How do you pivot your relationship with money when you had one singular goal, you finally accomplished it, and you realize you haven't at all prepared for what life on the other side of that goal might look like? Today's episode is part two of My Money Story, right after we became debt free. What did we do next? I'm Carly Hill and this is the Debt Free Mom podcast.
If you haven't yet listened to part one of My Money Story, go back and listen to the previous episode about our journey from getting married in college all the way up through having our first child and paying off our $26,000 in debt.
Today's episode starts Christmas of 2015, just four months before we paid off all of our debt, Kyle received the book Total Money Makeover by Dave Ramsey for Christmas. So we read it, but we were already in the throes of paying off our debt. We were almost finished and we were about to be debt free. We read and really liked his baby steps. We liked the process. We liked having someone tell us what to do next because we had no idea what to do next. So after we finished paying off all the debt in April of 2016 and found out that we were expecting a second baby, we then started prioritizing saving up an emergency fund. At the time we decided that a full emergency fund would be $10,000 for us.
So whatever money had been going to debt instead started going to our savings. In addition to prioritizing this emergency fund, we also set money aside that had been going to debt towards a vacation. In September of 2016, a couple months after we paid off all the debt, once Kyle's very busy summer camp season was finished, we took a vacation. Just Kyle, myself, and Milo, our oldest son to the beach. This was our very first family vacation, just the three of us where we weren't going with extended family or that wasn't just a short weekend in a nearby city. This was all the way to the other side of the country, down to the ocean, and it is a trip that we will treasure forever, not only because of how special those memories were, but also because we specifically called it our debt-free celebration trip. So we knew that the reason we were there was because of the hard work we had put into tracking our spending, putting the money towards a singular goal of being debt free and sticking with that until the goal was accomplished. That trip was a way to signify to ourselves that we had met this major milestone.
April of 2017, we got , our emergency fund from $1000 to $10,000. So we saved about $9,000 in a year. Which even now, as I think back to that, we couldn't currently save $9,000 in a year. So I think back to that time where our rent was $675, we had one toddler, our expenses were just so rock bottom that even an income of roughly $35,000 from Kyle's, full-time job and about 15 to 20,000 from my part-time jobs making about $47k total, we were able to save $9,000 of that. We cannot save a third of our income right now, so I am so thankful that we made those decisions at that very small, specific window of time when that money was actually available.
In the middle of saving up that emergency fund, In July of 2016, we took Financial Peace University in our living room with a few family members. We went through the classes. We went through the lessons, even though we were already debt free and we were already saving up our emergency fund.
In that class, there was a very small, very inconsequential worksheet called an allocated spending, and it was a little handwritten worksheet that you could write your paycheck at the top and write down the expenses that needed to be paid with that paycheck before your next paycheck came.
It wasn't the primary budgeting method that they recommended. They didn't even call it a budget. It was like an additional optional thing you could use next to a budget just to look at the cashflow. As I looked at that worksheet, I was like, this clicks for me. At the time, I was still using a monthly budget, even though Kyle was paid every other Friday from his full-time job. I was paid haphazardly all the time from my tutoring job in cash, and then my administrative assistant job paid once a month. So we had multiple streams of income on multiple different schedules, and I was trying to budget in a once a month format, and I know that there were inefficiencies in that budget.
There were ways that I felt forced to leave cash in the account simply because I didn't feel like I understood when money was coming out. So looking at this allocated spending plan, I knew that this was clicking for me in a way that a budget hadn't before that. The idea of knowing exactly how much money I have today and making a list of everything I have to do with that money before I get paid again was going to help me maximize not only what I did with the money, but how confident I felt during the pay period.
But I didn't wanna budget on a handwritten worksheet. At the time, I was using a spreadsheet that I had set up. I have always loved spreadsheets, I've always loved numbers. I find a spreadsheet to be as simple or as complicated as you want it to be.
