My Credit Score is Terrible – And That’s Ok

So yesterday I was reading about the new “Ultra FICO” and just generally feeling negative about America’s financial industry. If you haven’t heard, now people with really low/ no credit can link all their financial accounts (checking, savings, etc) to try to boost their credit score and borrow money they wouldn’t otherwise be able to access.

This got me thinking – I have no idea what my credit score is! I haven’t checked it for a handful of years. So why not? For what it’s worth, I used the free website Credit Sesame.

I’m not being paid by them or anything, I just wanted to tell you where I got it for free if you were curious. You have to give them a lot of information, and permission to check your TransUnion credit report. And then each month they will calculate an approximate credit score for you. As far as I can see, it’s the same as a whole host of other websites, like Credit Karma and even a few credit cards with a monthly credit score as a benefit.

So I checked my credit score. And it’s terrible.

Okay, well it’s not the worst it could be, but it’s the lowest it’s ever been for me.

656

My credit score used to be VERY close to 850. And I was PROUD. I thought that meant I was adulting really well. I had always been told to be responsible, to “build my credit”, that it would open doors for me into amazing jobs, low insurance rates, and the best deals on future purchases.

Turns out, that wasn’t the truth.

The only thing a high credit score ever did for me was allow me to borrow more money than I responsibly should. The deeper in debt I was, the higher my credit score soared. So when I was at my most irresponsible with money, when I was literally drowning, when we were living paycheck to paycheck with no savings… the credit companies were LOVING IT.

And then, I woke up. I stopped focusing on what other people thought, and stopping pining for the next big shiny purchase. We decided to stop borrowing money for things we hadn’t saved for, and start paying off the things we had already bought but still owed money on. (which was… ummm… everything.)

And as we gained steam, and began really getting a handle on our finances…. Our credit scores began dropping. Mine’s dropped steadily over the last ten years or so. I assume my credit score will continue to drop until there’s basically nothing to report on, because even the old paid-off debts will eventually fall off the report after seven years or so.

Right now, Credit Sesame tells me that there are a few factors contributing to my low credit score. They are giving me an “F” in the areas of Credit Usage (haha, I’m not using credit), Credit Age (umm because zero accounts means no age), and Credit Mix (because it’s hard to diversify zero things). I’ve got a C in Payment History, because I’d always made my payments on time, but currently I’m not making payments (living the dream!). The only area I’m doing well in is Credit Inquiries, because my credit reports are locked and no one can make any inquiries on them. Apparently the fewer the inquiries the better.

I also want to point out that the marketing here is genius. It’s not debt – its CREDIT. Doesn’t that sound better? Much more desirable. Who doesn’t want to “build credit”? I mean, if they called it a Debt Score, and rated my debts, it would be a bit more obvious that it’s not something I really want. But instead, they are gifting you with all this positive CREDIT, that you have to apply for. It’s really brilliant. And they give you a grade and a score, not based on how much you are drowning in debt, but based on your Credit Usage. Doesn’t that sound like you are really being responsible? As if you are using your credit, and your payments are not completely in control of your money.

And the best part? They give you recommendations! So they recommend, to improve my credit score, the number one thing I need to do is….. Get a credit card. Somehow digging myself back into debt will prove that I am a good risk. Because lenders don’t want someone who is debt free! They want someone who borrows lots and lots of money and doesn’t pay it back right away. They want someone who will pay their outrageous interest rate, each month, for the rest of their consumer driven life.

And that’s not me anymore.

Do you agree with me about credit scores, or are you still working to keep yours high?

Excuses, Excuses – The Lies We Tell Ourselves

When I coach people about their money, I can tell pretty quickly if they are serious about making changes or not. The ones who are serious will listen to me. They will step back and really examine their habits. They are willing to make sacrifices. They say “Hmm… let me think about it. I guess we don’t NEED three cars.”

But the ones who aren’t ready – they have a different tune. They have excuses. They have special circumstances. When I suggest re-thinking the cable package, they say “Well how would we watch Survivor?” And when I say, “Isn’t that on CBS? You can get that channel for free” – they say “But we couldn’t POSSIBLY lose the sports station”. But soon they are justifying their addiction to Starbucks because of a busy schedule. And their required gel manicures for a professional office. And their penchant for Whole Foods, ie “If I don’t buy organic I’m basically poisoning myself”.

