An observant viewer just posted the following query on my video highlighting the story of how our family became debt-free (not including our mortgage) to the tune of almost $55,000 in only 9 months:

The numbers don't add up, $55k in 9 months is $6k a month, that's a lot more than cutting back on starbucks/cable etc.

One of the reasons (in my opinion) that Dave (e.g. Dave Ramsey) asks about household income / what did you sell, is that it inspires others to make the bigger sacrifices to pay things off (e.g. sell that awesome car, etc.).

So if you care to share, what did you sell?

Good job and great video, loved it.

It's true that Starbucks and Cable TV cuts alone won't save $6k per month, but i didn't think that explaining the difference between whole life and term insurance would've made for a particularly interesting video! We actually didn't sell anything like cars or real estate, but we did benefit from consolidating assets and paring down other financial vehicles like insurance products.

Here are some of the other factors that went into our massive debt-elimination program:

Consolidating savings/investing accounts - we had monthly withdrawals of about $200 going into a Morgan Stanley money market account, but never ended up actually investing the money - things would accumulate a bit, then we'd have to withdraw down to pay for this credit card bill or that late fee. By stopping those silly monthly payments, we were able to focus on a more simplified income/outgo overview. We closed the $2000 money market that was sitting around at Morgan Stanley and used that money to pay down our debts instead.

Switching from whole life insurance to term insurance - this was actually a biggie. Whole life is supposed to add an 'investment' package of sorts to your life insurance, adding so-called 'value' over time. Dave Ramsey explains that once you factor in all the policy's fees, the actual rate of return on the money is pretty horrible - worse than regular bank savings account, if i recall correctly. Closing our whole life enabled us to collect a lump sum of $12,000, as well as saving over $100 per month for the cost of the insurance itself.

Going GEICO - yes, i hate to sound like that silly green gecko, but switching auto insurance policies actually saved us a bundle! Upon reviewing our car insurance packages, i saw that we were pretty bloated with extra 'goodies' - by paring down to the bare minimum for coverage, we were able to save about $300/month.

Temporarily stopping retirement contributions - for 9 months, i halted my contributions to my 403B retirement plan at Curtis. That saved about $400 per month - once we cleared our credit card/home equity loan debts, i immediately reinstated the 403B.

Let's see - that brings the monthly savings to $200+100+300+400=$1000. Multiply that by 9 months = $9000. Add the $2000 from the extra money market at Morgan Stanley and the $12,000 from the whole life insurance and the total debt-attack fund so far comes to $23,000. Add in other major budget saving factors like the ones i described in the video and others like grocery savings and the cancellation of other subscriptions (such as my beloved Audible.com and my own membership at a premium gym), and i think you could add another $1000/month to the pie, bringing the total to $32,000.

The remainder came from some terrific bonuses from my wife's job (she's a physician) and some amazing influxes of work for me (extra recording projects, concerts, and work for the Philadelphia Orchestra). It seems to be really true that once you start 'getting smart' with your money, then more money tends to flow in much more easily.

Even without the hefty work bonuses, it's easy to see how we could've knocked out the full $55K in just under 2 years (as we originally planned, by the way). Hope these extra details are helpful as you plan your own exit strategy from the debt-mines!

Just for fun, here's the video that the above commenter was referring to one more time (it aired on the "Dave Ramsey" TV show, btw) :




[ 04 June, 2008 ] • [ Hugh ]