This blog started out as a way for me to keep track debt, as well as my attempts at saving money (to pay off said debt) by living a more sustainable life. Obviously, a lot can (and has) happened over the past two years, and my thoughts and feelings on quite a few issues have evolved over this amount of time. I think the one that has most evolved though, have been my thoughts (or rather, actions) towards my debt for the year.
I distinctly remember telling my dad not too long after I started that I wanted to pay off all my debt, mainly because (at the time) I owed what was equivalent to almost 2 full years of pre-tax salary. Meaning that if I paid every single cent I earned towards my debt, it would take me 2 full years to become debt free. My dad was understanding that I had a high debt-to-income ratio, but was much more restrained when talking about it. While he thought that getting rid of debt was a good idea (and even more so in my case). He was less enthused about complete and total debt removal and debt freedom, however. Here’s what he told me (Im paraphrasing here, it was a while ago):
It’s a great goal Jeff, but not really possible. In todays world, debt isn’t something that you cant completely live without – but you do need to manage it wisely.
At the time, I understood what he was saying, but I didnt let it get in my way – I wanted to be debt free (still do) and couldnt understand why everyone else wouldnt want that same thing. Every bit of math that I looked at and every story I read kept showing telling me how much better life was/has been since the author became debt free, and what plans the author has for the future.
For those of you who were reading last year and have been reading most of this year, you can tell that I have made nowhere near the progress that I was able to in 2010. Of course, there were a lot of different “big ticket” items that I bought this year – I paid over 1,000 in state and federal taxes, I bought an engagement ring, I spent the better part of the summer and fall on the road for work, vacation and more weddings, I booked a honeymoon for H and I, along with countless other things. I did manage to pay off one loan and make a big payment on my truck loan. I didnt have to pay any of these “big ticket” things in 2010, and it looks like some of them will go away in 2012, but will be replaced by others (like my wedding). Still though, having all of these expenses in 2010 instead of 2011 would have just tossed me into the abyss because of all of my debt at the time. This year, I was able to pay cash for all of the items mentioned above.
Obviously, making all of these huge purchases didnt really do much for my debt repayment. I’ve been trying to figure out lately why exactly that is (aside from the fact that you cant spend the same dollar two times), and I’ve thought up a couple of reasons. I think that one of the reasons is that I’m not standing on the edge of the grand canyon of debt anymore. My high debt level is no longer the ‘boogeyman’ that it once was. One missed paycheck wont put me out on the street anymore, nor will I lay awake nights worrying about how I’m going to pay off my credit cards or any other bills, for that matter. My debt level is no longer almost 2 years of my yearly salary. Due to salary increases and my focused debt repayment, it’s less than half my yearly earnings.
The clear realization that i’d be up what they refer to as “shit creek” (or crick) in the event of a possible job loss really pumped up the intensity in my eyes. There was a legitimate fear that pushed me to work far too often on a daily (and weekly) basis. That same fear made sure that I kept getting up before 5am and stayed working until around 9 pm three nights a week. The risk is now gone – and so is the drive and intensity that pushed me through 2010.
One of the other reasons is because I had a lot of things this year that I would have rather done than repay my debt (bad, I know) – I enjoyed being there for my friends weddings and seeing them happy at their wedding, I enjoyed my time in Alaska, and of course, I’m excited to be engaged and getting married to H.
Given that’ it’s the beginning of the year, this leaves me wondering where I’ll be headed over the course of this year. Of course, I’d like to pay down the remainder of my debt in order to give H and I more flexibility after we tie the knot – expanding our cash flow will allow us to save for travel, a home, or whatever else we decide that we want to do in the future. Of course, I’ll be sharing the continued journey here (to the extent that H feels comfortable – I havent really talked it over with her yet). Now that the boggeyman is gone, I feel like my debt is on the backburner and I’d really like to move it to the foreground and get as much of it reduced by the time I get married as I can. It’s time for my focus to come back. I can increase my income and I can lower my expenses and tighten back up my budget. That should free up quite a bit of cash flow to pay more to debt.