Fear likes to creep into our lives, and fear tells us that our problems are worse than other people’s. Fear tells us that no one could possibly understand, and that our struggles are insurmountable.

Everytime I hear “But my situation is a little different”, I have a chuckle. (If I had a dollar for every time I heard it, I’d be much closer to financial independence!) But when you say that, that’s when I know – you aren’t serious. Come back to me when you are desperate to get ahead in life and willing to cut out a few luxuries. Stop making excuses. #sorrynotsorry

I get it. You are a unique snowflake who has struggles that no one else could possibly understand. But here’s the rub – WE ALL DO. Don’t paint yourself into a corner of debt because your parents couldn’t afford to pay for your college education, so you may as well get a fancy car loan on top of those monster student loans. Life pro tip: you do not need an eight passenger SUV to safeguard the lives of your not-yet-born children.

Yes, you are unique, and so is everyone else. You probably have challenges that some other people don’t have. That’s no excuse not to do the best you can.

Fear has a way of convincing us that we’re so unique we’re beyond help.

If you think that your situation is special, and there is nothing you can do to better yourself, you won’t change your behavior. If you think you are unique, and no one else can possibly understand your challenges, you won’t reach out for help.

I don’t believe there is anyone out there whose situation is so dire that there is nothing they can do to better it. Actually, quite the opposite. If you are in an absolute hole, sometimes a very little thing can really make a big difference. If you have really terrible habits, just a little change can impact your life in ways you didn’t foresee.

I believe in you.

Don’t use your history an as excuse not to succeed. Don’t listen to the fear.

Red flags you are terminally unique:

  • When someone else is successful, you say “Must be nice.”
  • When someone accomplishes something you wish you could do, you say “Yeah but THEY didn’t struggle with” [insert your unique situation here].
  • When someone asks if you need help, you say “You couldn’t possibly understand.”
  • When someone gives you advice you say “That couldn’t work for ME because” and you justify not even trying.
  • And lest you think I am immune from this syndrome – I used many excuses to justify my lavish spending. “I’m a professional Financial Advisor, I HAVE TO drive a BMW and get frequent manicures.”

People who are ready for a change, when their debt and their finances finally become too much to handle, they stop making excuses and start making changes. When you hear someone is successful, instead of thinking of why that couldn’t work for you – ask HOW it could work for you. Instead of comparing how different your lives are, think about how new habits would look in your life. When someone accomplishes something awesome, instead of “Must be nice”, why not ask them how they did it? Chances are you can learn something from them.

Everyone is unique. Everyone’s situation is a little different. How have you used your “special circumstances” to justify your bad habits?

What Have you Already Done?

I recently made a money mistake (more on that later). It wasn’t huge, but I allowed myself to wallow in self-pity and flagellation for a hot minute. Then I remembered some advice I had read recently that I hadn’t yet followed, and I decided now is the time. It was a “productivity hack” and entailed focusing on what you had already successfully accomplished rather than what you had left to do or what you had done wrong.

The premise is simple – by always focusing on your To Do’s, you are never feeling fulfilled and happy and proud of all you have already completed. By always focusing on the future, and what is still to be done, you never take the time to reflect on the past, or pat yourself on the back for what you have accomplished.

Focusing on the future list of goals, or regretting past mistakes, is my go-to tendency. I have an automatic habit of highlighting the one negative thing in a sea of positives. I’m really working to change that internal voice into a more gentler, encouraging version.

So without further ado, and simply to make myself feel better, I bring you a list of my money accomplishments over the past ten years (#humblebrag):

  • Created a workable monthly budget – together! On paper!
  • Read MANY blogs/books on finances
  • Cut up / paid off all credit cards
  • Paid off $40k in debt – car loans, student loans, etc.
  • Paid off $140k mortgage – became completely Debt-Free!
  • Saved 6 months cash emergency fund
  • Saved $5k to replace current car when needed
  • Save and pay cash for every vacation and other variable expenses
  • Create Christmas budget and plan in advance to make homemade gifts each year
  • Paid cash for amazing wedding/ honeymoon
  • Reversed crazy negative net worth to crazy positive net worth!
  • Reduced expenses to live on less than half of our income
  • Max out IRAs every year
  • Max out my 401k too!
  • Purchased term life insurance
  • Created wills and Power of Attorneys
  • Kept good stable job for 5+ years
  • Purchased reliable used car on Craigslist for dirt cheap
  • Canceled cable! Switched to $15/month internet and $10/month Netflix
  • Canceled crazy expensive Verizon and switched to Republic Wireless
  • Canceled all magazine subscriptions and gym membership
  • Canceled crazy expensive car insurance and switched to Progressive
  • Made decision to stay debt-free, never loan money, never co-sign etc.
  • Began giving a tenth of our income to church community!

