Debt Reduction: Freeing Up Money by Slowly Chipping Away at Debt

When we say that we are developing a homestead and building a home debt-free, we don’t mean that we have zero debt in our lives. What we mean to say is that we’re trying to develop our property with cash as we have the funds rather than going into debt to have everything now, or even buying an overpriced done-for-you home with a mortgage. For us, we still have some personal debt to tackle which we’re doing so one step at a time, but momentum train has left the station and is picking up steam!

We're developing our property debt-free, but that doesn't mean that we have zero personal debt.
We’re developing our property debt-free, but that doesn’t mean that we have zero personal debt.

In this post, we want to share that today we paid off a large expense we financed with 0% interest for the purpose of getting started with our homestead journey. Paying off this particular stream of debt put $350 back into our pockets monthly!

Back in April of 2015, we knew we wanted to buy land in Idaho but we couldn’t find property that would work for us. However, we did know that we needed to upgrade our office and work equipment before we went insane.

Jesse and I back in 2013 started the transition of earning our income online rather than at a J-O-B or in a physical, location-dependent business. To do this, we needed top-notch technology as our multiple desktop and laptop computers were holding us back severely, so we splurged on two MacBook Pros and two Thunderbolt displays, plus a few accessories, totaling $6,000.

Our upgraded office months before buying and moving to our land! We sure miss our office space.
Our upgraded office months before buying and moving to our land! We sure miss our office space.

Since we couldn’t find land, and had no idea if we would in Idaho in a reasonable amount of time, we were prepared to buy this cash when we discovered that we could purchase everything on credit with a 0% interest rate for 18 months. We were sold.

We are sharing this story for a couple of reasons that are important to our lifestyle of becoming completely debt-free and building our home with cash.

Using Debt Strategically Helped Us Get Where We Were Going

While we are advocates of living a debt-free life for more reasons than we can cover in this blog post, we also acknowledge that debt can be a strategic financial tool.

The year 2015 was busy and eventful for us to say the least. Back in April, we knew we had the funds to buy our office equipment cash, but we also knew that we were looking hard for land and that we were hoping to find property that year, so we also knew that it wouldn’t be wise to kiss all of our cash goodbye when we had the option to open up a line of credit with a 0% interest rate.

Working side-by-side in a coffee shop in Seattle last year. We love being partners in crime and think we make a really great time (most days...!).
We needed this office equipment when we did, but we also needed to hang onto a significant amount of cash to make the move to Idaho. We tried to have our cake and eat it too.

We never enjoy taking on additional payments, especially payments that are $350/month when we are trying to lower our monthly expenses rather than increase them, but we’re happy we did in this case.

It turns out, months later we found the perfect property and the owner was willing to carry the contract with $5,000 down. Because we didn’t blow all of this on our new technology, we could cover the down payment with ease, and figure out the rest later once we had our land secured.

how to pick a place to settle down
When we drove up to our property for the first time, we were SO HAPPY we chose to finance our office equipment! If we didn’t we didn’t know that buying this property would be an option.

We do not suggest this strategy to everyone… we keep careful track of our expenses and know where our money is at all times, even when we have multiple irons in the fire at once. Using debt and 0% financing can be risky for someone who is bad at managing their finances as the penalties for NOT paying it off in time can be severe.

We also used this same approach when buying our Honda generator… 0% financing was available and we took it. We bought a $2,200 generator for $0 down, and paid $200/month (over the minimum payment) until we could pay it off in full which we did a few months back.

Debt Paid Down = More Money in Your Pocket Monthly

The other reason we want to share the experience paying off our office equipment is the idea that we’ve put money back into our pockets monthly and lowered our monthly financial needs.

There are two ways to get more money… to make more, or to need less, and we always aim to need less money. More info on our financial strategy here.

We don't want a lavish lifestyle... we want to live simply and have few financial needs.
We don’t want a lavish lifestyle… we want to live simply and have few financial needs.

It’s hard mentally to pay off debt because on one hand, you say goodbye to your hard-earned money yet you don’t get anything tangible for it because you got it when you signed the agreement! It can be far more rewarding to some to buy a new tool or something physical that you can use or see.

