We were always bad with money. Then, my friend loaned me this book.
For most of us, debt is a necessary evil. Paying it off can be one of the most freeing, empowering accomplishments in the world, worthy of celebration. Mic's series Paid in Full tells the stories of these triumphs, and just might help you figure out how to get to balance zero, too.
City/state: Ottawa, ON, Canada
Amount of debt: $257,000
Type of debt: line of credit; business debt; mortgage
How long it took to pay off: 6.5 years
Jobs held while paying the debt: Teaching
My husband David and I were bad with money to begin with, and then David went through a career rollercoaster. For six years, he was in no man's land, career-wise. In 2009, he launched a home business, and it was a success. But it came with a huge business debt to add to our mortgage and consumer debts. This was all in the midst of raising our children. David and I both had parents who lived modestly. Both of us had stay-at-home moms and fathers who stayed in the same jobs for the decades of their respective careers. We were raised to be frugal, but we were also both seduced by what we saw in ads, movies, and TV shows.
We felt psyched as we took on the mission of paying off our debt. A friend had loaned me her copy of Dave Ramsey's audio book, The Total Money Makeover. I listened to it on my commutes to and from work in May 2012, and I was riveted. At one point, as Ramsey encouraged his listeners to envision freedom from debt, I was actually moved to tears. I shared the CD with my husband David, and he listened late into the night, equally hooked. It seems like such an obvious thing to do, but it wasn't to us. We were steeped in the culture of “buy now, pay later.”
Things got out of hand because for six years, we were living on my teaching salary. David had previously been an engineer in management, and my part-time teaching salary was low compared to his income. When he was in that no man's land, I began to teach full-time, but it still amounted to less than half of the income we had previously earned together. Our debts were significant when we were both employed. They were out of hand when mine was our only income.
Fortunately, our interest rates were low. We had leverage in our home, and so our line of credit rates were low. If I remember correctly, the highest one was 6%. Our mortgage rate was also low, at just over 3%.
We had tackled debt previously, when we paid off a combined debt of $38,614.99, owing in six different directions. After that, however, we maxed out on a mortgage for our "dream home." At that time, I was also expecting our third child. A few months after we'd moved in, David had his first layoff and his five years of the career rollercoaster began, followed by years of near-unemployment. I was functioning way beyond my bandwidth, resulting in depression and financial distress. Those were awful years. Hearing Ramsey's CD gave me clarity that I had never had before. We could prevent this from ever happening again, by paying off and staying out of debt.
We prepared a budget, and we started to have "budget dates" every week. In his book, Ramsey presents the budget date as something romantic. For us, it was a weekly bickering session. But this practice of meeting together to talk about our finances was essential. It kept us current. It kept us from wandering into our long-established bad spending patterns. We also saved and maintained a mini-emergency fund of $1,000 to pay off inevitable car repairs and other unexpected expenses. Any time we used it, we would make it our first priority to bring it back up to $1,000 again. We paid off the minimum on all debts but the smallest one and targeted our smallest debt with what Ramsey calls "focused intensity." There was a great psychological boost from this; we felt a growing confidence after paying off our two smallest debts in the first six months. This prepared us for the larger business debt that we took on next.
Once we had paid off everything except for the mortgage, after just over three years, we started to save up an emergency fund that could see us through six months of unemployment. For us, the next step was to pay off the mortgage while simultaneously saving 15% of our gross income for retirement — but we encountered hurdles in the form of big expenses. A year after we started our journey out of debt, we had to replace our roof. The cost was $10,000, and we were determined not to go into debt to pay for it. For several months, we paid nothing on our debt beyond minimum payments and our regular mortgage. We saved up the money and paid for our new roof outright.
I feel so blessed to be debt-free. We made our last mortgage payment in September of 2018. If you’re attempting it too, be encouraged despite the imperfection of your efforts. We often messed up on our budgeting — either because of oversights or careless overspending. We often disagreed and bickered. It wasn't all sunshine and roses, but it worked. After our first year of debt-repayment, we measured our progress against the previous year. We had paid off 312% more debt once we started on Ramsey's plan, despite the imperfection of our efforts.
I can only imagine that if we hadn't made debt-repayment our mission from June 2012 to September 2018, we'd still be in debt. Ramsey says that although most people "wander into debt," nobody wanders out of it. To get out, you have to be intentional. I'm so glad that for 6.5 years, we were.