The original piece was contributed by Ashley from Money Talks. Her life’s mission is to aid you in taking charge of your finances. Visit her website or follow her on Twitter to learn more.
In January 2008, my husband and I were burdened with an alarming $38,000 of consumer debt, with monthly costs close to a whopping $950. Then, at the onset of this year – on February 1st – I managed to repay the final portion of this debt, rendering me debt-free at last!
This means we no longer need to worry about mustering that $950 each month if my husband loses his job. That’s an extra $950 staying in my purse every 30 days. It equates to $950 per month of sheer financial liberty. And it feels fantastic!
On the surface, we resembled your everyday family. We’ve made regular decisions, owned two cars with ongoing payments, had credit card obligations due to home enhancement projects, parented two small children, maintained good credit, and lived off a single income. In several aspects, we were doing better than many. We practised controlled spending, held a reasonable amount of savings and despite our debt that included car payments, we could not be regarded as too extravagant.
This leads to the question, how did we accomplish it?
My account may not revolve around radical sacrifices and life-changing alterations. Although that could have been the simpler narrative for me to pen down, I feel it’s more applicable as most folk are reluctant or unable to take such drastic actions. It reflects my nuclear family – nothing out of the ordinary. Our central strategy to tackle debt was to refrain from accruing any new debts. Full stop.
Engaging this “no further debt” strategy, we channeled all our surplus cash into diminishing our credit card debt, which at the time hovered around the $8,600 mark. By September 2009, it was completely paid off. Ideally, we should have directed our credit card payments towards one of the car loans thereafter. However, we opted not to. Had we done so, we could have cleared our debts much earlier. Based on our tight-budget situation, we chose to create some wiggle room within our monthly expenses. It’s all a part of life, and although our journey wasn’t flawless, it was relatable.
The following step was to clear off my minivan’s loan. Occasionally making larger payments led to the loan being paid off by June 2010. Subsequently, we implemented one more semi-appropriate approach: the establishment of a “car fund”. This fund was aimed at saving for a future car. We made it a point to regularly transfer the amount we would have normally offered as a car payment, into a newly created savings account. By January 2012, the balance of our car fund was equivalent to what my husband owed on his car – approx $7,300. Now, we had the possibility to clear our debts completely!
Initially, I was reluctant to pay off the residual amount, taking comfort in the security of savings. However, realizing that it was the right move, I gave in. Paying off that last bit of our liabilities provided a fantastic sense of relief. It became apparent to me that I had been carrying a burden I wasn’t even aware of earlier. Now, with zero outstanding debts, I feel entirely in control of our finances. We decided to forgo all future car payments. If circumstances align with our plans, I foresee us remaining debt-free from here onward. What a wonderful feeling!
The mortgage is the next target we aim to eliminate. If paying off the car loan felt great, owning our house outright will probably be beyond words.
