Major Milestone: Our Consumer Debt is Paid in Full!
Ten months ago, we started out on a journey to change our spending habits, reduce our monthly bills, and to be able to make major life choices with more freedom. I also had a personal desire to spend my money in a way that more closely aligned with my true priorities. Basically, this required questioning every dollar that we were spending and committing to enough life change to begin rapidly paying off debt.
It was a daunting goal, but through the miracles of persistence, patience, and paperwork, we have reached an epic milestone...
Our consumer debt is paid in full.
No car payment.
No department store card payment.
No credit card payment.
When we started, we were 5 digits deep in consumer debt. We had a department store card balance, general credit card debt, and a car loan payment. Now we have none.
Zero. Zip. Zilch.
All told, we paid off $14,968 of debt in ten months.
An unreal number. A sum that would have seemed entirely unreasonable when we began. It honestly doesn't even seem real now. This has not only lifted an immense stress off of our life, being consumer debt free will also have an immediate positive impact on our finances... eliminating costly monthly interest.
Last year, we paid $1,069 in credit card interest alone.
Let that sink in for a minute... We paid over a grand to the bank in 2016 just for holding our debt (and we had a comparatively low interest rate credit card!). Yes, we did need emergency plumbing repairs, emergency legal services, and some of the other items we put on our card in a hurry, but it came with a hefty price tag. For the second half of 2017, we hopefully will not need to pay the bank a dime in credit card or car loan interest.
In addition to paying off our car and credit cards, we also got a head start in building up some savings to prevent future debt. We started our home repair fund and began saving money to buy our next car (when it's needed). It felt great when we recently paid for a home repair project and weekend travels in cash.
We did not reach this milestone by being perfect.
We did not follow every one of our goals without fail. For example, our goal to trim our household shopping to $650 per month has seen constant set backs. (I cannot tell you how much I wish I didn't have food allergies, so I could just eat a gosh darn sandwich or rice like normal people.) And it took me six weeks to consistently avoid paying for parking.
For every misstep we've shared, there have been many, many more that were too boring to write about. Although we are wholly imperfect, we forgave ourselves for our short comings, recommitted to our goal when necessary, and kept working on smarter spending. Eventually, we reached a financial milestone that feels unbelievable to us.
We aren't done.
With our consumer debt conquered, we've set some new goals of course! We can turn our focus to rapid payoff of our private student loan (We don't consider our Student Loans consumer debt. Some folks do and some folks don't. Ours were pretty crucial to the career growth we've experienced and the income we earn today). We also plan to begin investing more in retirement and start saving to pay for future travel with cash (Okay, so really we're going to use a credit card, reap the credit card rewards, and then immediately pay off the costs using cash, but still). We also still need to build up our savings for emergencies.
A new measuring stick for our money.
Since we've eliminated our consumer debt, we're evaluating our finances in new ways to make sure we stay motivated. We started tracking our net worth (we've improved it dramatically, but it's still negative at this point... thank you, student loans and housing bubble). And we'll soon be calculating and monitoring our personal savings rate (government retirement plans make this complicated, but personal finance blogger Luxe Strategist hooked me up with some good tips!).
Beyond these personal finance basics... we're also setting more specific intentions for how we want to spend our money. My goal is no longer simply to make it paycheck to paycheck comfortably while buying the general amount of stuff that people buy. I don't stick to a budget just because I want to have cash for Christmas gifts or my son's birthday (although I definitely do want to do want to pay cash for those things!).
Now that we have a little more financial breathing room, we can start asking ourselves bigger questions:
- What causes would we like to support with our money?
- How much should we be contributing?
- How do we use our money to support our creative pursuits and other things we love?
- What will we change about our budget as my husband returns to school to get his Masters?
- What does an ideal life look like 5 years from now? 10 years? 40 years?
- Are the choices we making now helping us to get there?
None of this seemed possible when we began just ten months ago. It has been a powerful transition to move from racking up debt to creating a financial safety net and putting our money toward things that are important to us.
Our changing relationship with money.
Paying off our consumer debt does not just mean a new set of financial goals. It has changed my relationship with money.
Ten months ago, money and I were in a dysfunctional relationship. It caused a lot of stress in my life. My spending felt out of control. I didn't know what I was spending my money on or whether I could change our expenses and habits enough to dig us out of debt. This feeling was a huge source of guilt and anxiety for me, and it was hard to talk about my money fears with my husband because (as the primary bill payer) I felt personally responsible for our finances. I was terrified that a broken household appliance or another plumbing emergency would put us deeper into debt, and that our monthly bills would begin to suffocate us and start taking away from the life we enjoyed together.
When I think about my spending now, "out of control" is the last thing that comes to mind. I also no longer get a stomach ache when I think about how we'd pay for an emergency household repair. While we still have a lot of savings to do before we have a sufficient emergency fund, we're on our way to achieving financial peace of mind.
I would have paid even more for the peace I have today when I think about the anxiety I felt before.
Looking back, I can also see that what I knew about personal finance was sorely lacking ten months ago. I learned a lot of valuable lessons from my parents and my schooling, but there were some gaps in what I knew about managing my money. Books like Vicki Robin's "Your Money or Your Life" and Anna Newell Jones' "The Spender's Guide to Debt-free Living" as well as countless articles helped me catch up on what I needed to know.
None of this seemed entirely possible when we set out, and I never expected it to happen in this short of a time period. My biggest hope was that we could change our finances in such a way that we would have greater freedom when it came to future life choices. While there are no major life changes on the horizon at this point, it absolutely would be easier now to change jobs, move, travel, or add a wee babe to our family of three.
When we began, paying off our consumer debt and lowering monthly expenses was the end goal. With those things accomplished, we can now set our eyes on even bigger prizes. I have a much greater awareness of what is possible and how much freedom financial independence can provide. We have come so far already. Yet, on the horizon before us, I can glimpse in the mist ahead of us that so much more is possible.
In the next few posts, I'll be writing a bit more about how we made it here -- about the miracles of persistence, patience, and paperwork and more. I'll also be sharing stories of those who have inspired me along the way, people who came from rocky starts or non-traditional backgrounds to become savvy money managers. I hope you'll enjoy those stories as much as I did.
Author's Note: The photo for this post was taken on a recent trip with friends to Smith Rock State Park in Oregon. It's beautiful -- Like the Utah of the Pacific Northwest! We hope to return there again.