Sometimes by focusing on how far we’ve already come, we can find more motivation to keep going. What’s on your list of “Done” money items? I bet it’s longer than you think!

My Biggest Money Mistake

We bought a house in 2007. Yes we did. Right when the loans were easiest to get and the market was pretty much at its peak. Probably the worst time to buy a house, in the history of house buying. But what did we know – I was 23 years old! Spoiler alert – somehow this story has a happy ending.

We got SO lucky, in many respects. We had a good realtor who cared about us and taught us about real estate throughout the process. She made sure we didn’t go really overboard with the houses we were looking at (the bank pre-qualified us for a ridiculous sum). We found a house in a great neighborhood, that was priced low and had been for sale for a while. We even negotiated, based on all the work that the home needed.

However, the whole thing was still a dumpster fire. Here is a top ten list of the huge mistakes we made:

  1. Had no savings or emergency fund AT ALL – not a dime to our names.
  2. Put no money down. (see #1 about being broke)
  3. Rolled the $2k closing costs into the loan – remember, because we were broke. Hey, fun fact: that $2k would have cost us $4,670 if we had taken the full 30 years to pay off the mortgage.
  4. Purchased a house that needed a TON of work with no money in the bank with which to actually do the work.
  5. Initially applied through a large bank (Shout out to Chase, the worst bank in the world) who didn’t give a shit about us and happily took our application and appraisal fees and then decided the home did not qualify for a loan like a week before closing. So we double paid these fees.
  6. Purchased a house after having a crappy job for approximately four months.
  7. Had about $40,000 in consumer debt! And did I mention NO savings?!
  8. Were a very young new couple (together less than a year), unmarried, and had no wills or life insurance.
  9. We also had no budget – no sense of where our money was going, or what we could afford.
  10. We had no furniture, household items (we didn’t have PLATES), or equipment to upkeep a house (um lawnmowers are expensive) and no money with which to purchase these things.

I just want to say right now that I am fully aware how badly this situation could have worked out for us. If either one of us had suffered a job loss, or any sort of medical issue, accident, etc. we would have lost the house. If we decided to break up (we were not yet married), one of us couldn’t afford it on our own. There’s no doubt about it. We lived paycheck to paycheck, drowning in debt, and we would have been in a very tough spot.

I do not judge for one second those who have been through a foreclosure and the loss of their home. We did not make the right decisions – WE JUST GOT LUCKY. We were able to keep our jobs through the 2008 downturn, we even got raises and promotions over several years. We both stayed healthy, thank God. The market improved, and our neighborhood increased in value. We educated ourselves, and stumbled our way through paying off our debt and saving more of our income. We grew together instead of apart, and we landed on the same dreams for the future to build our life on.

After a very long journey, we paid off the mortgage on our little fixer-upper. But it did require some sacrifice (#firstworldproblems) and our friends thought we were crazy.

Have you ever made a huge money mistake, that may or may not have worked out okay in the end?

FIRE is Crazy – and We’re Doing It Anyway

I started this blog to document our journey toward Financial Independence and Retiring Early (FIRE). I wanted to be able to look back and say, yeah, that’s how we did it, that’s how we felt, and it was totally worth it! I also wanted to have a place where I could point people (in real life) when they were incredulous about our (crazy) plan. If I can help others along the way, that’s just bonus points!

First, some clarity: the acronym FIRE stands for Financial Independence and Retiring Early, but the biggest misconception is that you are saving all your money in order to quit your job and sit around. FIRE has evolved to mean people who are passionate about creating investment portfolios that will support them in whatever future venture they may pursue. It may not necessarily mean immediately quitting your day job, it just means the option to stay or go without monetary considerations. It also means not being stressed about money, and having the ability to be generous and live abundantly.

So my definition of FIRE mostly entails Freedom. The freedom to choose to work for someone else (or not)… the freedom to stay up late and bake cookies just because… the freedom to start a blog that perhaps no one will ever read.

The freedom and peace of mind of having “enough” is absolutely priceless.