And so I googled "allocated spending plan spreadsheet," and I looked at a bunch of different templates that kind of represented what I wanted to do until I found one that made the most sense for me. That allocated spending spreadsheet that I found in July of 2016 is version zero of the Debt Free Mom budget template that I have today.
I have made a lot of changes and additions to what I originally found building off of it over the last seven years at this point. So the version we have today barely resembles the original that I found online for free back in 2016. But in July of 2016 was when I started actually implementing this form of budgeting into my life. I stopped monthly budgeting, and I started budgeting by pay period every other Friday. That was our primary income because it was the most consistent and it was the largest. I realized that I had been afraid of my finances in a way that I did not need to be. Even though I was in tune with our money, I had goals, I was sending money to those goals. I was still looking at our bank account and thinking, I'm not quite sure I can actually use the money in here, so I need to wait and see. I don't know about you, but wait and see was pretty much a theme of my money relationship for a very long time until I found pay period budgeting.
Once I found this method where I could match my bank account with my budget so that my budget could guide my decision making instead of my bank account, I let go of the idea that I was a passenger to my money and instead felt back in the driver's seat. Where I was making proactive decisions and I was able to accurately know what money was available to goals and send it to those goals at the beginning of a pay period instead of holding onto it just in case until I can wait and see what's gonna happen in the end.
Not just because of the professional opportunities that budget has provided me, but in my personal life, that budget template has changed my life and that is not hyperbole. The way that we have been able to use our money towards our goals, have confidence to make decisions that to outside people look ridiculous while at our same income cannot be overstated.
When we don't feel confident with what's going to happen to our money, it impacts the decisions that we make. We will operate out of fear and avoid risk because the numbers feel unknown. But if we have a budget template that reveals what those numbers are going to be before they actually happen, we can start to make wise, realistic decisions with our money that will match what's going to happen in our real life.
Right after we began pay period budgeting in July of 2016, I left one of my part-time jobs as an administrative assistant in August of 2016. So just one month later, I was able to look clearly enough at our numbers to know that I could remove that income, continue tutoring, Kyle could continue working full-time, and our numbers worked.
Now as I shifted down my income because of having more kids, Kyle took on a new part-time job that started in February of 2017. He got certified as a professional coffee roaster and started working for a new local specialty coffee shop roasting their coffee. So he worked about 10 to 12 hours a week, fitting it in, in evenings, weekends, early mornings, roasting coffee before and after his full-time job. This not only allowed me to leave one of my part-time jobs, but also allowed us to move into a slightly larger home as our family was growing.
So I've used this budget method when hypothetical scenarios have come up. For example, after we saved that emergency fund in April of 2017, we had an almost two year old and a four month old. We were living in a two bedroom townhouse. And I was ready to have our own dwelling detached from other people. So we started to look for rental homes. We knew we were not ready to buy. We started to look for rental homes that were detached- that gave us just a little bit more space while still not being ready to step into the role of homeowner. Now, the house that we ended up renting took our rent from $675 a month to $1100 a month. It also had a backyard and a two car garage and four bedrooms and two living spaces instead of one. And it gave us so many things that we didn't have in our previous house. It was an amazing next step for our family, but I would not have felt confident to almost double our rent without having a tool, that gave me a chance to play around with those real numbers. By the time we actually signed a lease on that house, I had set up our budget for the next six months with the $1,100 rent instead of the $675, and had made sure that it worked on our present incomes.
So I adjusted money we could put towards goals. I made room for a little bit of increase in utilities and then the increase in rent. And I could actually see that the numbers worked, that there still was a small positive gap between our income and expenses with this new rent before we decided to sign on. So we walked into that drastically increased rent with confidence that what we were doing would work.
