For those of you who have been here for a while (by a while, I mean, you’ve at least read 1/2 of my About page), then you know I’m into budgets. I’m also a big advocate of getting yourself out of debt. To me, debt is just a big hole that people can dig themselves into, whether it’s by credit cards, student loans or buying a new car. And while you’re in that hole, you can’t really go anywhere worthwhile. Sure, you can save a ton of cash up or invest your money, but that’s like taking a vacation on the south end of your giant hole. It may be a nicer view, but you’re not really going anywhere. I advocate that you get yourself out of the hole so you can see your options more clearly and take advantage of the opportunities that are available outside of your hole. (Disclaimer: to anyone that is literally living in a hole, please take no offense at this. This was nearly a metaphor to illustrate my point. I’m sure you ground-dwellers are nice enough folk….).
My Big Debt Hole
At one point in my life (about 4 years ago), I was in serious debt. I had over $16,000 in student loan debt, $4,800 in personal loan debt, and another $3,000 in credit card. Now, this may seem normal, but it was a bit overwhelming. Especially since I was about to get married and inherit another $24,000 in student loan debt (WOOHOO!!!…..to the getting married part ). As I’ve mentioned before, my brother-in-law dropped a Dave Ramsey CD in my lap one month before marriage. If you have never read The Total Money Makeover, literally the first half of the book is dedicated to bashing the brains out of debt and its so-called benefits. Once I heard all of this, I realized I needed to get out of debt with the quickness.
Otherwise we’d just live with our debt, most likely, forever. We’d invite it out to dinner parties and have it pay, but never pay it back. We’d allow it to pick out it’s very first new car, like a child who just got their driver’s license. Of course, debt didn’t have a job, but was able to finance the new car for 0% down. (I knew I was proud of that kid!). Debt would eventually grow up to be a mean-spirited angry person, who was only satisfied by having access to our overdrawn bank account and garnishing our measly wages until we get rejected for a payday loan to finance our walkers. Soon, debt would be the disowned family member that no one mentions at Thanksgiving as we eat our top ramen and talk about the good old days when we used to have turkey and pay for stuff with cash.
How Did We Pay Down Debt?
Well, first things first, we got ourselves on a budget. Before the month began, we planned out all of our spending and put it on paper. We decided we wanted to pay off our debt quickly after getting a month ahead on our bills. We were living on a bare minimum and only making $14 an hour while my wife was at school full time. We were motivated and were able to save money every month towards our goals. “But how did you pay down your student loan, personal loan, and credit card within only 6 months?” That’s a fair question, and I think the answer might bum a few people out.
I received an inheritance about 4 months in to our marriage, and paid off all of our debt. Yup, that’s how we dug ourselves out of over $23,000 worth of debt in under 6 months. Unfair, isn’t it? But let’s look at what really happened here. A kid who had blown through $100,000 before he turned 21 kept his same disregard for finances and racked up $23,000 in debt in just another year and a half. If you look at trends, he was on pace to go from $100,000 net worth to a -$100,000 net worth in the span of 10 years. Not only is that lame, but he was on track to put his marriage and family in jeopardy unless he had some sort of paradigm shift.
That shift happened in the form of some basic financial education through an awesome book and a brother-in-law who cared. Sure, I got a leg up through an inheritance to pay off my debt quicker, but the bigger financial gain came through the change of thought that I had through some good ol’ fashioned advice that I finally listened to. The long term return on that is probably somewhere in the millions over my lifetime, which is jaw-dropping! And honestly, as cliché as it sounds, that is why I want to help anyone and everyone I know get on a budget.
What About The Rest Of Our Debt?
So after we paid down all of my debt, the only thing left was my wife’s student loans, which totaled about $24,000. Though we paid all of my debt down in one fell swoop, we did not lose motivation. Over the next year or so, we paid down another $5,000 on the loan, still making a measly income. Once my wife graduated and got a job, we put another $2,000 towards the loan and then our priorities shifted to aggressively saving for a house (which is a story for another time). We still have $15,000 on the student loan left, and circumstances prevent us from paying any extra on it for a little while. But I plan on having that thing gone in the next 2-3 years. Then it’s on to investing!!!
Comments: What is your debt story? Are you in major debt and still piling it on? Then I’m glad you are here! Have you paid down a significant amount of debt? Awesome! Do you still think debt is a tool to be used to get ahead?