I would say that the Hubble and I are more than halfway toward our Financial Independence goal. We’ve paid off all our debt including the mortgage, squirreled away a nice Emergency Fund, and begun to save a big portion of our income toward early retirement. We’ve saved about half of our total goal. The journey so far has taken about ten years, but that was starting from a net worth of about -$180,000 (yes that is a big fat negative). I don’t expect it will be much longer – the beginning is always the most difficult part. Just getting the wheel moving in the right direction was a long, slow slog.

But now it’s rolling right along, on its own, the interest gathering interest until eventually, our money will be making more money than we are. Ahh, the power of compounding.

I do want to address a few of the most frequent questions/arguments I hear when we talk about our goals of FIRE.

  • “But I like my job. I don’t want to retire early.”
    • This is my favorite. It’s the misconception that on the day you hit your magic number you will be forced at gunpoint to march into your boss’s office and tell her to take this job and shove it. Come on! Stay at your job, if you want. The point here is CHOICE. Most jobs would be infinitely more enjoyable, or at least tolerable, if you knew you could walk out at any time without fear or regret. You could take risks, only accept the projects you really wanted, move into a new more challenging industry or role. So save up a big pile of money, and keep working if you want. Best of both worlds!
  • “What on earth would I do all day if I quit my job? God, I’d be so bored.”
    • First of all, I think it was Abraham Lincoln who said that only boring people get bored. But second, the world is huge place that you have explored approximately none of. Get out there. Stretch yourself at yoga or try painting or something that scares you a little. Get your hands dirty. Volunteer for your favorite cause. Clean out the garage. Do the thing you said you would do if you only had the time. Remember when you were a little kid and the world was so exciting to learn about? When did we become so dependent on someone else telling us when to wake up, how to dress, and what to do for the bulk of our waking hours?
  • “What about health insurance? Good luck if you break an arm.”
    • So there are a lot of different health insurance options. We’re going with a medical sharing plan, but the Affordable Care Act is also really viable if you have a limited income. (As you know, health insurance in America seems to be constantly in flux so we’re keeping on eye on this unpredictable variable, but I just need the courage to change the things I can.)
  • “You will definitely run out of money. Then you’ll be screwed!”
    • So I mean – worst case scenario, and the market really crashes for a lot of years straight as soon as we quit our jobs, and our investments just dwindle to the point of failure. What on earth will we do?! Umm… we’ll go back to work. Which would just be the worst thing in the …. Oh wait. Actually, that would just put us right back where we started, and right back with everyone else. Except we would also have all this knowledge and probably still more savings than the average American.

There are a lot more objections that I’ve heard over the years, online and in real life. Most of them boil down to trite cliches or downright jealousy.

Have you ever had a goal so audacious that everyone thought you were crazy?

The Gift of Desperation

I stumbled upon a new idea this week and it really resonated with me. I heard a recovering alcoholic say that his mental disease had brought him so low that he was given the “gift of desperation”. He said that only when he reached this bottom was he able to completely let go of his need to drink and to turn his life around.

Tony Robbins once said, “Change happens when the pain of staying the same is greater than the pain of change.” This is the same idea.

I feel like the gift of desperation is sometimes needed in finances, as well. You have to feel a pinch, some kind of pain before you will do the hard work of changing your behavior. If it just feels great to go deeper and deeper into debt, and you are able to buy whatever you desire with no consequences, everyone would always continue to do so. But sometimes, there is a moment where you look around and feel buried by the mountain of debt. You feel chained with no choices, and you decide to change something about the way you spend your money.

I remember the exact moment I received the gift of desperation. I had a student loan, a car loan, and a credit card balance. I had a mortgage on a fixer-upper, and a job I hated. My car needed new tires and my tooth had a cavity that needed filled. We were making ends meet, but barely. I thought we were fine – it’s like not we had creditors hounding us. We were skating by with minimum payments on everything and no savings. We had just replaced all the windows in the house with a 12-months same-as-cash loan.

And then, I received a statement in the mail from the window company. I began reading the statement and it said that no payment was due – YET. But it also said that if we were not able to pay the full balance – over $7,000 – by the time the 12 months was up, that the bank would retroactively charge us an insane amount of interest, backdated all the way to the day we bought the windows. The kicker? Nine months had already passed and we had made zero payments. I freaked out. It was a “come to Jesus” moment – there were a lot of tears.

