Eight years ago, I was single, working as a newspaper reporter and living on my own in an apartment.
Oh, yeah. I was also buried in debt – student loans, credit cards, car payments, you name it.
It’s not something I’m proud of, but as I’ve chronicled here in the past, I put all this out there for two reasons. The first is as a motivator. By admitting to the mistakes of my past, publicly, I hope to be less likely to repeat them. The second is because it is a reminder for me of just how far I’ve been able to come at eliminating debt.
Back then, I felt trapped, helpless, that this was going to be the way it was for the rest of my life and there was no way I could possibly get myself out of it. At times, I even took the absolutely wrong approach of looking at myself as a victim. I blamed the credit card companies, I blamed the banks, I blamed everybody because I felt ‘preyed upon’ in my youth, I didn’t know what I was getting into, etc. That didn’t help matters.
But in time, I realized I had to sink or swim. I got serious about it early on, but my desire to “clear up the books” only intensified when Meg and I got married, and hit overdrive when we had our little guy and began to realize that one day, there’s a good chance we could outgrow our house.
Before he was born in 2012, I had managed to clear up the credit card debt and now live completely credit card free. It’s incredibly liberating. Planning budgets, spending only what you have, saving for something if you really want it. It’s like a great big puzzle, but one that is so absolutely satisfying when you’re not owing money (and interest) to someone.
We bought our current house as a foreclosure and fixed it up, keeping our mortgage low but putting a nice roof over our heads and a warm place for our family to grow.
With the credit cards paid off, I began, as noted in earlier posts, to focus on student loan debt via Dave Ramsey’s Snowball Method to debt. With four student loan lenders, I took focus on one at a time (making regular payments to three of them), but throwing as much extra money as I could at the one with the smallest balance.
We’re often told to go for the one with the highest interest rate, but there’s a psychological aspect to paying something off. It motivates, it makes you feel like you’ve accomplished something, and hitting the lowest balances first allows you to do that and feel great about it, making you want to move on to the next.
So for me, I tackled Keybank. Once they were paid off, I moved on to National Education, taking all the money I was paying each month to Keybank and ‘snowballing it’ on top of my regular National Education payment. Before I knew it, I had that student loan paid off as well.
That then led me to two student loans and a car payment. The car payment was the lowest balance between all three, so I took the payments I was making to Keybank and National Education and snowballed them on top of my car payment, which has just recently allowed me to pay off my car more than a year early.
It really feels incredible.
This is where I was in May 2014:
National Education – $1,500
Car Payment – $6,800
Sallie Mae – $12,200
Discover/Citibank Student Loan – $23,000
Here’s where I was in September 2014:
Car Payment – $4,833
Sallie Mae – $11,878
Discover/CitiBank Student Loan – $21,379
And here’s where I stand now:
Sallie Mae – $11,379
Discover/CitiBank Student Loan – $19,386
I’m not one who needs a new car every few years and believe me, if I can maintain the one I have and get it to last as long as possible, I will be thrilled to do so, because now I own it. No bank, no dealer, just me.
Believe me. I’m the guy who is still using the old 4:3 television set I got as a Christmas gift from my parents in college 15 years ago as the family TV in our living room. I’m not one obsessed with spending money on the latest and greatest.
Of course, now there is all that money that was going toward these snowballed car payments each month, which has totaled out to roughly $700.
So, from here, I stood at a crossroads, determining what to do with that $700. If I were to continue on in the purest form of Dave Ramsey’s Snowball Method, I would take that $700 and apply it on top of one of the two remaining student loans. But, there’s other things I’m taking into consideration, including the possibility of needing another car eventually and the fact that one day, we might need to be looking for another house if our family grows out of the current one.
With that in mind, I’m doing a sort of ‘partial snowball effect’ from hereon in, taking $200 of that car payment money and applying $100 extra toward each of my student loans (Discover and Sallie Mae). It will likely take about five years to pay them each off, but that’s better than the 9 remaining years if I were keep making basic payments on each.
That leaves $500 of non-earmarked money that can be put away for any variety of things – whether that be some toward an emergency down payment for a car one day, a little money put aside for Christmas shopping, building savings, or just eventually being able to have some more money to put toward a mortgage if we decide it’s time to find a new home.
I’m not writing this to brag. The reason I’m doing this is because I once felt so buried that I saw absolutely no hope that my life could get better, but it did. It took time. It took cutting back, living a little more simple, not having everything.
But the feeling of a possible future that’s not tied to a shackle of debt is one that can and will keep me going.