So June 1st, 2017, we moved into that rental home. We had paid off all of our debt. We had a $10,000 emergency fund and two kids under two. In the fall of 2017, I remember a shift in my momentum, in my energy, in how excited I felt about our finances, paying off debt and having a specific goal for an emergency fund was a very clear goal. I saw the finish line. I watched the numbers grow. I knew that when they hit a certain number, we had arrived, and then we were focused on moving into this rental and we accomplished that. After we had done those things, I started to notice a little bit of confusion about what we were supposed to do next. In the Dave Ramsey baby steps that at that point we had been following, we were either at the point to save up a down payment for a home or begin investing 15% of our income. Now, I can tell you clearly that I looked at my budget and thought 15% from where? Where does 15% of our income suddenly become available? Because in this theoretical plan where you're paying off debt and you're saving an emergency fund, your income and expenses have to stay roughly consistent in order for this method to work where the money that had been going to debt and then had been going to savings can just shift and start going into retirement. However, we had priorities revolving around growing our family, me being home more and having more time together. So as we made decisions with income and with living arrangements, it shifted how much of our income was freed up towards our goals.
So the fall of 2017 to the fall of 2018 was a very stagnant time in our lives. We made ends meet. We were able to cover all of our bills. We enjoyed where we were living. I enjoyed having one less job, but we were not making lightning fast progress like we had just a year or two before that. And on top of that, in January of 2018, I found out I was expecting our third son. So now we had a much narrower margin between our income and expenses, and our family was about to grow again.
This summer, I'm inviting you to join me for Summer Budget Camp a -community of fellow budgeters coming together for a guided learning experience in pay period budgeting. Together we'll work our way through the newly updated modules of Pay Period Budget Academy, my signature course for teaching you how to prepare, build, track, and adjust a budget that fits your real life. This brand new format breaks down all the lessons into weekly tasks delivered throughout the summer and paces you so that you don't lose steam after building the budget and instead can build the habits needed to make budgeting a part of your busy life.
With summer budget camp, you'll get a lifetime membership to the newly updated version of Pay Period Budget Academy, a camp handbook that includes the information you need to guide you through the budgeting process, weekly emails to keep you on pace with the rest of the group, monthly live video calls with themes built around these weekly lessons, and access to the new Debt Free Mom online community to keep your momentum and accountability going after Summer Budget Camp ends.
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If I look at Mint at our net worth tracker, in June of 2017 when we moved into this rental, our net worth was $23,955. If I fast forward an entire year to June of 2018, our net worth was $18,758. This is because we had to replace a vehicle in the middle of that, so we used a large portion of our emergency fund to replace vehicles, and we had some substantial medical bills in the middle of that as well. So in the first year that we lived in that rental, when we were theoretically supposed to be able to save up a down payment for our home and start investing 15% to retirement, our net worth actually dropped by almost $6,000. Seeing that drop over time was very disheartening and disillusioning. I felt like I had been told that as long as I paid off my debt and saved up an emergency fund, things would just start falling into place for me. I realized there was much more to the story than that. While these two accomplishments were fantastic for the rest of our financial outlook, it still was going to take consistently increasing income, paying attention to our expenses, and having a realistic budget that allowed us to move forward with goals. We couldn't assume, like I had before, that paying off the debt and saving up the emergency fund meant that all of these options were wide open to us.
I heard a quote recently that as your wealth grows, you don't get rid of your money problems, you just get better problems. And I think that's a great way of summarizing this transition. That I thought that all of my problems would kind of melt away and all of my options would be available to me as long as I paid off my debt and saved up an emergency fund. And I found that to not be true. But like that quote said, it is a better problem to have to say, I'm really trying to find a way to invest more, is a good problem to have, and a much less stressful problem than I'm trying to figure out how to make ends meet, or I'm trying to figure out how to get out from under my credit card debt.
So that was a lesson I really, really had to learn in 2017 and 2018. Number one, it's okay to have seasons of your financial journey where you coast, where you are doing other things besides growing your net worth where you're focusing on other aspects of your life than investing and saving up, and jumping to the next point as fast as possible.
