We paid off our car, a 2014 Chevy Equinox, two years and two months early. (**insert happy dance**) We technically didn’t celebrate too hard since we didn’t have our car the day our final payment posted. We let my mom and dad borrow our car for their trek with Mark (our son) to Florida this summer to visit all of Dustin’s and my family. Regardless of not having our car with us the day of the final payment, this was a huge feat. If you recall reading this post here (The Day We Decided to Change Our Family Tree), you will remember that Dustin’s and my aha moment of wanting to start Dave Ramsey’s baby steps to get out of debt and better not only our lives, but the life of our son, was the fact that it took 6 years and 3 months to pay off my 2010 VW Beetle named Betty.
It should’ve never taken us that long to pay off that car, but it did. We refinanced once, and at least two times we did my lender’s skip-a-pay which was available every holiday season so that you could “have extra cash” for more important things. Little did we think about the longer-term impact of accrued interest, missing a payment, etc.
But, now here we are 250 days (as of July 23) into our debt free journey and have had a huge shift in mindset. Yes, we are paying the minimum on all loans, except our smallest in our debt snowball. But all extra funds, and I mean ALL extra funds, are being applied to the smallest debt in our snowball. We started with 33 bills which were made up of credit cards, personal loans, student loans, car loans and a few miscellaneous things like our cell phones. We have completely obliterated 19 of them and are honed in on those last 14, of which are much more significant in balance than our smaller and first ones. But we have gained momentum, just like Dave says you will when completing his debt snowball plan, and we are on track to be debt free in 2020.
Now that our car is paid off, we have a small list of action items to take.
Adjust Our Budget
As most of you know, we are in the middle of Dave Ramsey’s Debt Snowball plan on baby step #2. BS 2 is where you list your debt from smallest to largest. You then pay the minimums on all bills, except the first debt. This is snowballing your debt. So, adjusting our budget is the easy part. Our $315.61 monthly car payment, that we no longer have, is going straight to the next debt in our snowball, which happens to be one of my husband’s smaller student loans with Sallie Mae (a.k.a. Navient). This loan started off at $11,388 and is sitting just under $2,000! He only has three student loans, and the other two are giant compared to this. So this is a small, yet big, win killing one of his loans.
Review Our Car Insurance
Now that we do not have a lien on our car, we are not told how much insurance coverage we need to have. We can make the choice on our own. We can choose the coverage amounts, if they meet our state requirements, which I recommend you looking up. Now that we have zero car payments, we will reevaluate our car insurance coverages, adjust if we want, but also, we are going to shop around for coverage. Yes, it can be a hassle, but it could possibly save us money. We currently pay $124.24 per month through AAA Texas insurance.
Get the Title – Scan It, Store It
This is an easy part. In most states, your lienholder will notify the Department of Motor Vehicles (DMV) of the title change and submit the paperwork. Once that clears, the title, with my husband’s and my names, will be sent to us. When we finished paying off our Beetle last year, it wasn’t this easy. For some reason, the address on that vehicle was a super old address, so we never actually got the title, regardless of me ensuring the correct address was updated with the lender and the DMV. So, I had to file paperwork and pay for a replacement title. But, knowing that everything is sent to the correct address (we just received our registration paperwork to the correct address, made out to my husband and I), we should not have this issue.
We keep everything of importance in two locations; well, technically three. If there is a hard copy, like a title, we will scan it to our thumb drive. This is updated all the time with mail, insurance information, budget documents and everything else under the sun. We then have a backup of our thumb drive that we save every few months. That is stored in our safety deposit box at the bank, which our third location to store important documents. Our birth certificates, social security cards, marriage certificate, passports and many other documents are stored in our box. We must make time to go there during banking hours, but it is nice having the security of the bank. Plus, it makes me feel like a super adult having a lockbox. LOL.
The thing I love about the debt snowball is that while we started with a list of all bill’s smallest to largest, it adjusts over time. Some minimum payments are bigger than others. Every month when I update our debt snowball numbers, if one bills total amount due means it moves from spot number 14 to spot number 10, I make that adjustment. That’s part of the debt snowball, adjusting as necessary, which I do on a monthly basis.
Now that we have paid off our car, Dustin and I refuse to ever, and I mean, EVER, have a car payment. What does this mean for our family? Well, right now our Chevy is sitting at roughly 132,000 miles. We put on approximately 25,000-35,000 miles per year. The number depends on how many trips we take to Oklahoma. My parents live roughly 230 miles away. And, occasionally we will drive our car to Florida, or in this case, this summer we let my parents drive our car to Florida. Dustin and I have decided we will start saving additional money in our car sinking fund when the Chevy gets to about 160,000 miles. Let’s say we want to save $12,000 to spend on a new (to us) car, and we plan on being able to save for two years. We would then take our end goal of $12,000 and divide it by 48 pay periods. We get paid twice per month, so 48 pay periods would equate to 2 years. That means that every time we get paid, we would set aside $250 specifically for a car when the time comes for us to need a replacement. That’s the key here. We are not going to purchase a new (to us) car until we need one. In a perfect world, we would save for two years, and not need a new car yet. So we could continue saving until the car dies on us. Cause yes, that is what we want to happen.
Gone are the days for The Robinson’s to think that it is “normal” to have a car payment. Never again in our household!
Do you have a car payment? It’s so freeing knowing that we OWN our car. We finally have an asset amidst all of our debt! LOL.