Readers: When you had backed yourself off of the cliff of debt where 1 mistake would put you down in the hole, did your intensity go down like mine did, or did you get even more intense? Why do you think that you made the choice that you did? If you got less intense, were you able to eventually reach debt freedom sometime in the future, or do you still carry debt, but not as much or of the same type that you used to?
2010 was also our “OMG we must pay off debt this year” year. C lost his job in 2009 and we had no idea how long unemployment would last at the time. In 2010, we paid off over 33% of our non-house debt. In 2011, we paid off maybe another 10-15% (we did not reach 50% paid off).
Part of that is because we were no longer looking over the edge of the Grand Canyon. We paid off most of our debt (school loans and the house are now it); I got a major raise. Life is now comfortable again. We can breath. And after a year of not being able to spend anything outside of bills and needs, it sure is nice to splurge on a few wants.
The key is not to be complacent about your debt. You don’t have to be hyper focused on paying down what you have- look at everything you were able to do in 2011 without adding to your debt -you just need to keep repayment in the plan. Even if it’s paying only $10 over your minimums each month, you’re making progress and you’re not adding to it.
Yes, not having debt gives you freedom, but don’t be so debt adverse that you then limit that freedom by refusing to do anything that would give you debt. I’m not talking about buying a whole new wardrobe on your credit card, but don’t feel you have to buy a house with cash. If a once in a life time opportunity comes up, seize it.
Make sure you know what all the tools in your toolbox are, and which ones are best for what situations. Sometimes that’s being debt free- all your money is yours -and sometimes it means taking advantage of your great credit score to get low interest debt to do something you wouldn’t otherwise be able to do.
Thanks for the great comment erin! I’m not complacent about my debt for sure, I just want to get back on track to the intensity that I was able to have during 2010. I know all of the tools now I just need to use them! I think once the wedding gets done and over with, things will be much easier.
Hi Jeff, I think it’s good that you take a bit of time to enjoy life. As long as you make steady progress, I think you don’t have to worry about the bogey man much. Good luck paying off the rest of the debt!
Thanks for the thoughts joe – I’ve been able to make some steady progress due to things outside my control, but progress is progress, right?
We went through bankruptcy, worked to establish credit & payment history again & now have debt- but a limited amount.
We don’t use credit cards, we don’t make impulse purchases, we changed the way we save and spend & we’ve improved our incomes dramatically.
But we have limited our *new* debt to things we can get rid of if something goes wrong- our house and car. We can sell or rent the home and sell the car if we had to. We’re prepared to do so if necessary…but hopefully that won’t be needed.
Debt isn’t so much a tool as it is an option. I like to keep my options open- because life is always changing.
Great point dave – it’s always nice to have assets/debts that you can unload if the going gets tough. Right now i’m not in that situation.
There’s something to be said for perspective and priorities. It’s good that you had that time in 2010 to be so focused, but that’s not always sustainable.
In our case, I felt a huge relief when our credit card debt was paid off. But since that happened as a result of an inheritance, I still had my momentum going to finish off our other (car, home equity) debts. It’s also hard to be so focused with three other family members involved. We’ve done the best we can with what we have, but I wouldn’t say we’re 100% gung-ho in the first place.
I think you make a great point – the focus I had in 10 was not sustainable. I was working 2 jobs, driving all the time, not working out, and barely seeing my girlfriend (now fiancee). I didnt like it much and she didnt either, but what kept me going was that I knew it would be short term.
I felt a huge relief when my credit card debt was paid off as well, and a few of my student loans too. I can see how it would be hard to keep going if you had to keep 3 other people in line, as well as yourself!
I could’ve written this! We did the same. Went from gazelle focus to spending while paying down debt, and in the end I think it’s worth it. We’re still enjoying our day to day life, and able to pay cash for things that before we would’ve either put on credit, or couldn’t have afforded. After all debt IS all about making choices that work for you personally.
