Get that debt monkey off my back!

I’ve had a few posts about worry, and now I’d like to talk about one of the most common worries, at least in my book.  Money!  Who hasn’t worried about money?  I think we’re on pretty common ground to have money worries.  So how do we avoid them?  Well, if you recall my steps to get over worry, the very first one is to develop a plan.  Let me tell you about my story, about my financial situation and how I developed a plan to rid myself of money worries.

The Background

Rewind the clock about six years.  My wife and I were both working full time jobs.  We were making decent money.  (We’re not talking 6 figures or anything close, but it was enough that we thought we should be pretty comfortable. ) So, why weren’t we?  Once we actually took the time to sit down and look at it, it was pretty easy to see why.  We had a mountain of debt, and we were spending more than we earned.  We had a lot of wants, and most of those wants went on a good ole’ credit card.  That good ole’ card, and the good ole’ payments that went with it were like a noose around our financial freedom.  It was dragging us down.   Our ship was slowly sinking, and we could hardly bail fast enough to keep it afloat.    You get the idea.

Numbers probably help you get a better picture.  Most people won’t share this info, as it is a little embarrassing, but I feel it’s important for the demonstration.  I’m sure some of you are going to say wow, I had no idea.  We had $15,000 on credit cards and probably another $20,000 in vehicle loans.  I can hear some of you already; “car loans… everyone has those.”  Well not everyone, but it is pretty normal, and unfortunately normal is often losing financially.  But we’ll talk more about car loans in a later article.  For now, let’s focus on the debt as a whole.

The Plan

The very first thing we did was to make a written budget.  (Actually it was in a spreadsheet on the computer.)  We wrote down our income, and then wrote down every expense, from groceries to rent and utilities to entertainment.  We quickly found out that we didn’t have as much money for entertainment as we thought we did.  Getting our expenses written down allowed us to see this.  It also allowed us to see how much we actually needed to live on.  With the bare essentials as a base line, we found out how much we had available for paying down our debt.  Bare essentials being: Rent, Utilities, Food, and Gas to get to work.  The bare essentials, the car payments, and the minimum payments on the credit cards didn’t leave much room for anything else.  So… everything else had to be cut.

With our written budget, we are able to see that we couldn’t afford to be buying “stuff.”  We also couldn’t afford the weekend entertainment, which usually involved eating out and going to movies.  And, we couldn’t afford eating out during the week, as we often did.  Our typical entertainment expenses for a weekend had been around $80, our mid week dining another $50, and our buying “stuff,” who knows.

We made a conscious decision to start living within our means.   Furthermore, to get out of this mess of debt, it actually meant living well below our means.    For us, this meant no more eating out mid week, a strict $20 budget for weekend entertainment, and absolutely no more buying “stuff.”  This freed up enough money in our monthly budget to increase our monthly payments to our credit cards.  From the numbers above, you can see we had at least an extra $110 each month just by cutting our dining out and weekend expenses.  Every month we would see our debt decrease ever so slightly.  It actually took more than this, and we looked for ways to cut expenses any way we could, even including ditching cable TV.

So, how’d it go?

It was HARD!  It was very hard to eat at home, to not go out to the movies, to not buy everything our hearts desired.  But it was harder on our happiness to remain in debt.  We were driven with a purpose; to be debt free.  We ate at home, and prepared many simple and inexpensive meals.  Each weekend we made a choice; we could either eat out once at an inexpensive restaurant, or rent some movies.  And, every extra penny we saved went to pay off debt.

We stuck with it though, and paid off all that debt.  Let me tell you, it was worth the sacrifices to be free from all those monthly payments, and free from the worry and stress of debt.  We paid off the last of the debt,  just after our daughter was born.  What a great way to start a family!

Are you ready to start thinking about your debt?  Are you ready to get rid of your money worries?  Then my challenge to you is to start the plan.  Make a written budget.  Next time, we’ll continue the discussion and talk about the next steps.

Photo by Andres Rueda

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Tagged as: Family, finance, Worry