I drove home for the bachelorette party of my BFF's little sister, Bug [1]. Now that's weird enough in and of itself, because Bug is like 12 years old. Okay, not really, but at 22 she's a lot younger than me & Levi (BFF) and most of the ladieeez who were at the party. But I'll get into all that in a minute. Suffice it to say, it was weird, because I remember her bugging the crap out of us when we were trying to have sleepovers and here people are buying her lingerie. I mean, what the hell.
Anyway, so I'm driving along, thinking (it's a long drive) about how I'm going to be sort of a older, older sister at this shindig so that I'm prepared when a bunch of brain-bustingly aggravating 21-year-olds show up in prom dresses [2] and start making turkey noises at each other [3]. So I was thinking about how I'm going to be turning 30, and how satisfied I am with my life--great job, awesome fiancee, hysterical friends, hidden talents, a house full of books, and a drastically improving personal financial picture (no matter what the rest of the economy has to say about it). I mean after all, we're halfway through the year and I've achieved half of my savings goals (pretty good, considering it's the first time I've ever even had any savings goals), I'm solidifying my job skills and resume (just in case), I'm plumping up my Emergency Fund, I'm saving ahead of time and paying cash for things, and I'm feeling in a much, much more secure & powerful position than I've ever been in my life. And that's due to my own hard work and saving, not due to having a rich boyfriend or winning the lottery or getting some kind of bull$hit bailout.
But there was still one thing holding me back. And I decided I wanted to get rid of it.
I paid off my final consumer debt, to the Bank of Mom.
I handed her a big fat check when I got home on Friday afternoon. It was strange - when I paid off my last credit card bill, I did a lot more jumping around and freaking out, but then there was also a whole "eff you, Evil Credit Card Company!!!" element to it. It wasn't as painful paying my Mom each month - I mean, honestly, her minimum payments were quite reasonable, and who can beat those interest rates, right? ;)
But even though it came in a prettier package, debt is still debt, and that last little bit was still a remnant of my past less-than-wise decisions (personal AND financial) and now I can say I have conquered those mistakes. And now I am free.
When I first started this race, I was spending nearly all of every one of my paychecks. Big payments went to seven different credit cards, a school loan, and a car payment. Even though I didn't have a latte habit, or splurge on clothes, or buy expensive purses, I never could get my debt to go down. Sure, I played the 0% balance transfer game for awhile and kept it from going up, even on a lower-than-public-school private teacher's salary, but it didn't go down either. The total I had accumulated from one huge error in personal judgment[4], one year of full-time grad school and night classes with no time to work a paying job, six months of unemployment without access to Unemployment $$ (including two moves and a totaled car) and another three months of joblessness with unemployment checks (but with stupidly trying to "keep up with" some new friends who were significantly less jobless than I): all of it sat around, and sat around, and sat around. Under control, it seemed to me, because my credit scores were great, my balances were much lower than my limits, my rates were surprisingly awesome, and I could handle any "emergency" or actual emergency that popped up.
Until I added up my net worth one day [5].
It was -$55,343.29.
Make sure you notice that little "-" sign at the beginning there. Oh, nice, Blogger will let me put the number in red. Isn't that handy!
Even looking at that number now I feel like I'm being smothered to death. I knew a large part of it was my school loans, and honestly I don't feel too bad about those. The interest rate I pay on them a) is tax-deductible and b) is lower than what I get in my bank account, so it would actually be stupid to pay them early. Plus they're for a degree that I actually use in my job and I am very proud of it. So I added a row to my spreadsheet that says "Net Worth less School Loans" and got -$24,106.23.
Still red. Still BIG and red. Still not okay.
I hadn't used the cards in a long time and I'd always paid on time and more than the minimums. I was also paying ahead on my car loan, and really I felt like I was doing pretty well, all things considered. But I was never going to get out of it at that rate. I had already started to focus and become more aggressive about paying things off when I had my Great Financial Frustration Meltdown of 2007 and made an absolute resolution to myself to get out of the mess I was in so that I would never feel powerless about money again.
I made a spreadsheet that laid out each debt and what it was at that month, down to the penny. Then each month I added a new column for the new month and I started watching the numbers go down, and I wasn't going to let anything stop me. I scrimped and saved and pinched pennies; I started cooking at home whenever possible and letting Airbear have some "buddy time" with Eagle (i.e., letting the boys go out to eat without having to go along); I struggled for frugal Christmases & birthdays - that one was really hard for me [6]; I tried to rack up "$0 days" (first on this blog, later with support on the WIR boards) by spending absolutely nothing for as many days as possible; I started direct deposit savings and built a little--but at least in existence--emergency fund; and I took every cent I could possibly make, save, or find, and I threw it ALL at the debt.
I was lucky enough to have patient & understanding people on my side - in my real life and online - who would cheer me on and look at the numbers I'd post in my update and not just see how badly I'd screwed up but how hard I was working to fix it. I am so grateful for all of that support and encouragement. It gets really hard to always be the person who doesn't want to eat out, or go to the movies, or do other expensive stuff when everyone around you is doing it. But sometimes you've got to put your financial future first, and for me, that meant nuking that debt - and fast - before I could lose motivation ;)
Twenty months later, I can say I am free... I would have thought I'd have wanted to shout from the rooftops, you know? But really I'm just sitting here on the couch with a quiet little smile, feeling safe and secure and strong. Not just because the debt's not there to burden me anymore (although that's a part of it); and not just because my paycheck is going to all go to savings and things that I want to do now (although that's there too!); but also because I can look back at this race and think to myself, look what I did. Look what I CAN do.
I saved 62% of my net income in one year, and applied it ALL to debt reduction.
I own a car outright. And it is not even a crappy car!
I don't owe anybody anything [7]. No credit card company can raise my rates, or lower my limits (well they can, but I don't care), or increase my minimum payments. They can't make a decision that would totally screw up my life. I have the absolute power to tell them to suck it if they don't do what I like. I actually have one credit card now, which I pay in full every single month, that so far has paid me $200 in cash this year to use it. Take that, Big Mr. Credit Card Company Whose Name Rhymes With (the end of) Assface.
And altogether I paid off $28,942.01. In that time, I also built an emergency fund that would cover four months of my (now reduced) expenses if I were to get laid off. And built several retirement accounts. And learned what to put in them. And saved for a lavish Las Vegas vacation. And a wedding planner in Rio. And got two different banks to pay me more than $100 each to start accounts with them. And am making consistent interest, every month. And we're talking dollars of interest here, not the 59 cents every three months I used to get from my ancient Kids' Club savings account either.
I have knowledge, I have fellow Racers, I have spreadsheets, and I have a list of financial goals longer than your forearm - and that's just for 2009. And now that I don't have that debt? You just watch what I can do now ;)
Stay tuned!
[1] This is not really that creative of a nickname, everybody called her this as a kid. Beats me!
[2] Thankfully there were only two of them. But yes, there were two of them. In prom dresses. One of whom, I am not fucking kidding you, started the "I sometimes forget to eat" monologue.
[3] Ask Gramt.
[4] Dick.
[5] After reading an article by MP Dunleavy, which wasn't really about paying off debt but which listed out your debts, your savings, your retirement, & your assets and came up with a net worth. Interesting, I thought. Until I saw the number. Then I thought a different word, which is shorter than "interesting" and starts with an "F."
[6] With the unfailing support of my family members, who were completely generous and supportive!
[7] Except the school loans. But again, whatever :P
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