A reporter friend asked me, “What is the single best thing you and your husband did that set you on the road to succeed financially?” And hands down, that answer is becoming consumer debt-free.
There’s no way that we could have survived on Pat’s $47,000 a-year salary for as long as we did as a family of five if we had kept ourselves held down with debt. Becoming consumer debt-free was one of the best decisions we’ve ever made.
But I also know that the thought of becoming debt-free can be overwhelming. You’re staring at a huge mountain in front of you, and you’re not sure you can climb that beast. I totally understand. That’s why we’re going to roll up our sleeves and talk about digging yourself out of this hole you’ve dug because you can become debt-free.
I want to share this excerpt (below) from my book, Getting Good with Money:
Debt Eats Your Income
Debt eats your income. Read that again. Debt eats your income. It doesn’t matter if your paycheck is $500 a week or $5,000 a week. If you have debt, it will eat the money you just went to work all week to earn. Don’t believe me? Stop right now and go tally up exactly how much you pay every month in the form of minimum payments. Don’t even include your mortgage if you have one, tally up the minimum payments on your credit cards, personal loans, car loans, student loans, and any money you owe family or friends. For Pat and I that total was nearly $900 a month, not including the mortgage payment. Do you know what this meant?
After making those minimum payments, we had a little more than $2,000 monthly to live on. And we still had to pay the mortgage payment of $709. That means we had less than $1,500 to buy groceries, pay utilities, and live life.
This exercise of tallying how much we were paying out every month in minimum payments was the catapult that launched us on the debt-free journey. Granted, when we started, our main focus was on the credit cards only because they were our lowest balanced debts. Once we gained that momentum, we just continued until we finally crossed that finish line. But the motivation to pay off debt started with making a list of our debts. So make a list and check it twice because you’re going to kill off that debt!
The “Secret” of Becoming Debt-Free
When Pat and I started the debt-free journey, everyone thought we had completely lost our minds. They couldn’t believe that we were going to try to live without credit cards, pay off my student loans, and get out from under the weight of a car loan. They thought we were nuts. Then we became consumer debt-free and started being able to enjoy a little bit more freedom, and friends started asking us for the “secret” of how we did it. Since I was writing my blog and sharing about our family’s journey toward debt freedom on my online platforms, I thought I had pretty much shared this so-called secret. However, family and friends kept asking me. The truth was that they thought I was holding something back. They assumed I was sharing one thing online, but we really did something else to make it happen. At first, this confused me and even made me mad. But then I realized where this thought process was actually coming from.
My friends and family were hoping I was going to tell them the easy way or shortcut to getting out of the hot water they found themselves in financially. The cold hard truth is that just like gaining weight is easy and sometimes even mindless, losing weight is incredibly hard. We get used to the lifestyle that made gaining weight effortless or maybe we just can’t convince ourselves to eat healthy and workout.
Either way, we end up hoping for that magical weight-loss pill that will do the hard work of shedding those dreaded pounds without us having to lift a single dumbbell. But oh, my dear sweet friend, you and I both know the truth. Especially if you’re like me and have struggled to lose that last bit of “baby weight.” You know there’s no magical pill that’s perfectly safe and effective and still allows you to eat nothing but junk food.
There’s no magic pill.
It’s the same with debt. There’s no magical pill that will make that debt go away. Even in bankruptcy, your student loans and back owed taxes don’t go away. And bankruptcy is not free. Many people fall into the belief that bankruptcy is a “get out of jail free” card, but it’s not. Depending on the type of bankruptcy and how much debt you’re wiping away, it can range anywhere from $5,000 to $15,000 or more to declare bankruptcy. Bankruptcy isn’t a magic fix-all pill to solving debt problems.
The only way to solve that problem is to roll up your sleeves and get to work. Just like you had to build up a Starter Emergency Fund, you’re going to have to find a way to dig yourself out of the debt hole. In my honest opinion, it’s easier to get out of debt than to save money. I know that sounds crazy, but something magically happens as you start lighting that fire to that mountain of debt. You can’t wait to see it gone, and so it motivates you to keep going. If you’ve already achieved the feat of building a Starter Emergency Fund or you’re on your way to building one, you can kill off your debt. It doesn’t have to be a burden around your neck.
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I wanted to share this excerpt because becoming debt-free isn’t easy. It doesn’t matter if you’re paying off $20,000 of debt or $200,000. Paying off debt requires a mindset shift and a willingness to live life a little differently than you’re used to – at least temporarily. And that’s hard to do.
But it’s 100% doable if you want it. So friend, if this year’s goal is to pay off debt I’m cheering for you! You can do this!
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