that we have been able to work so hard to become debt free and I want to stay that way forever.

I’m thinking that we can come up with a strategy to save and maybe even pay extra on our mortgage that will make us happy. We’re also going to have to keep our future career aspirations in mind: I would like to work part time eventually, and when we have kids I would like to be a stay at home mom. My husband will continue to be a chef and try to advance his career when possible. I’d like to have a substantial savings account built up for when that happens for any unforeseeable expenses.

The thing is: I don’t know how much I should save towards each category. And I’m still lenient about paying extra on our mortgage. What if we decide to move? I’m almost tempted to just put all of the money into one account and just not worry about it. I’m thinking that a good plan of attack would be to prioritize our goals, decide a time line on when we want to accomplish them, and then start saving accordingly. It will be a bit easier to digest when we break it down into smaller goals.

The next step of personal finance is one that I’ve waited a long time for. It will be a new chapter of our lives. To be honest, it does not feel quite as exhilarating as I thought it would! That’s ok- the point is we’ve done it! YAYYYYY!

We’re debt free!! What do you think we should focus on next?

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35 Responses to “We are Finally Debt Free!”


  1. Congratulations!!

    If it were me, I would focus my efforts on saving for retirement, paying down the mortgage, or making a really nice emergency fund. I would also focus on celebrating this amazing milestone. :o)

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    Mrs Money Reply:

    Saving Her Life- Thank you! That’s a good point as well- we need to celebrate! :)

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  2. Shona says:

    Being debt-free is probably one of the most amazing feelings in the world. Waking up each day and realising that you don’t owe anyone anything anymore, tends to make getting out of bed just that little bit easier!

    By what was mentioned in the post regarding still having a mortgage payment, a suggestion would be to try to pay as much extra off on it as possible, which would definitely decrease the amount of time needed to repay it. Who know – perhaps by the time children decide to arrive, you may then very well be mortgage-free as well. Wouldn’t that be even more awesome! :-)

    [Reply]

    Mrs Money Reply:

    Shona- That would be awesome to be mortgage free when we have kids! Thanks for the kind words!

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  3. Congratulations!! That is fantastic and you are both so young, I’m so proud of you!! What does your emergency fund look like? If the extreme emergency fund is in place and at a good amount, I’d focus next on saving six months of living expenses. You’ll have to let us know what you decide to do.

    [Reply]

    Mrs Money Reply:

    Mrs. A- Thanks! I think I’m going to work on saving some money. I’ll have to set a goal and work towards that!

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  4. Little House says:

    Congrats! I can’t wait until I can say the same thing. As for how much to save of where to put it, maybe come up with a total percent of how much you can save. Say that is 20% (or how ever much was initially going towards your original debt). Then portion out 5% or so towards each category. I don’t think you need to have separate accounts, necessarily. As for paying down your mortgage, if you really are thinking of moving in the next couple of years, maybe you shouldn’t worry so much paying more into it and instead focus on building a substantial savings account. Good luck no matter what you do, you’re heading in the right direction!

    [Reply]

    Mrs Money Reply:

    Little House- Thanks! It feels awesome, but not as exciting as I thought! ;) That’s what I am thinking about the mortgage, but then part of me thinks that we’ll owe that money either way, so why not pay extra? Then I think, well, if we need that money later, we really can’t access the equity (I wouldn’t do an equity line). I drive myself crazy!

    I think I’m going to stick with your suggestion.

    [Reply]

  5. Ramona says:

    Wow, this is amazing news. I have 18 more months of my car payment and I’m debt free. My next move will be to work more on my savings and getting some sort of a pension, since in my country this is a very sad story :)

    Congratulations for your results. You’ve done amazingly well. I think the next step is to never get into debt again :D

    [Reply]

    Mrs Money Reply:

    Ramona- Thanks! I completely agree there- I never want to get in debt again!