At this point I was feeling frustrated that we weren't making progress. A year can feel like a very long time, but in reality it is not. So I was just focusing on this one year and saying, what are we doing? What is wrong with our money? We're not making progress. We're not making momentum. Because my frame of reference was 2013 to 2016 when we were making lightning fast progress with all of our goals, the gap between our income and expenses was so large that I started to get used to that. So as time moved on and that gap started to shrink because of increased expenses and decreased income, I had to come to terms with what that new season meant. And remember that I was choosing to prioritize time with my children and growing my family and having a larger home. Those were going to come with a decreased amount of extra income available.
I don't know if you can relate to this, but sometimes I feel like I'm always behind. I specifically remember feeling that way in 2018. I was 27 at the time, and I felt like all of my peers and everybody I knew and everybody my age was all buying houses and they were big houses and nice cars, and I was looking at my numbers thinking, what have I done wrong? What's the difference? Now, just five years later, I can look back and say 27 is not behind for really anything. There's very few things in life where if you say, oh, well you're 27, so now you're behind. But also it doesn't matter what my peers were doing, that doesn't determine what's wise and best for me.
So in September of 2018, our third son was born and we were still living in this rental. Kyle also got a substantial promotion in September of 2018 to the executive director of the nonprofit that he had been working for since college. So as his income shifted up in that job, he kept his part-time job roasting coffee. But I left my tutoring job to be with our three sons. Our three sons are less than three and a half years apart and needed my full-time attention. In September of 2018 was the first time that I was 100% a full stay-at-home mom. Which had been a goal of mine for a very long time, and I should have been able to fully and deeply appreciate that moment and see that the financial choices we had made in those recent years had led up to that moment. But while I appreciated that moment, I also was still comparing myself to others, asking myself, why can I not do what they're doing?
Well, looking back, I can say, you couldn't do what they were doing because you had other things that you were doing that they weren't doing. Namely, raising three very small kids at 27 years old and being able to stay home full-time with a husband who worked in ministry. In that window of time. We were surviving, but we were not investing and even though our goal was to be saving up a down payment for a house, that savings account was growing by about a hundred dollars a month. Not at all on pace to buy a home.
In January of 2019, I filed our 2018 taxes and saw that because we had had a third child, our tax return was going to be much larger than I expected it to be. Right away we started to get serious about the potential of buying a home because Kyle's income had increased and this tax return was going to come, I believe it was close to $5,000. We started to look at mortgages and look at homes and see if it was even a possibility, if it was even on the table, that we would be able to buy that spring.
In March of 2019, two amazing things happened. We went under contract with our first home, the home we live in now, and I started an Instagram account called Debt Free Mom. I had opened this account in August of 2018. I had called it Debt Free Mom of Three, and I had been posting just a few, like money saving things that I was doing, but I had a baby in September and I did not touch the account at all. I posted absolutely nothing from September to March, and then March was when I changed the name from Debt Free Mom of Three to Debt Free Mom, and actually started posting and have been posting ever since. So my very first pieces of content were related to living in our rental, tracking my grocery budget, being a full-time stay-at-home mom and walking into this brand new first time home buyer experience.
Not only did we get that tax return in the spring of 2019, but we also qualified for a grant, a first time home buyer grant in the state of Illinois. I don't even remember what it was called. The mortgage broker at the credit union that we got our mortgage from, looked at our information and said, I think you qualify for this. She gave us a form to fill out. We applied, we had to go through a little like counseling to make sure that our finances were in order before we could receive the grant. We qualified for, I believe, $6,000 in a home grant. So between what we had saved up from that tax return and then this home buyer grant, our down payment was about $11,000, but it came in the span of about two months between those two big things. And it wasn't actually something that we slowly were able to build over time. We had been trying to slowly build it over time, but it hadn't really been working because of our expenses and decreased income. Those two things were a massive blessing and the right timing that the right home came our way, and we know that this home was meant for us. We were able to move into this house in April of 2019.
