Today just might be one of the best days of my life. Because, after years of hard work, I can finally say the following words.
I am debt free.
Do you hear the trumpets trumpeting? Can you see the confetti canons canoning? Because that’s right, the final debt has been vanquished. The books are all in the black. While I’ve been anticipating this day for some time now, the fact is that day is here! And I couldn’t be more pleased. And excited. And relieved.
When I graduated nursing school in 2007, I had few assets but over $65,000 in student loans, a car loan, credit card and personal debt. It was obvious I needed a plan in order to get myself in financial shape. Heck, that was a good part of the reason I’d gone to nursing school in the first place, to ensure I would make enough money to get my financial life back on track. So, a month or so after graduation, as I was settling in to a new city, I went to work.
By this time I had started paying attention to personal finance blogs on the interwebs, which was giving me foundational knowledge of where to start and how to organize myself. Once the paychecks started coming in, I had a list of priorities of how to spend the money I had.
Spend less than you earn.
This was hard the first few months, when we were trying to build a life and furnish a new townhouse. But we did a bunch of things right.
– We found a great deal on a townhouse where we were paying far less than market value in the area. Diligence.
– The cable company forgot to turn off the previous occupants cable. Luck.
– We developed an eye for finding treasures to repurpose/refurbish on Craigslist and from thrift stores. Creativity.
– We basically gave up eating out at restaurants. I’ll admit, the first few years were a whole lot of spaghetti, but over time we’ve gotten much more skilled and creative with our cooking, to the point where I’m mostly disappointed or indifferent to restaurant food. Over-priced and under-seasoned, most of it. To me, eating out no longer represents a good value for my money.
– We took only a few short vacations those first few years, and made sure we saved up enough money to pay for everything before we left. This way there was no reliance on credit cards to get us through which would then have added to our debt load. Debt was only allowed to move in one direction – down.
Pay down the debt
Since we kept our expenses low, there was excess every month, and I focused intently on paying down the debt. I did as the experts told me, and lined up my debts in order of the interest rate. I made minimum payments on all of them, and put anything and everything I had left over towards the highest interest debt.
This was really hard at first. I was paying hundreds of dollars of interest every month, so even after making what seemed to me to be large payments, my total debt hardly seemed to decrease at all some months. Intellectually I knew the progress was there, but it was spread out and incremental, and I can understand how people give up and move on to find easier ways to make themselves happy, ignoring the the signs of impending financial disaster all around them.
But I persevered. Tax refunds, overtime shifts, raises, every extra penny I made went towards debt. At first.
I quickly realized that although it was important to pay off that debt as quickly as possible, I was also without any resources if something unexpected happened. Even after I’d paid off my credit cards, my savings account, or “emergency fund” as it were, had only had few thousand dollars in it. So I started siphoning off some of my extra money to build that up. Just a little at first. In fact I made it a game. Whenever I would log into my bank account, whatever the amount in checking was, I would round down to an even number and move the excess into savings. So if the total was $1147.35, I would move $2.35 into savings. This was such a small thing at first, but since I was compulsively checking my balances several times a week, it started to add up. Then after a while instead of rounding down to the nearest $5, I made it the nearest $10. And then the nearest $25, or, when I was feeling particularly reckless, to the nearest $50. What was amazing was that I hardly ever missed that amount when I was paying my bills. But it sure did make a noticeable difference in the growth of my savings account. To this day, I still do this.
I was also contributing to my retirement plan at work. And in 2009 I had the crazy idea to open a Roth IRA as well.
It’s true I could have paid off my debts much sooner had that been my only goal. My extra money was now stretched thinner over a variety of goals. But financial stability is about balance. Spreading out the risks and the gains.
Keep with it
I really wish I had more to say about this. I mean, overcoming that amount of debt represents a huge achievement in my life, and I wish I could talk on and on and on about it, with lots of tips and secrets to share. But really, the best trick I had was to just keep doing it. I set up a plan, and stuck to it. Now, my money habits have definitely gotten more sophisticated over the years. I’ve dealt with regular and Roth IRA rollovers, had to make estimated tax payments and, once my emergency fund was fully funded, I started saving for future spending priorities like the long-term backpacking trips I like to take every few years. But as far as the debt goes, it wasn’t really anything fancy. It was just making that payment each and every month. The balances got lower and lower, individual debts dropped off one by one, and as the interest payment itself steadily shrunk, the amount that was going towards principle steadily increased.
It was never easy. Using your hard-earned money to pay off debts from things and purchases and experiences that have long come and gone isn’t fun. It isn’t rewarding in its own right. I would have loved to have been putting all that money into retirement savings, or vacation savings, or even towards luxurious indulgences like the occasional concert or theatre show.
But it has taught me discipline. And the value of pursuing long-term goals. And did I mention how freaking excited I am???
So when asked how I paid off $65,000 of debt, I have a simple answer. One payment at a time. It may not be sexy, or revolutionary, but it is the truth.
I am done with debt. Now that I’m free, I never ever want to be a slave to those kinds of payments again. If I can’t afford to buy something outright, that means I can’t afford it. The end. Decision made. (I’d make the obvious exception if we were talking about a mortgage, but since I change zip codes faster than most people change cell phones, I kinda doubt that will happen anytime soon.) I’m not being mean to myself, I’m supporting my priority of maintaining financial stability. Because now that the goal of debt freedom has been achieved, I can focus more clearly on the next goals: entrepreneurship, financial independence and retirement. Well, that and a whole lot more travel.
I hope you will indulge me one final time, but I can’t stop saying it.
Robb Hillman is debt free.
How about you? Where are you in your battle with debt? I’d love to hear your strategies for dealing with debt in the comments below!