2012 is the year we’re getting more intense about paying off ALL our debt while still spending on essentials, paying the bills, growing our savings and investments AND remodeling. It’s enough to make me dizzy sometimes, but realizing we can do it all a little at a time is a wonderful, wonderful feeling.
Thanks for stopping by kelly!
I feel the same way. even though I didnt finish paying off my debt, I did do it so that I could enjoy my life in the future and the now, which I have been doing!
I’ll be reverting back to debt repayment mode in 2012, and hopefully will be able to finish all of it off and save for other goals over these 12 months.
Our only debt is our mortgage and it has been that way since we paid our first car off 3 years ago. But our mortgage is my boogeyman and its a huge one. Not really in amount, as far as mortgages goes ours is pretty small, but its huge because it takes up a huge amount of our usual income(about 40%.) This wasn’t the case when my husband purchased it while he was single and had 2 roommates paying the mortgage each month in rent but when we got married they moved out and when I had our first child a year later I chose to stay home with him. All of a sudden we were down to one person providing an income and a mortgage payment that ate most of it up. My goal is to get rid of this burden as soon as possible. Either by paying the house off sooner with income I make here and there or refinancing so it is not eating up such a huge percentage of my husband’s pay. Unfortunately, refinancing failed once last year but my goal in 2012 is to get it done somehow. Once that is done my boogeyman will be gone.
that’s what really bothers me about the mortgages – they are big and usually take so long to pay off which really bothers me. the refinance should help a lot as rates are so low right now. It’s nice getting something with such low rates (my truck is 1.9%) because so much is going to the balance and not to interest.
I am trying to find a balance between the two. I find that I stay really focused on paying down and always want to find things that help me enjoy life.
Debt is one of those things that shouldn’t be a monkey on your back.
Im trying to strike a nice balance as well, but lately it seems like my balance has been away from debt and towards having fun. Though I’m not mad at myself for having fun, I’d really like to get this debt out of my face, but I dont seem to act that way very often.
Personally, I became even more focused on debt once I paid a few off. It started with the high-interest credit cards. When I paid them off and especially when I paid off the personal loan to my parents, I felt so free. That feeling has kept my intensity up through the last two years. I just want it to be over and done with so I can feel that way again.
That is awesome kaite – I had great momentum after I paid off 5 debts, but those were all smaller (under 4k each). Once I got those all paid off, I started moving to the elephants – one 9k, one 16k and one 20k. The 9k is now gone, the 20k is now 8k and the 16k is now 11k (high interest rate), but those were much longer slogs than the first 5.
It is hard to focus on debt when you have so many big expenses like a wedding coming up. Maybe you could set small goals for yourself, like being intense for 8 weeks and then slowing down to enjoy life for 4 weeks. Maybe like interval training for your debt.
I’ve gotten to thinking about it a lot and i’ve set a reward for myself when I pay down 25% of my truck balance.
Jeff, I’m just new to your blog but you seemed to have had a great 2011. I have easy talking since I do not have any debt and I never had, but I think that life is more than just getting debt free as soon as possible. I assume that your debt in absolute terms also declined during 2011 and not just measured in years of salary. You have the situation under control, you move in the right direction and you had a good year. You can’t take your ball completely of the debt ball of course, but it seems you are doing great. I suggest you set for 2012 a target to lower your debt by a certain absolute amount that feels substantial and that still allows you to enjoy live to the fullest.
Hi VB
My debt did decline in absolute terms in 11, but not nearly as much as it had in 2012, so that’s probably why I was a bit disappointed. I’ve got some targets set up for 2012, so that should help, but i’ve got quite a few other things i’m focusing on as well in 2012.
When I was eradicating my credit card debt (not that I had a lot compared to most) I remember the stress about balancing which payments went out when….glad those days are OVER. Although I still check my checking account 3 times a day LOL
yea, i do the same thing for some reason. I didnt spend any money yesterday at all, but i’ll still check my account today.