My wife and I have been debt free for more than three years.  Here’s how we turned our lives around and changed our family’s financial future.

We began to spend less than we earned.

Brilliant, no?  It sounds so simple, but the reality is, many Americans spend more each month than they earn.

We put our credit cards in our wallets – and just left them there.

We stopped using our credit cards.  We didn’t cut them up or freeze them in a bowl of water – we simply made a decision to stop using them.  This might have been the single most important thing we have ever done.

We began to live on a budget.

Following a zero-based budget, we were able to control our spending and maximize our savings.

We began to dream of a debt-free future.

Within the first week of our financial turn-around, we were already convinced that, one day, we would be debt free.  This confidence, though tested by circumstances, never changed.

We created a system for organizing our financial documents.

Organization is so important.  In the past, we might forget to pay a bill or we might lose an important document.  Now, we have a system for organizing our documents, scheduling payments, and balancing our accounts.

We worked together.

I am the nerd and I like spreadsheets and calculations.  My wife is practical and she specializes in household management.  We combined our strengths, encouraged one another, and refused to argue, ever again, about money.

We created a specific goal.

Our first goal?  We wanted to be debt-free.  Having this specific goal, something to aim for, really motivated us.  We gave ourselves a specific goal, and a specific date to achieve it.  Surprisingly, even though we missed our original goal date, instead of being discouraged, we were further motivated.  The goal itself, the dream of being debt free, really kept us going.

We began to think long-term.

This was key.  Instead of living month-to-month, we decided that we wanted to live decade-to-decade.  Making the decision to be forward-thinking, we were able to give up temporary wants, and focus on long-term plans.  We matured, you might say.

We read.

We read, and continue to read, all that we can about personal finance.  Inspired by the success of others, we press forward.  We are not where we want to be, but we are confident that we are headed in the right direction.  Even surrounded by the negative news of the day, we have great hope for our future.

I want to once again thank those of you who arrived here via this Money Magazine article about families who are living without credit cards.

If this is your first visit to my site, welcome.  I hope you will take a few minutes to read a bit more about me and about how and why I live without credit cards.  Now, today’s post:

Creating My List Of Financial Priorities:

It is vitaly important, to me, that I:

Live On A Budget – No matter how much money I have (or don’t have), I will always use a written budget to manage my finances.  Over the course of the last 3 years, I’ve used very complex and very simple budgeting techniques, but my goal has always been to crate a clear picture of how money flows into and out of my life.  My budget – which is my financial road-map – keeps me on track.  (I’ve written several articles on budgeting, including this popular one about budgeting when you have irregular income.)

Purchase Adequate Insurance – I have health, life, dental, disability, and property (renter’s) insurance.  Once a year (or more often, if the need arises), I reassess my financial situation and purchase insurance accordingly.  (For those new to my site, when you read the word “I”, feel free to insert the word “we”.  Whatever I do for myself, I do for my wife and our three kids.)

Maintain Adequate Cash Reserves (Emergency Fund) To Cover Six Months Worth Of Expenses – I keep enough money, in my savings account, to cover the cost of food, shelter, clothing, and utilities, for six months.  In the past, I was more willing than I am now to dip into my emergency fund.  But now, especially with the state of the economy, maintaining a fully-funded emergency fund has become a very high priority.  (If you haven’t done so, consider adding your input to this poll I’m conducting about emergency funds.  In a few days, I plan to summarize the feedback and write and article about the poll results.  It should be interesting.)

It is very important, to me, that I:

Fully-Fund Our Retirement Accounts – Currently, I am fully-funding my 403(b) and my Roth IRA.  My wife is fully-funding her Roth IRA and her pension plan.  We plan to fully-fund these accounts, year after year, until we retire.  By fully-funding my 403(b)  – (similar to a 401(k), but for non-profit organizations) – I reduce my annual tax bill and save for the future.  Roth IRAs provide an opportunity for tax-free growth.

Fully-Fund Three Education Savings Accounts – I have three small children, ages 8, 4 and 2 months.  I plan to fully-fund ESAs for each of them.  My goal is to assist them when it comes time for them to go to college.  I will expect for them to work, while in college, but I do plan to pay their tuition (and living) costs.

It is important, to me, that I:

Continue To Live Without Borrowing Money – So far, I have managed to live more than three years without borrowing money.  During that time, I’ve purchase a newer automobile and several furniture pieces for our house.  But, if I plan to continue to live without going into debt, I must be sure that I -

Save For Future, Major Purchases -  Currently, I live in a house provided by my employer (as part of my compensation).  In the future (near or distant), I plan to purchase a house.  I would love to be able to do so without borrowing any money.  This may, or may not, be possible, but I am going to try.  Even if I am unable to purchase a house without borrowing money, I do plan to save up for a substantial down-payment.

It is cool, to me, that I:

Live Without Using Credit Cards – While it might come as a shock for some to read, living without a credit card is pretty easy, once you get used to it.  When I want to purchase something online, I simply use a debit card (which is associated with a separate checking account, dedicated for debit card purchases).  I also use a debit card for groceries or gasoline.  For most other purchases, I carry cash.  But, No Credit Needed isn’t, primarily, an anti-credit cards site! While I do like to write about my life without credit cards, I realize that most people will use them.  I want my readers to know, my primary goals isn’t to convince you of the ‘evils’ of credit cards.  No.  My primary goal (for the site) – is to promote the idea that credit does not have to be the default option.  You can save up enough money to purchase an automobile.  You can pay cash for a new television set.  You can go to college without accumulating massive loads of debt.  You can live debt free.

I realize that most people will borrow money when they purchase an automobile or buy a house.  And, I realize that many people use their credit cards ‘responsibly’ – and pay them off at the end of the month.  But, there are millions and millions of people who are over-their-heads, who continue to borrow money, always putting of tomorrow what needs to be dealt with today.

Credit, like anything else, is just a tool, to be wielded by its owner’s hand.  For me, I choose not to use credit cards, because I just don’t like dealing with credit card companies.  But, credit isn’t’ the real issue -  personal responsibility is!  Each one of us must look inside ourselves and determine those things that really matter.  So, today, I’ve listed what matters (in the financial realm) to me.

As you read my blog, please don’t get hung up on the ‘He doesn’t use credit cards” bit.  That’s such a small part of what I’m trying to do.  I’m trying to shape my financial destiny, and the destiny of my children and their grandchildren.  My ultimate, long term goal (for my life), is to be a blessing to other people – financially, emotionally, and spiritually.  Not using credit cards is just one ’small tree’ in the very ‘big forest’ that is my financial life.

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