So that's where I'm gonna leave the story for this episode because part three of our money journey will be what has happened with our finances since Debt Free Mom began in March of 2019. But what I want you to take away from this second episode of our story is that sometimes you have seasons in your money where you can clearly see the progress that is happening in your goals, where you are motivated and committed and you have your head down, you have that tunnel vision towards what's in front of you. And then other times you stagnate, you stay in the same place and you are just making ends meet. You're making sure that everybody is fed and has a roof over their head, but progress is not really happening. And sometimes in those seasons the hardest thing to do, but the right thing to do is to continue with the habits that you know will get you to where you wanna be, even if you don't yet see the results.
And that was what we really had to work through in 2016, '17, and '18, that our progress went from this upward swing to a flat line, and we had to stay committed to the principles that we had held to. As I closed out episode one last week, I talked about being slightly disillusioned. That was the word that came to mind when I talk about this season, because we had built so much momentum in debt payoff and savings that I had assumed that it was only up from here when really 20 17, and '18, while debt free with a full emergency fund felt like a complete financial standstill, like we weren't getting anywhere. Like no matter how much I tried to drive the expenses down, the engine was not moving forward at all. That was really the beginning of some of our departure from Dave Ramsey and from the baby steps because we realized that the baby steps really assumed that all of your income and expenses would at the very least stay the same, or the gap between your income and expenses would even grow larger. And in that case, then you are able to save up for a house quicker because your debt is paid off. Or invest 15% of your income into retirement because your emergency fund was full. But in our case, we had chosen to prioritize time together, me staying at home and decreasing income in order to make those things happen. And because of that, we started to need to pave our own way; to make an order to our goals that was still wise overall, but that suited our individual family's needs. I think the general framework of the baby steps is a good idea. Save up cash, pay off the high interest debt that's weighing you down, fill your emergency fund and then look to the future with your retirement.
That broad path from confusion and debt to owning your paycheck and sending it to your future is something that I still believe in, but the black and white and strict way of saying this is exactly how you do it, no matter who you are, and this is how much you should save no matter who you are, and this is the percent that you should invest no matter who you are, was something that I really had to acknowledge as unhelpful and depart from it as I realized that we weren't doing it wrong, simply because we weren't doing it the way Dave Ramsey would do it.
And as I've come to terms with those things, our relationship with our money, our ability to give our security in our home and in our ability to invest our income have all grown. I feel more confident about our path forward now than I did back when I felt stuck on some arbitrary baby step number four.
So while we used those baby steps for a time and then decided to walk away from them, what I have not walked away from, no matter what has happened since 2016 has been my pay period budget. I have used it from July of 2016 to now without any breaks at all. We even switched our pay period schedule back in October of this past year when we went to fully self-employed. So my structure completely changed of the budget, when we were paid changed, we went from a pretty set income to a pretty variable income, and although there have been hiccups and learning moments as I made those changes, it has been a seamless transition of managing my money, identifying if pay periods are going to have deficits, and what I'm going to do about it, and when pay periods will have surpluses, and how I'm going to use that money. It has helped me to track not only my current expenses, but also have a clear plan for my future expenses. It allows me to be reflective about the past so that I can make accurate decisions about what's coming up.
In episode three, we will dive into everything that has happened from Debt Free Mom to today, still continuing to use the pay period budget, but needing to shift and reprioritize what our goals were, and how we spent our money now that we were in a new financial season of life.
(*Credits) Thanks for listening to the Debt Free Mom Podcast. If you want to join me as a guest on the show, go to dfmpodcast.com. The Debt Free Mom Podcast is hosted by me, Carly Hill, and is produced, edited, and mixed by Kyle Hill. Music for this episode was written by Kyle Hill. Hit subscribe wherever you're listening to join in with every new episode as we grow our confidence and contentment in our personal finances.
