I’ve always believed that I’ve had my financial situation under control. After all, I’m a Type A personality – I don’t letanything in my life get out of control. My teeth are always brushed, my bed always made, my check book always balanced. It’s just how I role.
But three and a half years ago… well, I guess you could say things came unbalanced, unhinged, out of control. The thing is, I didn’t even realize they were – not even in hindsight. That is, until I read a post over at The Debt Myth, and finally saw things for what they really were.
Adding The Debt: Episode #1
It’s June 2007. My husband and I have just decided to start a family; mind you, I’m not pregnant, but we’ve decided to try to get pregnant. Unaware that this could be a very long process, we jump into planning for a baby head first. We start by selling my sporty two-seater (which was completely paid for) and buying a brand new, family-friendly sedan instead. It takes me seven months to get pregnant, during which we shell out $192.07 a month for a car with a backseat that is largely unoccupied.
Added debt: $12,000
Adding The Debt: Episode #2
After learning in January 2008 that baby was finally going to make three, my husband and I continue our mission to prepare our life – and home – for our first child. Suddenly deciding that our three bed, two and a half bath home is no longer big enough, we opt to put an addition on. Eight months later – just days before I deliver our daughter – the work crews finally complete our 12×12 sunroom. We plan to use it as a playroom, totally not realizing that our child will be unable to play independently in this room for another three years.
Added debt: $18,000
Adding The Debt: Episode #3
Our daughter is now six months old. My husband’s truck is not very family-friendly, but it does the job… until the clutch goes out twice in a three month period. In March 2009, we finally decide to cut our losses on this completely paid off vehicle and choose to buy a brand new mid-size SUV instead of shelling out the $500 for another new clutch. We take on another car payment of $256.52 a month, as well as loads of new debt.
Added debt: $16,000
Shedding The Debt
By April of 2009, we had a seven-month-old daughter, and $46,000 of debt (I’m not even counting our mortgage, nor my student loans in this equation). And this wasn’t just debt– this was totally useless debt. Totally pointless debt. Totally unnecessary debt.
Finally, we decided to do something about it.
We started by paying off the balance on our sunroom addition. We’d taken out a 12-month no interest loan on it, knowing that if we failed to pay the entire balance by September 1, 2009, that we’d immediately incur thousands of dollars in interest. On July 12, 2009, I sent in the $18,000 check and cut that unnecessary debt to $28,000.
About a year later, I announced to my husband that I couldn’t spend another day at my job – I wanted to stay home with my daughter (and the son we were mere weeks away from conceiving). We started evaluating what it would take financially to make that happen, and we realized two things:
- We had to get our monthly budget as low as possible
- We had to eradicate as much debt as possible
In addition to shopping around for a lower mortgage rate, better car insurance rates, and wheeling and dealing with everybody from our cable provider to our wireless carrier for better deals, we targeted our two vehicle loans. By August 2010, we’d paid off the remaining balance on our first car – it was around $7,000 at that point – erasing the $192.07 we were slated to pay every month until August 2013.
Then things got sticky.
The financial burden of adding a second child while losing a second paycheck hit home. Although I was freelancing, I wasn’t bringing in as much as I’d anticipated (I thought I’d have more time to work, but found myself turning down jobs due to the demands of full-time parenting). We struggled to make extra payments on our high-interest vehicle loan, but ultimately by March 2012, we’d saved enough – just over $9,000 – to pay off the balance on our SUV.
Our Debt Today
Since paying off our last car loan six months ago, we’ve been able to save boatloads of money every month. We’ve discussed snowflaking that money in order to pay off the remaining balance on my student loans (about $14,000), but since my parents generously pay this bill – and since it positively affects my credit score by giving me some diversification and a strong payment history – we’ve opted to keep the cash in our bank account.
We also have our mortgage to contend with; I’ve considered making extra payments to our principle, but since we hope to finally sell this house in the next year, it won’t make much of a difference in the long run.
Reader, what’s your debt story? Where have you been – and where are you today? What’s your ultimate debt goal?