I’m blissfully sitting at my kitchen table, working. It’s 2011, late December, just before Christmas. My husband is home from work, relaxing in the family room, where our dog, Piggy, is curled up tight in her favorite napping spot, snoring. Then it……well, happened. An ordinary moment from the outside, but one that would change my life more than I could have imagined. This moment would never make the front-page news or even be worthy of a Facebook status. But none of that mattered. It was my first wake-up call. Telling me I was BROKE.
As I said, the moment was rather benign and ordinary. I get an email from my boss, saying that I’ll need to make a business trip. “Go ahead and book everything, and submit your receipts when you get back,” she said. The travel policy was for employees to front the cost of the flight, and the company would reimburse us after the trip had completed and all receipts had been submitted. No problem, right? Let me just check my credit card statement. (The fact that I went there first should already be telling you something.) The number sitting under ‘Remaining Credit’ caused things to move in slow-motion. $90. That’s all we had available? When did that happen? Ok, maybe we have enough in our checking account. Being in the last days before payday, we had a hefty ‘ol $52 in our bank account.
I sat there for a few minutes, frozen. For so long, I’d always made it work. I could usually juggle things well enough to get money from somewhere, or put it on the trusty credit card if I had to. I’d made a fairly reliable routine of paying it down “just enough” to get more breathing room. But this time, there was no way out. I sat still and silent for a few moments. Once my reality had some time to sink in, the tears started flowing and so did the inner monologue. “How the HELL did you get to this point? How can someone make decent money yet be so poor? You’re pathetic, you can’t even float a $400 plane ticket…”
I continued to sob. Then I sobbed a bit more. Finally, the tears dried, and I felt a surge of financial self-preservation kick in. “This madness ends today”, I told myself. The days of living paycheck-to-paycheck were over. And with that, our journey began.
Interestingly, the business trip that started our whole debt-elimination journey ended up cancelled. Figures. But the fire that had been lit by that circumstance was far too hot to fizzle out at this point. I was determined and I was focused; we would start a savings account and then throw everything we had at our debt. I went into a Google-frenzy; searching and finding all sorts of personal finance articles/gurus/blogs.
My my my, the things I found. It seemed that for every true financial mentor that was out there, there were 10 more that were purely charlatans, masquerading as a financial know-it-all in the interest of making a buck. In these early days, I was drawn to Dave Ramsey. He had a simple approach, what he calls “Baby Steps”. He begins with building a small emergency fund, and moving on to knock out debts one-by-one with the “Snowball Method”. For those who don’t know what the “Snowball Method” is, google it and come back. There’s plenty of people on the web who describe it much more eloquently than I could hope to.
And frankly, this worked for us. We didn’t follow his plan to the letter, but he provided the basic framework as well as some motivational stuff to chew on. We saved up our $1,ooo emergency fund rather quickly. Then aimed our efforts towards our debt pile. It may not be as high as some, and it may look gargantuan to others, but we had about $40,000 in debt across a few credit cards, a couple personal loans, and an auto loan. This does not include our mortgage, which was about $400k at the time. (Even now, that number still makes me cringe. But downsizing to a smaller home ended up being one of the keys to our success.)
I’m an impatient person by nature, and this whole debt nonsense…well, I wanted to get ‘er done. Like yesterday. But where to begin? We decided to start with the smallest balance in order to get a quick, psychologically-satisfying win right off the bat…a Capital One credit card with a balance of $1,500. We paid it off quickly, and the day I made the final payment was nothing short of euphoric.
From that point, we moved from debt to debt, until we reached our last one, an auto loan for $15,000. However, let me step into the confessional booth and pull the curtain behind me for a moment. (Wait, is there a curtain? Or am I thinking of a photo booth?) Anyway…we weren’t perfect. We had moments of “we’re doing fantastic, I deserve a (fill in ridiculous materialistic item here).” But what counts is what you do MOST of the time, not what you do SOME of the time. So while we may have delayed our debt-free status by a month or so squirrelin’ around, we got there eventually.
On April 19th 2013, we celebrated. We were officially debt-free. My husband took me out to my favorite high-end restaurant and we enjoyed a luxurious dinner…paid for with CASH.
Without any debt, we were able to start putting money away like never before. We learned everything we could about personal finance and investing, and by the time the 2-year anniversary of that first wake-up call came around, we had $100,000 sitting in the bank. We still continue that saving habit, and have met many more savings milestones since then.
We get asked quite often how we managed to pay off that much debt and save $100k in two years. It comes down to determination and a change in perspective. It wasn’t always easy to make the life changes that were required, but we don’t regret any of them for a single moment. I encourage you to check out my Personal Finance and Money-Saving Tips sections; a lot of what we did to turn our finances around can be found there.
I invite you to start living your best life. Pull up a chair and stay a while.