The First Steps to Starting Your Path to FI as First Responders

The first thing you have to do is to sit down and write down all your monthly expenses for your family.

Write down everything. The mortgage payment, car payment, car insurance, food, water, gas, electricity, the ballet lessons, your credit card debt, and etc. I’m sure you get the point.

If you have a large amount of credit card debt, write down the total amount. In parentheses, write down what the money payment will be for the credit cards.

Look at your expenses and see where you can save money. See what bills you can cut down on. Look into trading in that fancy expensive car for a cheaper car. See if you really need a 5 bedroom house and trade it in for a 3 bedroom house (and use that equity to pay off some debts).

After looking at your expenses, pick either the debt with the highest interest or the highest amount to pay off first (not including your mortgage because obviously that will be the highest one). I personally like to pay off the one with the highest interest first.

The reason why I like to pay off the one with the highest interest first is because I am giving away free money to the bank. By paying the interest, I am not making any impact on the principal of the debt. In the long run, I’m losing my hard work money to interest.

Let’s say you decided to get a loan of $40,000 for 60 months at 3% APR for a car. The monthly payment comes out to $718.75. But by the end of the 60 months, you would have paid $43,124.86.

That’s $3,124.86 of free money you are giving away to put the bank. That’s money you can put towards investment or save up for a family trip.

Make sure you are meeting the minimum requirement for the other debts, but concentrate on one debt of your choice and put all your extra money you can into paying off that debt early.

After paying off the first debt, move onto the next. Keep attacking all these debts left until the only debt left is your mortgage.

And by lowering your expenses and paying off debt, you won’t have to rely on overtime or complain about not getting the raise you were looking for. You’ve learned to live a lifestyle where you can live comfortably with the paycheck you’re making now.

When it is only the mortgage left on your debt list, it is up to you if you want to pay it off early or make the monthly payments. There are people out there who believe paying off the mortgage is as important as paying off the other debts. And others do not want to pay off the mortgage early to receive the tax benefits when they do the tax returns.

I am caught in the middle where I pay a little extra, but not too much.

It is a decision you and your family must make for yourself.

All it takes if the first action and everything will come into place as long as you’re dedicated. Just as you were dedicated during the academy to graduate, be dedicated to graduating yourself from debt to financial freedom.

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