My decision to climb and ascend out of debt forever was one of the best resolutions I have made in my life. My last debt was paid off in March of 2009. And now that my wife has joined the debt free club I have spent some time recently reflecting about those days when I was working my debt snowball.
At its peak my debt stood right at $24,000 that was spread across three notes through student loans. I had two credit cards: one was for everyday use (I did not live on a budget) and was paid in full every month and the other I let a jewelry store talk me into opening when buying my wife’s engagement ring.
My Early debt kill
Before latching onto the ways of Dave Ramsey I was killing debt before I even knew that it was necessary to build wealth. The early debt kill was the largest note of my three student loans, which peaked at $15,700. For the first two years of entering the workforce I paid above and beyond the minimum payment. At this time point in time I used a credit card for every day purchases and did not live on a budget. When fall kicked in during 2008 my wife gave me a brilliant idea. I had roughly $15,000 in a savings account in California that my grandmother had left me when she had passed and this student loan balance stood at around $5,000. My wife proposed that I pay down and close this student loan as it was generating accrued interest on top of the principal, and the remaining 2 notes would still be months away from beginning to accrue.
So I sucked it up and paid down the student loan note that stood at $15,700 at its peak and set the remaining $10,000 aside to buy the love of my life an engagement ring.
My First Step
It would not be until January 2009 when I would first read Dave Ramsey’s “The Total Money Makeover” and my personal finances would never be the same. Since paying off the big note I had two remaining student loan notes which stood at $5,700 and $2,600 and had begun paying minimum payments on these and accrued interest had begun to set in.
So with a game plan I set out to destroy my debt while never fully realizing that I was taking baby steps towards wealth building. So with my first paychecks of the new year in 2009 I had two goals: (1) save $1,000 in a liquid baby emergency fund and (2) pay off all remaining debt with the debt snowball. I had also created and followed a monthly budget where I spent every dollar I made before the month began. Every extra dollar I made and could squeeze out of my budget I applied first to the baby emergency fund then to the smallest debt owed.
Within the month of January I was able to get the $1k baby emergency fund crossed off my list and paid off my credit card that I used for everyday purchases. It was fairly easy to pay this guy off as I typically paid it off in full every month and never ran a balance month to month. So cash envelopes replaced my previous non-plan for groceries, entertainment and clothing.
Getting Pushed Around
Unfortunately though in November of 2008 I had taken the $10,000 previously mentioned to a jeweler in Indiana to buy my wife her engagement ring. No it was not unfortunate that I was planning to get married, the unfortunate part is that I let my personal finances get dictated by a company with an agenda. With the cash sitting in my checking account and my debit card ready to go, I let the salesperson talk me into opening a credit card to, “build my credit,” which meant the jeweler could sell the book of payments and make even more off me in addition to the cost of the ring. So before any interest could accrue I paid the remaining balance and closed the account in early February of 2009. So with $15,000 that was left to me from my grandmother I paid off one student loan note and promised my heart and soul to my best friend.
The Last Debts
The last 2 debts that stood in my way were the student loan notes that stood at $2,600 and $5,700 at their peaks. Armed with my $1,000 baby emergency fund, one student loan knocked out and two credit cards TKO’D I used all remaining and available disposable income to payoff these last two debts in March of 2009.
So to recap:
· Paid off $15,700 student loan
· Read Dave Ramsey’s “The Total Money Makeover”
· Drafted my first budget before paychecks started rolling in
· Saved $1,000 baby emergency fund
· Paid off and closed 1st credit card
· Paid off and closed 2nd credit card
· Paid off and closed $2,600 student loan
· Paid off and closed $5,700 student loan
· Did the happy dance
It’s funny. Off my credit report I can see the original term agreements from my student loans. For 3 loans that totaled $24,000 if I was to pay monthly minimums on each it would have taken me 257 months, or 21 years. Instead I focused and prioritized and had the debts paid off in 27 months from my graduation date. Or, as I like to put it, 7 months when I finally got serious about it. I’ll leave you with one of my favorite unattributed quotes:
“Those who understand interest earn it: those who don’t, pay it.”