One of the biggest demons my wife and I faced after getting married was our combined credit card and student loan debt. Fortunately, my wife had a relatively small student loan balance and I had none, but we had collectively amassed quite a bit of credit card debt from paying for our wedding and honeymoon, dining out, my habit of purchasing music CDs, as well as a seasonal ski vacation rental home (and its associated monthly costs) which completely put us over the top. (FYI, Compact Discs were a brand new thing back then – much better than the LPs and cassettes which comprised my music library at the time. It didn’t help that I was rapidly replacing all of the music I already had in the older formats. Streaming and other digital formats for listening to music weren’t invented yet. Our version of that was something called FM radio.)
Once we totaled our debt balances and looked at everything together on one page, we were shocked at what we saw and questioned ourselves on how we let this happen – not to mention the harsh realization of how much monthly interest we were paying. However, we were determined to figure out a plan to eliminate all of our debt and set ourselves on a path to financial security. After all, we ultimately wanted to purchase a home and start a family but felt we absolutely had to slay this debt dragon first. Back then, Dave Ramsey and others like him weren’t around to guide us on how to institute a debt payoff program. We had to come up with a plan for ourselves.
The most logical approach in our minds was to line up all of our debts in order of interest rate, highest to lowest, and pay the minimums to all but the highest rate card or loan. We put our maximum effort to that balance until it was gone and moved down the list from there. Today, this method is referred to as the debt avalanche.
In order to make room in our monthly spending plan to aggressively tackle our mountain of debt, we buckled down hard and spent only what we felt was absolutely necessary until that dragon was defeated. We stopped going out to eat, only allowing ourselves the occasional meal out here and there, we cancelled the vacation rental after the lease ended, I stopped buying CDs, and most importantly we went on an all cash diet and locked the credit cards in a safe. We even substantially lowered our housing costs by moving in with my mother-in-law. (It wasn’t as bad as you might envision – I actually really like my mother-in-law.) It was a full on attack to eliminate this debt dragon and we vowed never to let it into our lives again!
We made a point of celebrating each time a card or loan was paid off – nothing real extravagant, more like a toast with a cheap bottle of champagne. However, those little milestones, which always included a ceremonious shredding of the associated plastic card or loan book and of course the obligatory high-fives, reaffirmed our mission to eliminate the next one. We also took time to reflect on how the sacrifices we were making were totally worth it. After all, reaching designated milestones (in this case, each debt paid) on a quest toward the final goal is equally rewarding.
The Final Reward
The lasting benefit from this experience was two-fold: 1) my wife and I had to work together as a team to eliminate our debts (establishing a mutual foundation for cooperation that continued as we worked toward financial independence afterward) and 2) a good portion of the relatively high percentage of income we had committed to paying down our debt was redirected toward saving and investing goals once the debts were gone. I can’t begin to express how important these two elements were to ultimately reaching our goal of financial independence later in life.
From experience, I can tell you that it is not an easy task to confront your debts and follow through on a plan to pay them off, but it certainly is achievable if you have the determination to slay your own debt dragon. Having a partner or a confidant to assist you in this process, either by accomplishing it as a team or just for moral support and accountability (if it is a solo endeavor) is extremely valuable and will likely ensure you meet your goal. The discipline required for reaching debt freedom can later be translated into the effort required for achieving your savings and investing goals enabling your financial freedom.
I encourage you to take this first step toward financial freedom and independence – Slay that debt dragon!
A call to arms, you can do this!
– Mark –
P.S. If you are in the Crested Butte, Colorado area this Thursday (February 2nd), I will be hosting a program at the Crested Butte Public Library entitled “Get Out of Debt” to assist in making this goal a reality. This is a free program sponsored by the public library.