On the other hand, if you keep a spreadsheet of your expenses, it feels really great to see the monthly overhead decrease! Any time we pay off any debt, the first thing we do is give each other a high five, and then we update our monthly expense spreadsheet together and watch our bottom line decrease. Then we crack open a hard rootbeer to give ourselves a pat on the back that we’re moving the right direction.

We saw this in the store for the first time today (the 10.7% alcohol version, not the normal 5% one!) so we picked it up to celebrate with! Hope it's as tastes as good as paying off debt feels!
We saw this in the store for the first time today (the 10.7% alcohol version, not the normal 5% one!) so we picked it up to celebrate with! Hope it’s as tastes as good as paying off debt feels!

Since we moved to our land in September of 2016, almost 10 months ago, we have lowered our monthly overhead by $550. Not only that, but in another month we should put another $50/month in our pocket since our internet installation will be paid off (decided to pay that over six months rather than upfront), and we’re also putting an additional $83/month back into our pocket since we’ve installed a small solar power setup.

Believe it or not... this baby is putting $83/month back into our pockets! In 4-5 months, we should have recovered the investment and it will be pure profit! Yay for lowering financial overhead!
Believe it or not… this baby is putting $83/month back into our pockets! In 4-5 months, we should have recovered the investment and it will be pure profit! Yay for lowering financial overhead!

Paying Off Debt & Climbing Out Of The Hole Snowballs

If you’re an American, chances are you have debt. You have a mortgage payment, a new car or two, student debt, credit card debt and who knows what else. The good news is that paying it off starts a snowball effect at some point.

To be honest, we have been pretty cash-strapped since starting this journey back in September. Even though Jesse sold his business and I sold my brand new car, you will see in our expense reports that we’ve been spending money non-stop!

If you live in a city and have never tried to build a home, it may be hard for you to understand that the expenses come at you like a fire hydrant for a while which has been happening for us. Whether it’s installing a septic system, buying tools and materials off of Craigslist, or trying to build a simple structure to survive the winter, everything seems to cost money. The thing to remember is that this type of journey is not about trying to save money over a month or even over a year, but over a lifetime.

These are just some of the receipts we have since we moved to our land. We are forced to spend money like it's going out of style!
These are just some of the receipts we have since we moved to our land. We are forced to spend money like it’s going out of style!

Believe it or not, despite spending loads of money since we arrived on our property and even before such as purchasing our pickup truck and travel trailer, we’ve been slowly grooming ourselves to be in the position to rapidly pay off all debt while actually building our home debt-free. Today, freeing up an extra $350/month helped us to give the snowball quite a push.

Becoming or Staying Debt-Free While Building a Home is a Chess Game

The last thing we want to share is that managing finances, especially while building a home which requires spending tens of thousands of dollars, is not unlike a game of chess. It requires understanding the pieces you have in the game to use if you need to, having a strategy, understanding what all is happening on the board, predicting the future, knowing your vulnerabilities and then moving your pieces in a way that will help you to accomplish your goals.

Owning property and a beautiful homestead isn't free. Far from. A LOT has to happen to get to the point where you have a comfortable home and food-producing land.
Owning property and a beautiful homestead isn’t free. Far from. A LOT has to happen to get to the point where you have a comfortable home and food-producing land. And most people that “have it”, are swimming in more debt than you can possibly imagine.

We like to think that we’re doing a pretty good job in our chess game and we know that sooner rather than later, we will get to tell the last of our debt “Checkmate.” Bring it on, and let’s all celebrate our small successes together!

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I am an aspiring homesteader on a journey to become self-sustainable and free. In my past, I've worked corporate jobs to make ends meet and get ahead a little; it didn't make me happy or confident in my future. Since taking the leap to self-employment and living a more simple life, my happiness levels have increased greatly and I've never felt more alive. I finally understand what I want in life and how to get there, and that is what this blog is all about.

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Comments

  1. TiM says

    During the fall of ’96 I purchased a computer with someone else for no interest, no money down for a year (or 15 months). I was making monthly payments, but the other person was not. Five months before the time was up I inquired with that person who decide on a mind change, so I was stuck coming up with the other half in five months or have serious interest and penalties to pay. Fortunately, I was able to do it.