You see, I didn’t know the rules of the game I was playing. And in my fear, I couldn’t see any way that we would be able to make all our minimum debt payments and also pay the balance of this purchase in full in the next three months. I broke down. I got desperate. I began searching for a better way. I talked to my husband. I got some books at the library. I pulled out a calculator. I began looking at our spending, trying to find the things that we could cut to make this work. We spent about $100 on a money class that we took together. We started writing down a plan for spending. We argued about what was important. We got serious. We had a garage sale. We cut a lot of other things out. It was really hard, and it was worth it.

After a long road on the debt payoff journey, we reached the end. We celebrated – it felt great. And then, we coasted for a bit. We bought a few big ticket items that we had put off – new flooring for the house, a new(er) car, a better computer. We got a bit lazy and didn’t really have any goals besides our regular savings. But then… I began feeling a new type of desperation. I had switched jobs, but this one wasn’t much better. It was still a small cubicle, in which I was held captive all day, and had to report for pointless meetings and fill out meaningless self-assessments. I was feeling hopeless, staring down 30+ more years of working under clueless managers and feeling chained to a life of corporate drudgery. Even the “perks” felt completely arbitrary. A bigger cubicle? A fancier title? A window in my prison? I began searching for a better way.

That’s when I stumbled upon the FIRE movement. I began to see a light at the end of the tunnel, finding a different way forward, outside the regular forty year corporate career path. Giving up the little things that don’t matter for a life of freedom in early retirement became the goal. And that’s the journey we’re on now. We’re totally debt-free and living frugally to squirrel away as much money as possible, to afford an extremely early retirement.

***I do want to include a small caveat that I am not talking about depression. I don’t see any gifts in depression and most times it does not stir you into taking action; in fact it may do just the opposite. Desperation is not depression.

Have you ever been given the gift of desperation?

The Sacrifice is Worth It

To get out of debt, you have to really want to.

I know that sounds really simple, but its SO true. No one ever just wakes up one morning and is like “Oops – I’m debt free! How did that happen?”

You have to be intentional, and focused, and really, really want to. It’s very simple to pay off all your debt, but it’s not EASY. I’ll say that again – its simple – you just pay it all off and don’t get any more. But its difficult – if it were easy, everyone would be debt-free and it wouldn’t require any sacrifice. (see Part 1 here)

We cut out a lot of spending to achieve our debt-free goal. Sometimes I’ll refer to these cuts as “sacrifices” although I know it is such a first world thing to say that I “sacrificed” getting a manicure. Let me assure you that I know that going down from 100 channels to 10 channels is not a sacrifice. But subjectively, these things all definitely impact your life and everything is relative.

Things we Gave Up:

Credit Cards (use debit cards)
Cable TV (got Netflix)
Movie Rentals (haha, remember when this was a thing)
Manicures
Expensive salon cuts/highlights
Almost daily restaurant/coffee outings
Organic expensive grocery stores
Trips to the Mall or Target for entertainment purposes
Movie theatres (oh, but we still see movies!)
Home Warranty
Newspaper subscription (for the coupons!)
Magazine subscription (I loved the magazine Real Simple and this one hurt)
Verizon Wireless (switched to Republic Wireless)
Gym Membership
Expensive Internet (switched to super cheap plan with a different provider)
Super Expensive Car Insurance (shopped around online and found Progressive)
Giving expensive Christmas gifts and fancy custom photo cards to every person we knew (DIY for the win)
Dog grooming (DIY baby)
Oil changes (DIY again)
Privacy (getting roommates)
Saturdays (listing things on eBay or holding a yard sale)
Expensive Date Nights

Remember – personal finance is personal. Your Mileage May Vary and these are just the things WE cut. If you want to keep your cable TV because you are addicted to HGTV and genuinely love to watch it every night – be my guest. No judgement. Don’t give up your favorite things. Just figure out what you most value (and you can’t say you most value EVERYTHING you are spending your money on!).

I can honestly say that I do not miss a single thing on the list of things we got rid of. I do not feel like we truly sacrificed anything. I have literally every single material object that I need. And I’m even more happy and grateful for what I have now than I was when I was spending a LOT more money.

Isn’t that the strangest conundrum? We’re spending MUCH less than we were, but appreciating what we have more. We go out to eat much less often, but when we do, it’s special, it’s fun, we enjoy it more. Humans get used to nice new things really quickly.

What could you give up? What are you spending money on that isn’t adding joy to your life?

You Really Have to Want It

To get out of debt, you have to really want to.

