We are now officially DEBT FREE except the mortgage!! It was a long road. Scroll to the bottom for the latest updates.
I guess I don’t see that point in being too private about our lives. If sharing what we have learned helps one person it will be so worth it. We still don’t do things perfectly and I’m afraid of what Dave Ramsey might actually say if he knew what we were doing. This is the best way we’ve found to continue living the life we love while still working towards a more secure financial future. It is going to take longer that we’d like to get out of debt but we are successfully avoiding further debt while still farming which is in itself quite the accomplishment. If you have any questions feel free to ask.
The Nerd Finds the Book
Those who know me well have heard me talk about Dave Ramsey and his fabulous Total Money Makeover Principles. I first picked up the book at my library just after graduating from high school. At that time I already had a truck, a loan on it, and a full time job. I was always unsure whether I should pay extra on my truck or build up my savings account. Dave Ramsey’s baby steps simplified things for me. I got my first apartment and worked the plan. During that time I lived very cheaply, used the envelope system, and stuck to a simple budget.
In the meantime, Brian was working good jobs and enjoying life as a single guy. He was tight with his money (from what I’ve heard 😉 ) He didn’t have a lot of bills so if he wanted something he bought it, and he usually paid cash. Like me, he did have a loan on his pickup.
Love, and Foolishness
Not long after we met (actually I think it was on our first date) I began sharing the TMMO principles with Brian. Ironically, I went through a weird stage in my life right then. I switched jobs, moved to a bigger apartment, and traded up to a truck I could barely afford. Brian also got a new (used) truck that winter and tacked more on to his loan.
As our relationship grew we started to talk more and more about our future together. Brian encouraged me to finish college. We moved in together and put my truck up for sale. There was no way I could make that payment plus put $4/gallon gas in that truck. I was driving over 1000 miles a week to and from school and work so we bought his Mom’s older fuel efficient car. Thanks to some very generous friends we were able to sell my truck for exactly what I owed. They could have talked me down and they didn’t – we won’t forget that!
I got rid of that truck payment just in time to take on a student loan. Actually, my Mom took out a loan for me and then I took out a second one. I did work a lot. If I could do it over I would bank the money first to avoid loans. The professional part of the program I went through required a solid 9 months of classes 4 days per week with several far away lab visits and a total of 280 hours of unpaid internships. Plus I was driving 3-4 hours per day! My total student loans are small compared to others but they are still hanging around like a pet and I wouldn’t wish that on anyone.
Home Sweet Loan
During that time Brian and I were wanting a home of our own. We were living in the house were he was raised but his Mom still owned it. We talked and talked and eventually decided to buy the family farm from Brian’s uncle. His uncle had long since moved up north and the farm wasn’t getting much attention from anyone. Brian wanted to farm and I wanted to paint and decorate a home for us. We started to work on the farm that spring and Brian signed papers on it that fall. We moved in on Labor Day 2007.
The farm consists of the house, outbuildings, and 74 acres. The loan we have on it is an “agricultural loan”. Half of the money comes from Farm Service Agency (government run) and half comes from Greenstone Farm Credit Services (basically a bank for farmers). The payments are both due on January 1st each year. The idea is that you will get paid for your crops in the fall and then have the money to make your payment. That first January we only had to pay the interest. Since we didn’t have any crops they didn’t expect us to make a real payment until the second year.
Too Close For Comfort
Not long after that our money situation got a little crazy. We were basically living on Brian’s income alone. We made the payment in January but how would we have the money for seed or fertilizer in the spring? I resisted the idea of an operating loan (a line of credit that almost all farmers have) but Brian insisted we get one “just in case”. Sure enough, we still didn’t have the money when we needed it in the spring. I don’t remember exactly what went on that loan but I think we maxed it out that year, which would mean we spent $10,000 we didn’t have.
I was lucky to land a good job at one of my intern sites – and it was only 15 minutes away from the farm. When my income started rolling in that summer it really helped. We paid for everything as much as we could. We got married that fall and added my name to the loans on the farm, officially making it “our money” and “our debt”. When we harvested our corn the price was so low we couldn’t sell it for what it cost to grow. We sold our soybeans and started to save like mad to make those big payments in January. We had to use our last paychecks from 2008 and empty our bank accounts but we made the payments with about $50 to spare. Whew – that was too close for comfort!
Things Have To Change!
Dave Ramsey’s ideas were in my head throughout that first year. However, I was completely shocked at the financial turmoil that seemed to plague us since we literally “bought the farm”. I would have quit right then and there. I actually figured at one time that we might come out ahead if we let the fields go and just paid the mortgages from our salaries. I think I was just being a pessimist – and you can bet that Brian told me that! After all, this was his dream and I too was falling in love with the lifestyle that came with the farm. We just had to make it pay. I was used to my small, simple budget were I spent $20 a week on groceries and my electric bill might be $30. I had no idea how to manage the tens of thousands of dollars in bills that came across my desk.
Starting in 2009 things really began to turn around. We saved every dollar we could from January 1st until the spring and were able to use our own money to buy all of our inputs (aka seed and fertilizer) that spring. That spring we also got a big check from our insurance company to cover our losses from the shed fire we had in November of 2008. We used the money to get ahead as much as we could. We got 2 really, really good deals that allowed us to stretch the money. We found a gently used pickup for several thousand dollars cheaper that others like it. The owner “wanted a different color”. Our older car was limping along so we were thrilled to replace it and pay cash in the process. The second amazing deal was on our semi. It had belonged to my aunt and her husband. They were killed several years before and my cousin wanted to get rid of the truck. He offered to use at a low price since it hadn’t been started or used it years. We were prepared to sink some money in to repairs and did spend a few thousand but nothing like we thought.