    Once that was paid off, or perhaps halfway through I decided to buy a bed with a similar deal and was able to pay it off in the required amount of time. After that, I bought the matching 4′ high chest of drawers and Armoir and was able to pay that off with the year.

    The no interest, no money down isn’t for everyone, but for those of us who are disciplined it works well. I purchased my first home in ’99 built to my specifications, but had to put my student loan on forbearance for a year. I received a promotion (planned) at work and was able to begin paying on my student loan again about 8-10 months later. In 2000, I purchased a new (sensible) car (I’m not a mechanic and have no one close to me to help out, so that seemed my safest option.

    In 2006, I purchased another new (sensible) car (trade in), but this time the car had some extras, I did my research and was able to negotiate a better deal, plus I had had several more promotions and was making a comfortable amount of money. The extra money was going toward student loans, which included a graduate degree by that time.

    I never refinanced my home (I kind of did for lower interest, but kept my payments the same), so when I sold it in 2008 and moved to another state I was able to pay off all student loans (including the graduate loan), my car, and put a significant amount down on my current home, with emergency reserves left over.

    I am a Thrift Store “junky” and most of my thrift store finds are my favorite belongings (I like to read about your finds also). There are also two discount grocery stores in my area. Other than a mortgage and utilities, I am fairly debt free. Grandparents taught me you only use your credit card for as much as you can pay monthly, so that’s what I do. It is nice to be virtually debt free and have a mortgage including taxes and insurance under $500 a month. Of course I make significantly less in this area than in a metropolitan area, but I have a lot more than others making what I do because of the discipline.

    Kudos to you and keep up snowball rolling!

  2. Allen says

    Congratulations on your progress!

    Although it will be a delayed reward, you will likely find that you end up with multiple tax deductions from this project at the end of the year, which can possibly offer you an even larger cash windfall, in the form of a tax refund down the road too.

    Something that you may wish to carefully consider in your “chess game”, is the federal tax credits for renewable energy systems, specifically solar. The tax credits for wind, geothermal, and all the others will expire by the end of this year, but solar was extended for the next 8 years, and at least until Dec 2019, represents an effective discount of 30% off of the costs of a qualifying system (in the form of a tax credit that can carry over to the next year if you can’t use it up all the first year you qualify). After 2019, the tax credit drops to 26%, and then later to only 22%.

    It may even be cheaper long-term, to go into debt initially, to get a system installed, vs. missing the 30% deadline. Please check with your tax professionals on this for details, but from what I’m reading in the current law, you have to be the property owner (check!), you have to be using it as a residence, even if it is not your primary residence (check!), the system has to be made of new components (the used batteries won’t meet this requirement), the system has to be installed AND operational prior to the cutoff date, and it has to include at least 1 solar panel…

    You can even get a basic system installed and benefit from it, and then file an additional claim later, when/if you upgrade the system, as long as the upgrade included at least 1 solar panel too. So far this year, you’ve spent money on the used batteries, which won’t qualify, because they’re not new, but no off-grid household has ever wished they had less battery capacity ;-). There’s no maximum credit anymore (that got amended in December?), and now, the cost of the installation is also subject to the same 30% credit too.

    Your RV solar panel system isn’t quite a complete system, but combining it with your inverter, and a new battery might make all of them qualify, and it doesn’t prevent you from getting additional solar systems or components to get your eventual full-home solar-powered setup, which would possibly qualify if done in prior to the deadline, but also save you money in fuel costs too.

    You can think of it as getting a 30% discount on things that you’d need to buy anyway :-), but I’d strive to get a large enough solar system that will be capable of running all your power tools as soon as possible, because it will pay you back sooner, rather than later.

    (You’re also going to find that while it is an expense to jump out of the mobile/12V systems into a higher voltage system, it will end up being much cheaper/kWh of power, and given a choice, I’d recommend going to a 48V system as soon as possible – At a glance, a 3800 watt system w/20 kWh of storage can be assembled for less than $11,000, and that WILL run all your power tools!)