I know that sounds really simple, but its SO true. No one ever just wakes up one morning and is like “Oops – I’m debt free! How did that happen?” It’s really easy to get into debt but you have to create a plan if you want to get out of it.

You have to be intentional, and focused, and really, really want to. It’s very simple to pay off all your debt, but it’s not EASY. I’ll say that again – its simple – you just take money and you pay it all off and then you don’t get any more. But its difficult – if it were easy, everyone would be debt-free and it wouldn’t require any sacrifice.

Probably one of the most drastic “sacrifices” we made, that actually impacted our quality of life, was to take on roommates in our home. Not impacted negatively – just moderately changed our lives. Over the years we have rented our guest room out to three different people (at different times). These people were all friends or at least acquaintances, and we were relatively sure each of them would not murder us in our sleep. And we ARE alive today to tell about it, so I’d say it worked out well for everyone. But our house is pretty small, so we had to share the one bathroom, kitchen, laundry, and living room.

Friend 1 – A friend I met at work wanted to move out of her parents home. She was also actively seeking employment out of state and so we figured she wouldn’t stay around too long. This was an experiment and it was great. We loved getting rent money in exchange for our guest room and we decided always wearing pants was something we were willing to do. She did move out of state and we parted ways on great terms.

Friend 2 – This was a guy with whom my husband went to high school. Bizarrely, we found him through an ad on Craigslist but when he showed up, it turned out they knew each other, so we felt like it was meant to be. Besides a few late night, rowdy World of Warcraft sessions (lol), he was a great roommate. He got engaged after about 8 months and moved in with his fiancee.

Friend 3 – A good friend, who was living out of state and needed a place to rent to transition back to our neck of the woods. She already had a job and this was perfect for us. She stayed about a year, probably the longest of any of our renters. After she moved out, we wanted to take a roommate break, and go back to wearing no pants around the house.

One thing I will say – having roommates allowed us a huge leap forward in our debt/mortgage payoff goal. $500/month is $6,000 a year that came out of nowhere – for little to no cost on our part. It was the best “side hustle” because it took no time. The only expense was maybe buying a bit more toilet paper and laundry soap. And with the girls, it was nice for me to have a built-in hang out buddy around (extroverts holla!).

I will tell a funny story though – just for you slightly crazy people like me. One day I got home from work and my roommate’s car and my husband’s car were both in the driveway. So I thought – cool, everyone’s home. So I walk in the door and the dog greets me, but no one else is around. I go “Hello, I’m home” and I get no reply. And mind you, this is not a large house. So I look in the living room and bathroom – no one. I go down the hall – my roommate’s door is open and she is not in there. I keep walking down the hall – my bedroom door is closed. That’s weird. And as I’m walking up to the door, my brain tells me – They are in there together. They are having sex in your bed. You’re going to have to commit murder today. How long do people go to jail for homicide? And I hesitate at the door, holding my breath and trying to bask in the time before I knew my husband was sleeping with my best friend.

And I slowly open the door, and the room is dark. My husband is asleep. Alone. He had a migraine. And our roommate? She wasn’t even home, her friend had picked her up to go out.

As I sidle up to my much maligned husband in bed, I whisper “I thought Liz* was in here.” And he mumbles “thoughtless?,” and I let him go back to sleep.

So anyway. If you can swing it, get a roommate. You (probably) won’t regret it.

*Names have been changed to protect the innocent.

Have you ever done anything extreme to save money? Would you consider getting a roommate or taking in a lodger?

Debt Freedom is Peace of Mind

I wandered through life for quite a while, with no savings in the bank, no plan for future purchases, and no real goals (besides vague wishes). I put things on credit in the hopes for some magical future with more cash than I had today. I woke up one day with lots (and LOTS) of debt and no way to pay it off. I wasn’t doing anything out of the ordinary, I was just doing what everyone else was – being an American consumer. I had student loans (like everyone else), I had a car loan. I had less credit card debt than the average person. We had gotten a modest mortgage, and I had a little bill at the dentist office I hadn’t been able to pay off right away. We were doing ok. It’s not like creditors were banging down the door.

But we had no plan, no dreams. My car (that was not really mine, but more the bank’s) needed new tires, and I had no way to pay for them. So they went on the credit card. Next month, and that $400 statement came in the mail. Shit, now what? The house really needed new windows… well that’s $7,000. Ooooh they have an interest free loan? For 12 months no payments!

