Baby Step Update: Where we are five years after FPU
It’s been a year an a half since we become debt free! Progress at this point feels a lot slower, so we haven’t been great about keeping you updated! You can read about our financial journey up to this point here.
In January of 2015, we first took Financial Peace University. We were so stressed about our finances and insurance and debt and investing. We were in over our head, and it was time to get help.
During the 9 week class, we learned SO much. We also decided that the only way we would stay on track is if we had some benchmarks to get us through the next ten years. We set five financial goals that felt like absolute BHAGs (big, hairy, audacious goals). In fact, I remember being nearly in tears, because it seemed impossible that we could be at that point in ten years.
We want to share where we are at 5 years after completing the class. We don’t share to brag about how we are doing, but to encourage you that these Baby Steps TRULY work. If you’re willing to put in the work and make the sacrifices that need to be made, you WILL see results.
Goal 1: Paying off loans in 8 years – by Christmas 2022
If you haven’t been following our journey, here’s a brief history. We had $111,424 in student loans with interest rates ranging from 3.5% to 12.5%. Cody was working in IT, and I was a part time preschool teacher’s aide at the time. We both took on extra jobs, cut back our spending, learned to budget, and threw as much money as possible at the loans.
3.5 year after getting started, we paid off our final loan in April of 2018! We were able to go to Nashville to celebrate that following August. We even were a part of the Dave Ramsey show by doing a debt free scream! It was SO special to be able to celebrate our hard work that way!
So doing the math here, we accomplished this goal 4.5 years early!
Goal 2: Be able to set aside travel money for one vacation a year
Travel is important to us, but it can also be expensive. We wanted to be able to take at least one bigger trip each year. We’ve set up a sinking fund (setting aside money each month) for travel and have made that dream a reality. We still have to budget wisely for our travels, and have made sacrifices in other areas to make it happen, but it has been worth it! Being able to travel even while getting out of debt has been such a blessing for us.
Goal 3: Have an Emergency Fund of 3 months of expenses saved up
This is SO important to have! Emergencies happen. Sicknesses, illnesses, and disabilities can happen too. The theory behind having 3-6 months of expenses saved up in a nutshell is:
- Long Term Disability insurance often doesn’t kick in for 30-90 days. If you are out of work because of an injury, you may still need to cover your expenses until this kicks in.
- If you lose your job, having 3-6 months of expenses gives you time to find a new job. And if by terrible luck it takes longer to get a new job, you can often get a part-time job delivering pizzas or something. This little bit of extra income can supplement your emergency fund until you can get a full-time job again.
When we got out of debt, we were both working a lot of extra side jobs, so we were living on under 50% of our income. That meant we were able to finish our 6 month emergency fund in just 5 months!
Goal 4: Increase retirement to 15%
This is baby step 4! There is something unofficially called “Baby Step 3b” which is saving for a down payment for a house. We spent a few months on this, while saving enough into Cody’s 401k to max out the employer match. However, since we are still debating the 100% down plan, we have now moved forward to Baby Step 4. It’s a big step to start saving a full 15% of your income, but we know that future us will thank us for doing this.
Goal 5: Start saving for a car and a house
We actually bought our second car for a steal of a deal (in cash, of course) during our time getting out of debt. Since then, our first car became more of a burden than a blessing. Since we started a sinking fund for a car way back in our first FPU class, we don’t have to worry! We’ve sold the “extra” car since Alyssa walks to work right now, and threw the cash into that sinking fund account. We have the money to get a new-to-us car when we need one!
As I mentioned, we also started saving for a house between baby steps 3 and 4. Our BHAG is to pay 100% in cash, but we also know that will take a LONG time to save for. At the VERY minimum, we will pay 20% down to avoid PMI. We will also buy a house that we can afford the 15-year-mortgage (to reduce interest and time in debt). Our house expenses will also be less than 25% of our monthly income, so that our house stays a blessing and not a financial burden!
Moving on to new things
I honestly can’t believe it. We’ve already accomplished all of these financial goals that we wanted to complete by 2025. It was NOT easy. It took a lot of sacrifice, learning, and budgeting to get to this point.
The craziest part is that we’re not done! We’ve got more to do. We’re planning on saving for another year and a half before we re-evaluate our house plan. We’ve recently switched to 15% of our income going to retirement, so we’re setting goals about where we want our net worth to be in the next few years as well. We’re still working on setting some more firm numbers on our goals, but knowing that we are more than 5 years ahead of where we thought we would be is absolutely incredible!
If you want to learn more about taking a financial peace class, reach out to us at [email protected] or search for a class here!
into the studio where Dave records and films for his shows. The wall is covered with hand-written notes from past guests who have paid off their debts. We were greeted and welcomed in true Tennessee fashion, “Y’all”s and everything! We got checked in, snagged some complimentary lattes and cookies at the cafe… Sidenote- if you want to become the Osegard’s new best friends: coffee is the answer. We were there nice and early, so we had plenty of time to chat with our wrangler, Kat, and the video host George Kamel. Everyone we talked to was so kind, caring, funny, and so genuinely excited for us to be there! They made us feel like the celebrities.
When it was almost time for us to join Dave on the air, Kat got us our headset and we were officially tethered to the wall. Like a well-oiled machine, they clear the furniture in the lobby to the sides, and gather all of the visitors towards the entrance. They have a camera on the visitors, and this gives us a clear line-of-sight to Dave in his chair in the studio. We have a sound check with Kelly, and give a wave to the camera to set up the shot. And we were LIVE!
music. What a surreal experience! I just kept grinning like a fool, and leaned down to give Alyssa a nice, awkward don’t-smack-the-microphone-on-your-face hug. We did it – we were out of debt, we made our trip out to Nashville, and we yelled at Dave Ramsey. I’d call that a successful trip!
It was late 2014 – a big year for us full of college graduation, starting new jobs, getting married, moving to a new state, and more. As crazy as it sounds, all of that was relatively low stress for us. In fact, we found those changes to be pretty easy to adjust to. What threw us for a loop that year was the realization that we had to start paying back our student loan debt.
Method 1 – A sinking fund