    The biggest two expenses in going full-solar, are the higher voltage inverter (can be upwards of $2000), and the batteries (a good set of what you have used in its smallest quantity that you could use for a 48V system, would run $3000 or more), but if you can stretch to buy them in the same tax year as you also get a charge controller (Midnite Solar Classic 150 can be had for just over $600, new), and a couple of 315 watt solar panels for $600 would make for a small system that can be expended on, up to 16 more panels, as the budget allowed, but would still be complete enough to claim the tax credit. That same setup can be charged with your generator (through the inverter) when you don’t have enough solar to charge the batteries, like before you get the next 16 panels…

    You can also stack the charge controllers (and inverters too, if your power needs exceed the rated output of a single inverter) if you need more capacity. Food for thought? Hope it was helpful/useful, and if you want more details, drop me an email.

    • says

      Thanks for the suggestions! This is something we haven’t looked into yet (tax exemptions) but it may be something to consider. Tax incentives or not, a full solar setup isn’t something we’re ready for today, but we may be ready within the next couple of years. I think our ultimate goal is to strive to not NEED much power… we hope to design our home in a way that is truly energy-efficient because even solar isn’t really sustainable but that said, we will still probably need a decent-sized system. A 30% discount could help and at some point it could make sense to try to take advantage of that even if it means buying things a little early (like we did for our batteries). This is definitely food for thought… we will drop you an email if we need more info!

  3. Ty Tower says

    Financing stuff, no matter what the rate, is only OK if you have to ! If there are other options make sure you look for them , realise they are there and investigate them. Like the materials for your shed .You went out and found them . If you had seen a special price deal on timber and roofing steel and taken it at no interest you probably would not have looked for and found that deal at all and you would be consequently much poorer off in the long term . The major thing is do without if you can’t afford it because debt will grind you down.

    • says

      I think the key is to understand all options and pick the best one as appropriate :-) Sometimes labor wins, sometimes money wins. But if money wins every time, then you find yourself swallowed in a massive hole of debt you can’t get out of. We try to find as much balance as possible, leaning on the side of not using money when we can.

  4. Ty Tower says

    The other point I would try to pass on to all of you is that debt is relative . A $5000 debt is a big worry if you have no or a low income and no assets to speak of . You are technically bankrupt.

    If you are worth 2 Million a $50,000 debt is a trifle. Many people are asset rich and cash poor for most of their life but if you allow yourself to worry about that you will put yourself in an early grave.

    • says

      Funny thing is that if you have $0 and no assets, you technically more wealthy than the majority of Americans because most Americans appear to “have it all”, but in reality, they own nothing and have more debt than they will ever be able to pay off!

  5. Jo says

    Can I ask a very personal financial question?

    Is your land paid off? If not, are you ever concerned that if something happened to your income, all your improvements would be lost? You are super smart cookies, and I may have missed this post :)

    Also, do you find it hard to get financing with online jobs? I wondered how the banks look at blogging income.

    Follow your blog because we love it, and you beat me to it, we were going to do a homesteading blog about going off grid too :). These were just a few things I ponder as I read..

    All the best!
    Jo

    • says

      Not personal at all! Well, I guess it is but we don’t mind sharing. Our land isn’t paid off but we hope to pay it off ASAP. The nice thing about our income right now is that it’s incredibly diverse unlike a job where there is one person that pays you. It’s highly unlikely that all of our income streams would vanish overnight which is one reason why we worked hard to diversify our income. Our living expenses are actually quite low so what we need to survive (that is, just make ends meet) should never be a problem to make. Also, if we ever need to, we can go get jobs (or one of us) to make ends meet although we have lots of ideas for generating an income so I don’t know that we’ll ever need to be actually employed by someone else again. All that said, in the rare event all income is lost and despite how driven and hard-working we are, we can’t ever replace it again, then we could lose our land but I doubt that will happen, especially since we hope to pay it off as soon as we can.

