My History with Debt
If you’ve visited my 100 Things section, you’ve seen ‘Become Debt Free’ on my list of 100 things I want to do in life. You may have also noticed that it is crossed off, which of course means that we have achieved this life goal. But crossing off two words doesn’t really tell much of a story. I thought our journey to debt freedom was worthy of an entire post.
From Debt Free to Buried Under a Mountain of Debt
I was incredibly fortunate in that my parents prioritized education. Not just in words, but also in action. They set aside a generous college fund for me, so I was able to complete my undergraduate degree without any debt.
I was equally lucky that my parents instilled in me the lesson that debt is dangerous and should be avoided. When I started graduate school my goal was to pay for it out-of-pocket as I went and leave with no debt.
I almost accomplished this goal. However with just 2 semesters left, I wasn’t able to start my classes because I hadn’t paid my tuition from the semester before. I hadn’t paid my tuition because I didn’t have the money.
For the first time in my life I took out a student loan. I remember the financial aid office encouraging me to take out the full amount. I had already done the math and figured I could get by with just taking out $5,000, so that is exactly what I did.
It wasn’t ideal, but it wasn’t too bad either. Around that same time I began to slip into a bit of credit card debt. Nothing insurmountable, but for the first time in my life I was carrying a balance on my credit cards.
Debt Momentum Builds
After graduating and beginning to make decent money I stopped worrying about my credit card balance. I was making more money than ever before, surely I could spend freely.
Additionally, my long-term girlfriend and I were ready to take that next step and get married. She was the oldest of four daughters and her parents didn’t have the means to help support her education. This meant meant that in addition to marrying my amazing girlfriend, I’d also be marrying her student loan debt. She’d amassed a fair amount between college and graduate school.
We got engaged during her last year of graduate school and at that time she no longer needed to take out any more student loans. However, the wedding would cost money and we began to charge the expenses on my credit cards. I was already carrying the highest balance I had ever had and with the added expenses I quickly maxed them out.
When we realized we wouldn’t have enough money to fund our wedding, we took out one last chunk of student loans to bridge the gap between what we had and what we needed.
In the midst of wedding planning, we had to figure out a place to live after getting married. Neither of us particularly liked either of our apartments and felt like they would be too small for both of us to live in. We began house shopping in 2007…just as the housing market was about to crash.
To add insult to idiocy we couldn’t afford the 20% down payment, so we took out a second mortgage to buy our house.
At some point in the four or five-year stretch of graduating, marriage, and moving into a new house, we each also got new cars. After all, we weren’t poor college students anymore and we deserved to drive something more reliable.
We were both reasonable in our car purchases, ensuring we paid off my wife’s car before buying mine. However, despite a few wise-ish choices, these debts were just added to the pile we were collecting.
Here are the Debt totals during that five-year stretch (Note that we didn’t carry all this debt at one time, but it gives you a general sense of the mess we had made).
- Primary Mortgage – $196,000
- Secondary Mortgage – $19,000
- My Credit Card Debt – $18,000
- Wife’s Credit Card Debt – $8,000
- My Car Debt – $12,000
- Wife’s Car Debt – $10,000
- My student Loans – $5,000
- Wife’s Student Loans* – $90,000
*This includes the extra we took out for our wedding.
Total Debt – $358,000
The Housing Market Crash
We had started paying off our debts before the housing market crashed. However, when the value of our house dropped by nearly $100,000 it was a wake up call. This forced us to take a long, hard look at how we were managing our finances.
After about three years of casually paying off our debt, followed by about seven years of more seriously paying off our debt, we hit debt freedom and had knocked off every item above except the mortgage.
The Journey to Debt Free
There was a lot of sacrifice, compromise, and even a few tears along the way. Here are a few of the highlights (or lowlights depending on your perspective).
- We went from eating out 1-2 times per week to less than once per month.
- Six years without a vacation.
- We cut out the cable (technically we never signed up for it in the first place).
- We stopped upgrading our phones (each keeping our phone for about 4-5 years.
- My wife was a trooper when it came to cutting our clothing budget and her hair salon expenses.
- I learned some valuable lessons at how expensive women’s clothing and hair can be and just how important it is.
- All spending was a discussion, which would sometimes turn into a debate, and on rare occasions turn into a fight (and said tears).
Debt free doesn’t just happen. Like so many good things in life, it requires work, sacrifice, and most of all endurance. But as good things usually are, it is worth the work and sacrifice.
If you are already debt free, congratulations, it is a great club to be in. If you are thinking of becoming debt free, it is a worthy pursuit. And my best bit of advice for you is to follow my philosophy of change and immerse yourself in content that supports and encourages this goal.