I was 17 years old, looking to start a college education with dreams of a successful career and raising a family in the not to distant future. I did not have a penny of debt.
I was 17 years old and looking to start a college education with dreams of a successful career and raising a family in the not too distant future.
My parents had done an awesome job teaching me the importance of work and managing the resulting income in a responsible way divided between saving and spending. At the time, I didn’t have a penny of debt.
Eight years later, I had obtained my doctorate degree, was married, finished residency training, and bought my first house. I was also more than $350,000 in debt.
I had borrowed money that I had no business borrowing for things I didn't need to buy. It had all seemed so normal and manageable.
“I have it under control,” I thought. I was making a 6-figure salary and never thought twice about taking out that much debt.
“It’s not even stupid debt,” I rationalized in my mind. I had neither credit card debt nor fancy cars.
My wife and I had bought a modest $200,000 home that was well under what the bank told us we could afford. I was driving a beat-up minivan with more than 100,000 miles and doors that sounded like they were going to fall off whenever they were opened.
We seemed to be living a reasonable and responsible life. By societal standards, it was all “normal.”
The problem is our society has more than $890 billion in credit card debt, more than $1 trillion in student loan debt, and a population with a median retirement account balance of $3000 for all working-age households and $12,000 for households nearing retirement.
That said, using society as a measuring stick is probably not a good idea.
It was a little over 2 years ago when the light bulb finally went on and the scales fell off my eyes.
The first thought that came to mind was a humbling one: accepting the reality that I was broke. I was making a 6-figure salary, but I was broke and had borrowed almost everything that I had, so I didn’t actually own anything.
The second more uplifting thought was what I would do if I had no debt. What would that look and feel like?
My wife and I began to attack, and attack, and attack all of our debt until we finally paid it off, with the exception of our mortgage balance in October 2015. We had taken $350,000 in debt and paid off $200,000 of it in fewer than 7 years.
What was the key to getting out of debt? First, we planned and set a budget.
This was painful and something that I felt like I had never been taught how to do before. It involved setting priorities and looking at every single area possible to cut in order to make maximum amounts of money available to throw at the debt.
This was not fun by any means. However, it was essential.
The second key was writing down our long-term financial goals and dreams. The budget allowed us to address the here and now, but dreaming about our long-term financial goals motivated us to keep going.
Writing down our budget at the beginning of the month and getting aggressive about piling up as much money as possible to throw at the debt freed up $2500 per month. A plan with motivating factors is powerful.
When we hit the submit button on our last debt payment, the feeling was pure joy. No more car payments, student loan payments, or any other payments. We now have more than $2500 per month to pay off the mortgage early and save for our kids’ college education and our retirement.
What an incredible, freeing feeling.