      Financing is much more difficult to get being self-employed, which is one reason why we don’t look good to banks. We actually spend our money strategically to avoid high taxation (something you have control over being self-employed) but if we pay low taxes, that also means we look bad on paper to the bank, so it’s kinda a game. Being self-employed, a rule of thumb is that you need a minimum of two years of stable income to make banks want to lend to you… but I’m sure ridiculously high interest rates are always an option. Financing larger purchases on the other hand (our MacBooks) has been a piece of cake. The auto checks don’t know where you make your money, all we know is that the check comes back green and we get to take advantage of a financing plan with a 0% interest rate!

      I don’t think there can be enough people sharing their experiences about off grid living! The more the merrier! All the best to you as well!

      • Dustin Horn says

        Sorry for my soapbox!
        You are a banks worst client. You pay your loans off quickly, and do not take loans for everything you own.
        They want clients that spend, spend, spend and pull another Home Equity on top of that. Worry not, the American Way is the Illusion of Grandeur and there are many that are still “supporting” the Banks.

        I’m 34 and my house is solvent in 6 yrs. Went from 6.1% APR/30 yr to 3.875% APR/15yr in ReFi, and paid the closing costs cash. The difference in mortgage was $80 month! Think about that $80 month more, to not pay a ~$1000/month mortgage for 15 yrs!

        The biggest mistake our generation makes; is thinking they need something they really do not. I know an uncountable number of college gradates that the 1st thing they did upon getting the 1st real Gig was go go get a nice car to prove they “Made it”. Soon after follows a house much bigger than needed. If they had any sense at all they would be dropping $458 dollars a month into a Tax Free Withdraw Roth IRA instead of a BMW that depreciates faster than they can pay it off.

        The irony to my method is that many that are tight-fisted are so obsessed with making and keeping (Greed) that they do not give any away. If you talk to older and wiser ppl you soon realize they invest in relationship and not physical things.

        Another priceless gift is good health, it can not be bought for any amount (Steve Jobs can attest).
        In Conclusion: take care of yourself, spend wisely, invest in relationships, and give a lil away to help others.

        **I love the rewarding yourself for paying off a debt. Once you get your structure built you should take a nice vacation to de-stress.

        • says

          I love your conclusion Dustin! Yes, we all think we need things we rarely do, or to the extent that we do. I thought I deserved a new car and a big house as well… and while we have a car and a home, they’re both nothing like what we had in our previous lives but we have more freedom than ever and are gaining true wealth by the day. And yes, there is lots of greed and no relationships. I think we as human beings actually enjoy giving and giving things away but everyone’s too afraid of not having money that they don’t do so and are missing out on that wonderful piece of life. And yes good health is priceless too – one reason why we aren’t afraid to spend money on it when needed! The past few months alone we bought a new bed, new shoes, and even some chiropractic visits which is irritating because those things don’t have tangible value, but they kinda do because we only have one body and our bodies will be what build us a home. And in the end, things come and go, but relationships are what can stick, and if you have everything in the world but no quality relationships you’ll probably be an unhappy person, and vice versa.

    • Ty Tower says

      If it all went belly up for some unforeseeable reason and had to be sold up then, because they have not spent great wads of money on what is there, the additions to the land and improvements thereon will most probably return a profit (wages) for the work done in that time .
      Nothing will be lost if you do it this way. Its good insurance as well as good sense.

  6. peewee henson says

    ALYSSA AND JESSE, YOUR STORY INSPIRES ME, NO DOUBT. MY WIFE AND I ARE IN A BIT OF A DIFFERENT SITUATION. WE’RE BOTH RETIRED AND LOOKING FOR THE UNCOMPLICATED LIFE, NOT EASY, JUST UNCOMPLICATED. I’VE RESEARCHED PROPERTY IN IDAHO, MONTANA, WYOMING AND EASTERN WASHINGTON. RAW LAND IN MT, ID, AND WY WERE SUBSTANTIALLY MORE EXPENSIVE THAN EASTERN WA. WE CAN TALK ABOUT THE TAX CLIMATE IN EACH ANOTHER TIME. HOW DID YOU COME TO SETTLE ON IDAHO? AND YES, TAX IMPLICATIONS PLAY A VERY LARGE PART IN OUR DECISIONS. THANKS PEEWEE HENSON RENO, NV

  7. Jeana Riley says

    Hi,I was curious as to what type of work you each do online instead of traditional JOBs?
    I am looking to do similarly but have no idea about online work.