Life just kept happening to me, and without a plan, I drifted through, getting further and further behind. I lacked intentionality. I spent money on things that were not important to me. Little luxuries that I thought I deserved or that helped me to feel like I fit in.

But eventually, it caught up to me. With no savings, every little thing was a disaster. After a mini-breakdown, I started looking for ways out and began talking with my partner about how we could change what we were doing.

So. We made a plan. We wrote out a monthly spending plan and began paying down our debt. And we did it, we’re debt free now. And it was all worth it. Being debt-free feels REALLY good. Owing nothing to anyone is priceless. It’s peace of mind that you can literally buy.

Here’s what we did. Just a warning, this is pretty simple. I did not say it was EASY, but it is simple. It’s difficult, but it’s worth it.

First, we created a spending plan with a little money factored in for debt payments. At first, we were making the minimum payments on everything, with just a little bit extra to throw at the smallest balance.

We followed the “Debt Snowball” method of repayment, which I highly recommend. It’s simple to figure out and remember. You just pull out all your statements, and make a list of your debts (all of them, credit cards, loans, etc.) and you list the balances in order from smallest to largest. You pay all the minimums on all the debts, but any extra money goes toward paying down the smallest debt. After you pay it off, all the extra money goes towards the next smallest. It’s called a snowball because all the minimum payments keep getting rolled together bigger and bigger until when you are paying off the larger debts, you’ve got a huge monthly amount going toward it. It feels amazing.

So for me, I had a $200 bill at the dentist, I had just put $400 on a credit card for car tires that I couldn’t pay cash for, we had a same-as-cash loan for new windows, two car loans, a big whopper of a student loan, and then the mortgage. That was the list, and it seemed insurmountable.

But you know what? It wasn’t. We did a bunch of crazy things to pay off the debt, and it worked. We didn’t have to go to extreme lengths, but I’m glad we did. We had a garage sale, we curbed our out-of-control restaurant habit, and I stopped going to the mall for entertainment (god Sephora can fuck right out of here). Stayed tuned tomorrow for some of our other nontraditional choices.

The bottom line is being debt-free is peace of mind, and the freedom to choose where to put your money.

What could you do with your money if you had no debt?

I’m Not a Doctor

I want to put out there that I’m not a professional, and so this is part disclosure and part reassurance of my motives.

I’ve recently lost 25 lbs. Not a ton of weight by any stretch, and I’m taller than average so I guess I “carried it well”. But still, I felt kind of gross and so I read about losing weight, chose a strategy to do it, and followed through. Basically the strategy was the calories I ate had to be less than the ones I burned (this is called CICO – calories in, calories out). It wasn’t sexy or gimmicky, but it was free and very effective. The thing is, I didn’t take any advice from those naturally thin people who seem to eat candy bars for breakfast, or overweight people who hadn’t found a solution. But I also didn’t pay attention to the ads trying to sell me an expensive diet plan or weight loss program. I wanted advice from experts (doctors) or my fellow “losers” – the ones who had been there, figured it out, and lost weight.

Being financially fit is a lot like being physically fit. I don’t want to hear advice from a trust fund kid or a filthy rich lawyer or something. I especially don’t want to hear advice from someone who is broke! When I was looking for money advice, I wanted to hear a rags to riches story, someone who had made mistakes and turned it around. Dave Ramsey’s story resonated with me when he talked about declaring bankruptcy with two small children, being scared and vulnerable and having to figure out how to build his life back up.

And that’s kind of where I was, drowning in debt with no direction. Here’s the irony – I majored in Business in college, took lots of finance and economics courses, and then got my first “real” job as a Financial Advisor at Morgan Stanley! I passed my Series 7 license exam, as well as Series 66 and 31. (These are required licences for registered representatives who are selling stocks and things at an investment firm.) The Series 7 is a six-hour exam, so I had to study my ass off and it was no joke – you were fired if you didn’t pass after six months.

But the hysterical part of this is that I was 21 years old, with lots of student loan debt and an overpriced BMW payment. I had zero savings and a really great downtown loft with garage parking. I soon upgraded to a mortgage and some expensive home repairs on credit. My partner got a car payment as well, and I assumed that soon we’d be spending on a nice wedding.

So while I do have some financial management and investment experience, I also have the “drowning in debt and brought it back from the brink” experience. I’ve done the things I talk about and I know they work. So while your mileage may vary, and personal finance is personal, these principles work. But I’m not your doctor, just someone who lost the weight and wants to help you do it, too.

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