Monday, June 25, 2012

My Conquering of Stupid Tax

This is the start of what will be a monumental week for our household. On the social calendar our group of friends are getting together for monthly book club, and for the FPU class we are facilitating we are on the home stretch with the last 4 lessons, which honestly are some of the best in bunch J! My nerd side is also tingling as it is almost time for my tri-annual credit report check, so you can be on the lookout for a “how to” piece in the near future regarding your credit report. And we are coming up on the end of June and it’s almost time for another entry in the series that is, “My Quarter End.”

But perhaps what takes the cake in the middle of my personal finance bonanza of events is that on Friday my wife’s student loan will be paid off. This is the last of our debt and for the first time in our marriage we will be debt free together. So in a taking a brief walk down memory lane I wanted to spend today’s post reminiscing about the stupid taxes that I’ve paid in life.

Credit Cards

Truth be told I had previously only carried one card and paid off the balance every month. But having and using a card helped me get on the fast track to overspending. Before I sliced my one and only card I established a $1,000 emergency fund that sat in a basic bank savings account. This 1k put some pad in between myself and life and allowed me to cut up the credit card and close the account with relative ease. It was a great first step in saying no to relying on credit, and yes to relying on myself.

Car Note

Ok, you got me. I have never carried a car note my entire life. I just saw an opportunity to say that I have lived the last 9 years without a car and have used public transportation to get around during my day to day life. No auto insurance, no sensitivity to the rise in gas prices, no monthly parking rates, no registration fees, no maintenance cost, only piece of mind.

Student Loans

Lastly the big bad beast known as student loans. In short I’ll frame it like this: I took out more than I needed in student loans to pay for a self-imposed higher standard of living that had nothing to do with the classroom. At its peak my student loan debt bill stood at $24,000 and my wife’s was $58,000. Now when I had graduated from college and began working my monthly minimum payments were somewhere around $200 and if I recall correctly in my Pre-Ramsey days I was sending in about $500 a month.

Now once I resolved to rid all debt from my life, after covering my cost of living for the month, I launched all remaining disposable income at my student loan every month until the dragon was slay. During the time between starting to build my baby $1k emergency fund and paying off my student loan I gave focused intensity towards the debt. I grabbed every ounce of overtime I could get, cut expenses to the bone and even unplugged my monthly retirement contributions for the short time to payoff the debt.

Once my loan was done we hit a long stretch gearing up to payoff my wife’s student loan. We knew it would take us a while to work that debt down to 0  so we rose our emergency fund to a full six months worth of expenses and picked up retirement contributions (my wife 12% and I 15% towards 401ks and Roth IRAs).

So this week our debt journey ends and our debt free adventure begins. It feels great to be at this point which is literally days away. We’ve paid our fair share of stupid tax in life, but we’ve also been able to turn it around by having an emergency fund, executing a debt snowball and consistently saving for retirement once the smaller debts were paid off. In three and a half years since we started our gazelle intense trek to financial fitness we have paid off over $80,000 of debt and have saved around $120,000, a $200,000 change in financial position in three and a half years. I’d say that’s a pretty good reason to be excited this week!

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