Becoming Debt-Free in Three Years

Hello there! Grab a comfy chair, maybe a cup of tea, a fuzzy blanket, (and in my case, a cat) and settle in. Today, I’m sharing Part One of our journey toward financial freedom. You might be wondering, “Is it really possible to become debt-free and retire in just three years?” Well, let me share a little secret: with the right plan, a sprinkle of determination, and a dash of patience, I think it we can do it. Or, I think we can get really, really close!

Why Being Debt-Free in Retirement is a Gift to Yourself

First, let’s chat about why being debt-free in retirement is so important. Imagine stepping into your golden years without the weight of debt hanging over your shoulders—sounds like a dream, right? According to the 2022 Survey of Consumer Finances, 77.4% of Americans have some form of debt. For many, this becomes a financial burden during retirement, affecting everything from healthcare to daily living expenses.

Being debt-free not only offers financial security but also peace of mind, allowing you to focus on what truly matters: enjoying life, family, and hobbies. We don’t have huge plans for our retirement. We’re not big travelers. Our kids and grandkids all live nearby. We’re looking forward to walks on our beautiful park trails with our dogs, having time to make our yard and home more beautiful, and just the overall freedom that comes with being retired. While we love owning a home daycare, we won’t be able to chase toddlers forever. We want as few expenses in retirement as possible. Being debt-free will help us achieve that.

Our Plan to Become Debt-Free and Retire in Three Years

Our journey to becoming debt-free and retiring in three years isn’t just about numbers; it’s about changing some habits, making some sacrifices, and being dedicated to our goal.

A little disclaimer: I am not a financial expert or a financial advisor. This post is simply to share what we are doing to manage our finances and work toward our goal. Everyone’s life and financial situation is different. Therefore, do what works in your own situation. My intention is to provide encouragement for those wishing to improve their financial picture.

Debt-Free In Three: The Beginning

In the summer of 2024, I became discouraged with our financial situation. I’d gotten off track with making a budget, tracking our expenses and working on paying down our debt. We were not following a plan for our money. One day, I was watching YouTube and came across a video by Raising Wildflowers. She shared how she uses the Clever Fox Budget Planner. I felt like it was what I needed to get myself motivated to work on our finances. I ordered my own Clever Fox Budget Planner, and it has worked wonderfully!

Understanding Our Financial Landscape

Before we started plotting our course to becoming debt-free, we had to know where we stood. We began by listing all our debts—credit cards, car loan, and medical bills. We are fortunate that our home is paid off. After listing our debts, we looked at our income sources. Grampy is retired from regular work and we now operate a daycare in our home. Next we looked at our monthly expenses. It was like taking a financial snapshot, and the picture was a little bit scary!
Have you ever done this? It can be eye-opening! The biggest eye-opener for me was how much we spent at the grocery store. I was surprised at how much we were spending and felt I could do a much better job. I was also a bit discouraged about the total amount of debt we owed, but knowing how much we owed was the first step in getting rid of our debt.

My Tips:

Create a detailed financial summary: You can use a simple spreadsheet or an app on your phone to track your income and expenses. I don’t like spreadsheets or apps. My favorite way to budget is with a good old pencil and paper system. I really can’t say enough great things about the Clever Fox Budget Planner. It has everything I need. I can adapt it to work perfectly for me. Different types of budgeting systems work for different people. Keep trying until you find a system that works for you. When you track your income, expenses and debt, you might be surprised at what you discover. I sure was!

How This Step Helped Us:

When we first tallied up our spending, we realized our visits to the grocery store several times per week were costing us a lot in little “extras.” By shopping once a week using grocery pickup, we redirected those funds to our debt payments.

Setting Clear, Achievable Goals

Next, we set clear, achievable goals. Instead of saying, “We want to be debt-free,” we broke it down: “We will pay off this medical bill in three months, this credit card in six months, this credit card in one year,” and so on. This approach made our journey feel less overwhelming.

My Tips:

Set SMART goals: Specific, Measurable, Achievable, Relevant, and Time-bound. This keeps you focused and motivated. A time-frame is important. I think this is helping me stay motivated. I am able to gauge the amount of remaining debt we have against the amount of time left until the “retirement date” I chose and then adjust accordingly. It’s also great incentive to keep from adding any new debt. New debt would increase the time needed to become debt-free, and I am pretty set on June of 2027 as our goal.

How This Step Helped Us:

Seeing our debts written out, with a date we have planned to have each one paid off helps us see that we are making progress each month. Having mini-goals over the next three years feels much more achievable than looking at the total amount. The Clever Fox Budget Planner also has an area to set financial goals.

Crafting a Realistic Budget

Creating a realistic budget was crucial. We prioritized needs over wants, but also made sure to leave room for small treats—because, let’s face it, life’s too short to skip dessert entirely! The Clever Fox Budget Planner is set up in a way that helps me better account for all expenses, and I find I don’t have “surprise” expenses come up during the month that I did not budget for.

My Tips:

Give yourself time to settle into a new budget. There will be things you forget to include, things that cost more than you thought they would, and unexpected expenses. Each month you will become more familiar with your budget and do better at anticipating your spending in different areas.

How This Step Helped Us:

Our budget helped us see where we were overspending, and showed us that we could make more than the minimum payments on our debt, if we cut back in some areas. We committed to paying an extra $400 on our credit card debt each month, in addition to the minimum payments. As we pay off one debt, we add its payment to the next one in line.

Embracing the Power of Increasing Our Income

To accelerate our journey, we increased our income. In the business of family child care, this is easily achieved by adding another child. We keep our child care small. Originally we had two full-time and one part-time child. Recently we added another full-time child (a sibling of a current student). We can have up to six children, but the most we will have is five. We will be adding one more part-time child in the coming year (another sibling).

My Tips:

Explore your talents and hobbies: Could you turn a passion into a profit? Platforms like Etsy or Upwork offer great opportunities. It can take a while to get a business started and begin making a profit. Be creative to find ways to increase your income.

How This Step Helped Us:

Increasing our income gave us some breathing room in our budget. Paying extra on our credit card debt without more income would have made our budget very tight. That’s kind of why our debt had stayed where it was for so long.

Celebrating Small Wins

Staying motivated can be challenging, especially when the road feels long. We found that celebrating small victories keeps our spirits high. Each debt we pay off is like a little party! It can be discouraging to work on something for a long time before you see the final result. But hitting mini-milestones along the way is key to staying motivated.

My Tips:

Celebrate milestones! Treat yourself when you reach a goal. It doesn’t have to be extravagant—perhaps a homemade cake or a picnic in the park. Paying off a debt that has been hanging around for far too long calls for a celebration!

How This Step Helped Us:

When we pay off a credit card, can see that we are one step closer to our goal. That is a reward all by itself. It’s exciting and gives us a boost of confidence. Yes, there’s still a pretty large pile of debt to pay off. But the total amount is going down every month, and that’s a win!

In the next part of the “Debt-Free in Three” series, I’ll be sharing parts of my budget planner. I’ll show how we use it, some of the debt we have paid off so far, and some things I’ve learned along the way.

Until next time, happy budgeting!

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