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  6. AJ says:

    Congratulations!! That’s awesome. I cannot wait until we kill off our debt. I’m hoping within the next year, if not sooner. Since having the baby, our budget went out the window! We need to get back on track asap though.

    As for what to save for, I think you should divide it up just like the commenter Little House mentioned above. Put a percentage towards each goal.

    [Reply]

    Mrs Money Reply:

    AJ- Thanks! I’m worried that when we have kids we’ll do the same thing so I’d like to start saving for that. I think the percentages will work well too!

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  7. Kacie says:

    Way to go! That’s a really great accomplishment. I felt that once we paid off all our debt, it WAS a challenge to stay motivated to build up our savings. It’s one thing to see numbers decrease, but for some reason i was more motivated to reduce debt than to build my bank account. Weird, right?

    I think as long as you put at least the amount you were previously putting toward debt toward a “good” thing, like retirement, savings, your house, whatever…then that’s cool.

    Even if you move sometime soon, it’s better to owe less on your mortgage at the time of sale. You owe the balance of your mortgage one way or another — either monthly or at the end when you sell the house.

    For awhile, we were focusing on saving for our next vehicle and once we got a pretty small amt. socked away ($4k) we decided to shift our focus to our house down payment. We can use those savings however we want when it all comes down to it, but having a different goal designated was more motivating for us.

    Good luck with whatever you decide!

    [Reply]

    Mrs Money Reply:

    Kacie- Thanks! I agree. It’s much more exciting to watch loan balances go down because you know you’re saving yourself money in interest. I agree with you- as long as I’m saving that money instead of spending it each month, that’s good.

    I totally understand your point, and sometimes I think that I’m getting a 5% return on our money when I pay extra on the mortgage. I know that’s not completely the case, but it helps me mentally pay a little more.

    I like what you’re doing. I think I’ll probably do something similar- create goals and then try to attack them that way!

    [Reply]

  8. Becky R says:

    So awesome! I am so excited for you both.

    Next step.

    On all money coming into house give 10% to God, save 10%.

    On extra money you were paying on debt:
    -fully fund an emergency account ($10,000 should be realistic)
    -pay down mortgage
    -fully fund all stuff that will occur over a year but is not in monthly budget (i.e. car registration, gifts, Christmas, car maintance, car repairs, medical stuff not covered by insurance, etc.)
    -live off only one income (don’t spend any of your income for regular bills, so you can prepare for being a stay at home mom)

    The time line and goals are a great idea.

    [Reply]

    Mrs Money Reply:

    Becky R- Thanks hun!

    I think your tips are all amazing! Would you like to guest post sometime here??

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  9. Great to hear! We’re down to the car loan and mortgage. I satisfy my urge to pay more on the mortgage with a small $25-$50 extra principle payment every month (we know we won’t move anytime in the next 10 years, if ever). Besides individual retirement accounts, we use just one account for our savings to cover out-of-the-ordinary expenses. It depends on how much structure you need with your finances in order to stay on track. We’ve always been very disciplined and never in major debt, so we don’t find structure/separate accounts necessary.

    [Reply]

    Mrs Money Reply:

    Penny Frugalista- Thank you! I think I’ll start paying $25-50 extra each month. I think that will help a little and make me feel better :)

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  10. Congratulations!! That is so exciting to be debt free!

    But I understand your point of view about savings not really being tangible like paying down debt is.
    We have a lot of debt to pay down, but at the same time we are saving to build a new home AND for an emergency fund in case something happens (lay offs perhaps?). We keep all our money in the same account. I have built in an emergency fund into our savings goal. But hopefully whenever we reach our savings goal we’ll have a good chunk of our debt paid off.

    Congrats again, and I hope you do something awesome to celebrate!!

    [Reply]

    Mrs Money Reply:

    Journey to Our Home- Thanks! It’s overwhelming sometimes, isn’t it?!

