Well, we did it! On Feb 1st we paid off our last chunk of consumer debt.
It feels good.
I would love to tell you a story of us getting mad at our debt and making a huge lifestyle change. I wish I could walk you through the daily grind of sacrifice and debt repayments. I wish I could enthrall you with images of me selling my once prized possessions at garage sales to get money to pay extra towards debt. But for us it wasn’t really like that.
It was more of a slow progression away from stuff and towards financial freedom. As we focused more on what we really wanted in life the “stuff” of life fell to the side. I used to think that having a budget and saving a little each month was good enough. If you could make your payments then you could afford it. I didn’t see a problem with that.
But the more I read, and wrote, and learned about personal finance the more financial freedom took the forefront of my thoughts. My journey to debt freedom was a slow process of gradual debt reduction. I didn’t wake up one morning pissed off at my creditors, ready to take action. I just slowly changed what I thought was important in life. As a result, my finances changed too.
I made my first debt freedom spreadsheet in January of 2008. At that time I had $38,000 in consumer debt and was paying $943 per month in debt payments. I don’t know the high water mark on our debt. It was more than that once. At one point we had almost $1,100 just in car payments!
Slowly but surely we have been paying off the loans. We didn’t use any particular method. Mostly it was avoidance of new debt and an unofficial debt snowball. We did have one set back in March of 2010 when my husband’s car broke down and we bought him a new-to-us one. We borrowed $10,500. We were going to pay it off the following month but a week later our business took a huge hit and a few months later went out of business. So we decided to hold on to our cash since our future was unknown at that time. (I guess the future is always unknown, but right then it was especially unknown!)
That car loan is the one we just paid off. I talked about this some the other day, but I’ll go over it again for those who are just joining us. About a year and a half ago we paid off my minivan. Instead of absorbing that payment into our lifestyle we set up automatic transfers of the payment amount into a new savings account dubbed “the car fund”. This is our savings account for replacement cars when the time comes. Our goal is to never have another car payment.
The car fund has taken some hits along the way. Unexpected medical bills mostly. But in January the balance of the car fund and the balance owed on my husband’s car was about the same. $7,300. Gulp. We could be debt free!!
It was actually really hard to pull the trigger on this. I don’t know why. It’s like the debt becomes part of who you are. My inner change-resistant self screamed “But I’ve always had a car payment!” Plus I didn’t want to let go of this big chunk of savings. Honestly, it kinda felt like a step backwards. I liked seeing that balance. When you have always had a car payment it’s hard to imagine it not being there, sucking away your dollars. I felt like I was just sending money into the abyss.
I finally bit the bullet and sent the money. As soon as it was done I knew I had done the right thing. I had always known mentally it was right, but it wasn’t until the check was in the mail that it felt right emotionally. It won’t take long to beef up our car fund now that we are banking $670 a month in there. That will feel WAY better than making car payments.