  8. says

    There aren’t any moose in California, so I’m heading your way someday soon — although moose populations seem to be struggling in so many areas anymore. Have you seen any in your neck of the Idaho woods?

    I love your website and really enjoy following your progress. But the expense reports kind of freak me out. If you have that kind of money to spend, then it makes sense you’ll do it to buy the tools and other supplies you need to develop your homestead.

    But it seems like you’ve already spent what lots of folks spend on building an entire, sustainable home. I’ve never spent anywhere near what you two do in one month, and honestly, I doubt I’ve ever even earned that much in a single month.

    So I guess you’re a really good example of what you can accomplish when you earn a nice income. I just don’t want folks with lean bank accounts to think they can’t create a sustainable and beautiful homestead, that you have to spend that kind of money. People are building functional and amazing homesteads every day with significantly less funds.

    We may be two peas from different pods, but I really do appreciate your hard work, and I loved your berry and fruit canning posts. Talk about confronting fear and rolling up your sleeves and getting to work!

    • says

      We have seen a few moose so far! It’s certainly not a frequent occurance, but seeing four or so within the year is more than we expected to see. Come on up, but you may have to stay a while to see a moose!

      Our expense reports don’t strictly include expenses on developing our actual home… in our household expense category for example we have things like food, entertainment (what entertainment? Hah!), etc. Also, there are a lot of fees involved with building a home that aren’t lumber or even tools, but prep work, vehicles, trailers, and everything else we’ve spent money on! I guess I can’t recap it all here, but if folks build sustainable homes for less then that’s great! We don’t have an inheritance or anything like that but between the two of us, we were able to come up with $30,000 prior to the move, we have cash tied up in assets and we also do have a decent monthly income which we’ve worked hard to create, so I’m sure everyone’s financing will look different. We are doing the best we know how and so far, it’s not proving to be inexpensive, although all said and done it will be far less than buying an overpriced home with a mortgage.

      Either way, yes we do work hard one way or another and are always striving to improve and learn new things! WE are certainly not afraid to confront fear 😉

  9. Linda S says

    Welcome to Idaho. I’ve been in the southwest area for 30 yrs; just moved to Mountain Home last month.

    • says

      We have a Honda generator but it’s not solar-powered. The 120w solar panel kit we have is by GoPower!… I think whether or not it’d offset your power usage depends on how much power you use and what you use it for?

  10. Eric Duggan says

    Keep in mind sitting on cash results in reduced spending power due to the effects of inflation. The effect can and should be offset by putting cash to work in CD’s. They can be laddered like bonds with different maturities. I highly recommend you look into this for a portion of the cash you have on hand.

  11. says

    While the best way to keep out of debt is not to get into it in the first place, and while we’ve been lucky enough to be able to follow this practice, I do realize that strategically, sometimes it pays off to take a loan. If you are already in debt, pinching pennies is a slow but sure way to make every little bit of cash count. I hope you are totally debt-free and financially sustainable in the near future.

  12. Luke says

    I love following your family adventures online. Last week I was land shopping in northern Idaho near where I grew up.
    We’re very near the land purchase phase of our plan. So far we’ve paid off our home, sold and bought a fixer- upper in cash, then finished a complete remodel to gain experience and raise cash with a live in flip.
    Now we’re saving as much cash as possible while we land shop with the hope to start our own homestead within a year.
    We’ve been 100% debt free for nearly 2 years!
    Please keep up the hard work you’re a great example. I enjoy learning from you.

  13. Donna says

    Hello, love your blog. Curiosity killed the cat and this cat used her nine lives years ago, I was just wondering what you guys are doing for health insurance, not to get to personal but we are dept free but one of us has to stay at a factory in order to have some what decent health insurance at a reasonable rate. And we don’t like paying for something that we don’t use enough(like to stay away from doctors, and in good health) Keep up the good work, it feels great having the home free and clear.

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