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  11. Deirdre says:

    Congratulations! That’s a huge accomplishment. I figure I’ve got 3 more years to go ’til I’m there… I’d say save an emergency fund of 10 months of expenses ($30K maybe, since you live very modestly), then saving for retirement – or even Financial Independence. (I forget – have you read “Your Money or Your Life”?).

    [Reply]

    Mrs Money Reply:

    Deirdre- Thank you! I need to re read Your Money or Your Life. It’s been awhile! I think I’ll work on an emergency fund. It can’t hurt, plus later we can take that money and put it towards the mortgage or whatever! :)

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  12. CONGRATULATIONS!

    We started on our mortgage after we paid off the last car loan, but you may want to squirrel more away for future family expansion. :-)

    [Reply]

    Mrs Money Reply:

    BIFS- Are you aggressively trying to pay off your mortgage? I’m kind of afraid. I’d rather have money liquid, but I’m a worry wart.

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    Budgeting in the Fun Stuff Reply:

    We are odd. We’ve overpaid our mortgage since our first payment ($900 instead of $740). We also built up an emergency fund (ef) to 6 months of necessary expenses (about $15,000).

    Then we had a huge dental bill and decided to pay off our last car loan early, so we nearly zeroed out our ef. Now we’re rebuilding our ef to $10,000 (we’re at about $5000 right now). Once we hit that, we will hit our mortgage harder.

    As of right now we’re still simply paying the $900, which will take our 15 year mortgage to 11 years, but our future plans should take it down to 10 years max.

    I also like liquidity, but between the $10,000 plus our monthly $500 contribution in our ef, $2000 in padding in our checking accounts, $2000 plus our monthly contribution of $500 in our home and auto account, and $4000 plus monthly contributions of $500 in our vacation and fun money accounts, I feel secure cash wise. We only use the excess after we pay ourselves to fast pay the mortgage. We live off of my husband’s $47,500 salary and save all of mine ($35,000) every year, which is how all of this craziness works. :-)

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  13. Congratulations! I would advise building up your emergency fund to a suitable level, and then attacking your mortgage. That way you can truly be debt-free!

    [Reply]

    Mrs Money Reply:

    Khaleef- Thanks! It’s so hard to pay down on that stupid mortgage because when I make principal payments, the balance just keeps going up! We can afford our mortgage and we don’t have a huge house, but sometimes I wish we had bought a less expensive house.

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  14. PassingBy says:

    Hi Mrs. Money! Congratulations on being debt-free! I just stumbled upon your blog from another site and started browsing around. My husband and I are about your age and also debt-free except our mortgage. I’d recommend saving six months of living expenses (a concrete goal) while also paying a set extra amount on your mortgage principal each month. As little as $100 a month will shave years off your mortgage and save you thousands in interest! And the more equity in your house, the greater amount you’ll have for a down-payment if you ever move. You can’t lose! Also, my husband is paid bi-weekly and we take the two extra payments each year (you know, from the months you get three paychecks) and put them into a Roth IRA as a little extra retirement cushion that doesn’t break our budget! Hope the tips are helpful. Good luck!!

    [Reply]

    Mrs Money Reply:

    PassingBy- Thanks so much! I think $100 a month is a good amount to pay extra on the mortgage. That way, it’s not a ton of money, but like you said- we’ll have more equity if we move. Thanks so much for the tips!
    xoxo

    [Reply]

  15. You’ve already gotten great advice from the earlier commenters. Congratulations on becoming debt-free. I’m seeing the end of the tunnel in about 14 months.

    [Reply]

    Mrs Money Reply:

    Kay Lynn- Thanks! 14 months will fly by! :)

    [Reply]

  16. CDW says:

    Congratulations! I just found your blog today. It’s always nice to read about people becoming debt free.

    I’m certainly on my way! I cannot wait for the day I blog about my success!

    Congrats again!

    [Reply]

    Mrs Money Reply:

    CDW- Thank you! Good luck with your journey- I’m hoping it will go faster than you anticipate :)

    [Reply]

  17. Revanche says:

    My very belated congratulations!

    [Reply]


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