Happy Monday! I have another post in what may or my not be a series, The Power of Debt Freedom. Today we’re sharing the story of Amanda from Centsibly Rich. Amanda and her husband paid off $100,000 in debt and are now living life happily consumer debt free. My hope and prayer is that by sharing these stories, you’ll find the motivation you need to start your own journey to debt freedom.Also, if you’re interested in finding out how to start paying off debt when your debt situation is completely overwhelming you, read my article on Centsibly Rich.
How We Almost Lost it All
My husband and I started off married life in debt. We married when I was still in grad school and by the time I graduated, we had student loans totaling $40,000. Within a few months, we added a car payment and mortgage to the tally.
As life circumstances changed quickly, we bought and sold three houses and two cars within the first few years. Needless to say, all this buying, selling, and trading added greatly to our growing debt.
When our son was born, my job didn’t pay well enough to cover the cost of child care and I can’t deny the burning desire to be home with my baby. It was then that we made the decision to become a one-income family.
Within 3 months of becoming a single income household, we moved into a fixer upper. The “new” home came with a larger mortgage and added to our already negative net worth.
In the meantime, our daughter was born. To pay the bills, we had to develop some super frugal living habits. I cooked all meals from scratch and all of the kids clothing and toys were second-hand. I even made my own baby wipes! (I credit Amy Dacyczyn’s The Complete Tightwad Gazette for many of the frugal habits developed during this time.)
And then we were sued. It’s been 13 years, but I remember the day well. A knock at the door with the messenger asking us to sign for the papers. The lawsuit was for an “undisclosed” amount of money from a minor fender bender (think 5 mph) we had 3 years prior.
I was terrified. Panic ensued. Images of the worst scenarios ran through my head: we would lose our home, the small amount in our bank accounts, our cars. My level-headed husband proceeded to do his homework and reassured me they couldn’t take our home. The most comforting thing he told me was we had nothing for them to take. With very little money in our bank accounts and loads of debt, what could they possibly get?
The lawsuit was settled out of court and we came out relatively unscathed (with the exception of a higher insurance premium), but we felt the urge to do something, anything to keep that fear we felt during the lawsuit from becoming a reality. We knew we had to do something to protect our young family from financial disaster.
Paying Off Student Loan Debt
The debt was a huge factor to our financial instability, so it became a priority. We simultaneously built an emergency fund and threw extra money at the student loans. We sold some collectibles and other stuff, I cleaned my mom’s house, and sold baked goods to my husband’s coworkers at Christmastime. Our already frugal habits kicked into high gear and we saved wherever we could.
Eventually, our student loans were paid off, but it wasn’t one of those lightning fast success stories you hear about. I admire those that are able to pay off their debt in record time, but living on one, moderate, 5-figure income, meant paying off the loans was a slow process. It took us around 5 years to pay off approximately $40,000 in student loans. But we did it and it felt great!
In the meantime, my husband’s income rose to a more comfortable level (yet still 5 figures, even today) and we didn’t have the weight of the student loans, so we let up on the reins. And we got lost.
Ending the Debt Cycle
We soon traded and financed yet another new(ish) car and, eventually, a new camper. Though we had good intentions of becoming debt free each time, we would pay off the car loan only to turn around and get ourselves back into consumer debt with another vehicle.
There is no rhyme nor reason why we did this. Maybe the new cars represented financial success to us? More than anything, I think we got a little high each time we got a “good deal” on the next car. Though the exact explanation isn’t clear, we continued the debt cycle over and over.
And, honestly, the only way we continued to take on debt, pay it off and repeat the cycle is because we continued to live frugally in almost every other aspect of our lives.
Several years ago, I discovered personal finance blogs and, eventually, I happened across Mr. Money Mustache. I devoured his site. We made the decision to stop the debt cycle once and for all and work on saving for an early retirement. We finally had direction and a goal to work toward, providing the motivation we needed to stop taking on debt.
Once all the consumer loans were paid off, we had a decent emergency fund, and were contributing to retirement accounts at a higher rate, our financial stress was virtually nonexistent.
We do still have a mortgage and though we aren’t 100% debt free, it isn’t a source of stress for us.* It’s cheaper than rent, plus we have enough equity in the house to sell it and buy a smaller house if we want or need to.
What Does it Feel Like to Not Have Consumer Debt or a Big Mortgage Payment?
Honestly, I rarely worry about money anymore. And the worries I do have pale in comparison to what they did back in the days of consumer debt. Now, I do get uncomfortable when the emergency fund has to be used, but am grateful the money is there when we need it.
Today, if we get an unexpectedly high bill in the mail, whether it’s medical bills, insurance, or anything else, we don’t worry how we will pay them. When we were in debt and living paycheck to paycheck, we often scrambled and had to shuffle money around to cover unexpected bills.
I sleep at night. I know my kids will be taken care of if the worst happens. If my husband and I were to die tomorrow, it would not cause a financial burden for my family.
Best of all, we have options we never had before. Options such as:
- When our kids want to do an activity, we can say yes (within reason – we’re still frugal!).
- We will be able to retire early.
- We aren’t worried about a job loss because we have enough to get by for quite some time.
- We are now pursuing dreams, business and otherwise, we’ve both had for many years.
Amanda and her family are able to have the financial peace of mind they have and to make spending decisions not on whether or not they have the money, but on whether or not they think the purchase is a good decision for their family. Now, that’s freedom! If you’re interested in starting your own journey to financial freedom, check out this post series.
*The mortgage is manageable leverage we’ve chosen to keep, at least for now. The most important thing when buying a house is to buy a house you can afford. I have no idea what the banks would have qualified us for, but I bet it’s nearly double what we spent. When we purchased our home, we decided how much we would spend according to our budget.