The rest of the insurance money went in to repairing the burnt shed and paying off the operating loan from the year before. I’m sure someone might say we might not have gotten ahead if we didn’t have that insurance money. I would say that if that shed didn’t burn we wouldn’t have the semi and I’d still be driving that car. By the time we got that insurance check I was already dead set against taking on any more debt. Brian wanted to avoid debt too, he just wasn’t sure if it was possible. After all, every farmer he knew, even the really successful ones, usually relied on an operating loan.
Anyway, in the spring of 2009 we were sitting pretty good. Everything was paid up. I was ready to start knocking out our debt but it seemed like the money was always getting sucked in other directions. It was frustrating and overwhelming all at the same time. Sometime during the summer we sat down and made a list together. We listed all of our “projects” and where our money was needed. We made the list in order of what needed to happen first. We agreed that all of our extra money would go towards the next thing on the list. When the list was done we would start throwing all of that extra money at our debt. In the meantime, we maintained our $1,000 baby emergency fund per Baby Step 1.
Oh, but what about that mortgage that is due again this January? This year we grew wheat. We weren’t able to harvest it due to the poor weather but our crop insurance policy paid us what we would have gotten. I’ll never complain about writing that insurance check again! We used the money from the wheat, along with a couple paychecks, and have now paid most of the Greenstone payment for the year. The soybean harvest will finish it and cover the other mortgage. Then, the corn will go towards our input expenses in the spring. All this means that we have almost reached a point where the crops pay the mortgage and inputs and our salaries pay for… well… whatever we need to do at that point. At this point Brian and I are on the exact same page with money matters and that, umm, is quite the turn on!! He is so proud to be able to say we are paying for things as we go and I am so relieved! As much as I wanted this I had my doubts too. We’re not yet enjoying financial peace but we have a plan and we’re working together.
In the fall of ’09 we started doing a real budget. I’m using a combination of Quickbooks and DR’s Financial Peace Software to pull it off. You can read more about the details of the budget here. We really pared down the list of projects. We’re going to finish the cattle building, rebuild the lean-to, pay cash for a semi trailer, and pay for my wisdom teeth to come out. After that we can ATTACK the debt. Optimistically speaking we could be debt free except the mortgage by Christmas of 2010. That would be awesome! We are now renting another 44 acres of farmland in addition to the ground we own and already rent. That means extra expenses for seed and fertilizer next spring. It will also mean more income next fall! All of this budgeting and planning is really stressful for me (the nerd, obviously) but it also addicting and very exciting. I feel like I’m holding my breath.
Hurry Up and Wait
We have finished the cattle building, at least as much as we’re going to for now. We still need to put in horse stalls and more cement but that can wait. The lean-to is being put off as long as we can stand it, although we’re hoping to have it done before next winter so the sheep can move in there. We paid cash for my wisdom teeth to come out. It wasn’t so bad I guess. Oh, and… we paid cash for our first semi trailer last month!!
It was a very scary feeling for me to send Brian off to a farm auction with the checkbook! Lol. We figured out the max we could spend and he got the trailer for less than that. It needs a little bit of work but it is pretty nice and just what he wanted. I am so relieved to have that last thing big purchase out of the way.
We still have a big seed/fertilizer bill coming that we’ll have to pay before we can start snowballing our debt. This is so stressful! We usually have crops left to sell to save these bills but we drained most of that to buy the trailer. I know we can cash flow the bill but I’m so tired of being patient. We’re about 1/3 rd of the way having the bill paid in full after getting paid this week. I expect it to take another couple pay days at least unless we find a windfall somewhere.
Brian may have an opportunity to pick up some extra work on Friday and Saturday as soon as he’s done planting. If it works out we can use that money for the improvements on the semi. I’m a little disappointed that the extra $$$ won’t be going towards our debt but at least the semi expenses won’t be taking away from our snowball. I have inquired about an extra job too so we’ll see where that goes.
Things should really start rolling when we get the wheat off around the middle of summer. Typically what we do is pay the mortgage first before anything else. I think we should stick to that. After this last big bill is paid we should have our paychecks free to pay regular bills and snowball the debt. We can work at it that way all summer and hopefully by fall/early winter we’ll have the mortgage paid and can wipe out the rest of the debt with some of the crop checks. We absolutely have to sock some away for next year’s inputs too… hopefully there’s enough to go around!! I’m feeling pretty optimistic at this point. 🙂
Whoa, how has it been THREE YEARS since I updated this!?! And how did I ever think we could be out of debt by Christmas of 2010!?!
Let me try to catch you up on all that has happened since I last updated:
- we’ve cash flowed all farming expenses and have not taken on any new debt
- we put a new roof on the shop this winter
- we purchased 24 calf huts and filled them with calves twice
- after dropping to part time for a few months I quit my job on July 1st and delivered our first child on July 7th, 2011
- we sold two of our three vehicles – Brian’s Dodge and my Dodge – to purchase a 2008 Ford Pickup with a bigger backseat. By doing that we paid off the last bit that we owed on Brian’s truck and came out even and forever free of vehicle debt!!
- we set up an automatic withdrawal to replace Brian’s truck payment that pays that same amount down on my student loan each month.
We still have not rebuilt the lean-to on the back of the shed or cemented the remaining half of the cattle building. We’ve been managing fine without all of that for now. Instead, we’re focusing on getting through the planting season and paying the big bills that come this time of year. So far, so good. We’re on track to have my student loan paid off in February of 2013 with just the automatic payments we set up. We SHOULD be able to kick in a little extra and pay that off by the end of 2012 at least. That would make us debt free except the mortgage. This has been a long road but all the work is worth it when we have tight months and only one lonely payment to worry about. I’ll keep you posted!
To be continued…
We made it! Official DEBT FREE announcement post here!
More details in this post.