November was a truly happy month in our household. After a year and a half of hard work, we paid off the last of our credit card debt. We learned some new things about ourselves and our needs and wants along the way. It isn’t rocket science, but here’s how we did it.
The reason we ended up with this debt was pure and simple lifestyle inflation. We were doing pretty well until we built our house in 2004. It took most of our savings, and by itself, was not a toxic debt. The mortgage is affordable. We have good equity. You have to live somewhere. What got us was the need for stuff to fill it up. We left a couple of rooms unfinished, but filled the others up with new furniture, curtains, rugs, a new washer. I could go on and on. We also bought tons of lawn equipment, new bikes, and skis, whatever we wanted. Before our daughter was born, we decided to finish the spaces we had left, so that was a big bill on the Home Depot card. All the while, we were trading in cars every three or four years, which insured a continuing car payment. It was fun to get into debt. It’s fun until you turn into an insomniac because of the two ton elephant that is sitting on your chest waiting for his payment at the first of the month.
I was the one who initiated the debt conversation in June 2011. It wasn’t pretty. No one wants to admit there is a problem, but after watching our in-laws lose their house to foreclosure, it makes you re-evaluate your position. After some hard discussions, my husband and I sat down and wrote out all of our debts and their respected interest rates, ranging from 0% to 18.99%. It came to just over $30,000! That is almost a year’s salary for my husband.
Then we got angry. That debt was holding us back from financial independence. I carried a ton of mommy guilt. I wanted to be a better Mom and role model for our daughter. That’s hard to do when she is in day care all the time while I work to pay for this crap that we just didn’t need.
We started by paying off the lowest balance, which also had the highest interest rate. Every payoff was like a victory against the elephant. We sold tons of stuff that we had accumulated over the years. My husband joined as many paying committees at work as he could. I took on a contract job that had me working more in the short term, but it was for the goal of being debt free. We looked at every option, including selling our house, but we love it, and decided it was best to stay put. When we got half the debt paid off, we transferred the remaining $15,000 to a 0% interest card.
At this point, we ventured from the gazelle strategy. You may not agree, but it’s easy to burn out. We took a vacation using reward points, which could have been applied toward the debt, but we needed that break. After much soul searching, I decided I didn’t want to own my practice anymore. I made plans to sell. Due to my extra job, we also were able to purchase a rental property, very cheaply with 25% down, to create some passive income. We had until August 2013 to pay off the rest of the credit card debt, but when I got a big paycheck last month, we decided to go ahead and kill that elephant.
What Being Free of Credit Card Debt Means
We learned many things on our journey out of credit card debt.
- We never again want to take on debt that doesn’t produce income for us.
- We have learned to let our values dictate what purchases we make. We love travel, the outdoors, and family time. Things that don’t directly contribute to those things aren’t that important (and yes, my husband feels ESPN and the History Channel contribute to our family happiness).
- We now have a budget and evaluate all spending in case any elephants try to join the circus again.
- Paying off debt feels darn good. We’ve decided to keep on this path for our remaining debts. The student loans should be gone with the down payment from the sale of my practice, and then we will start aggressively paying off our rental and home mortgages. After that, we will be light as air with no debt and tons of possibilities.
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