How we got out of debt (long)
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| Sun, 04-27-2008 - 5:37pm |
I thought I'd share our story in case it could help motivate someone else here.
In June of 2004, we had $50,000+ in unsecured debt. Our interest rates ranged from 12.9% to 24.99%. We did not own a house and our cars were 8 and 5 years old. We had no savings at all, not even an IRA or 401k. We did have good medical, life, disability, home, and car insurance (if there is one thing I learned from my parents, it's make sure you have good insurance!!!). I was the breadwinner, and DH (who's been a SAHD since 1996) worked on the weekends at a catering place to make $200-400 extra per month. My income was enough to make payments on everything, but that was it. DH and I were 41yo. Our kids were 12, 9, and 4yo.
In July 2004, we started on a DMP that had us paying off all our principal, at interest rates of 6-9.9%, in 5 years. The amount per month was about the same as we were paying on our own, but since the rates were lower, we'd actually be paying off *principal*, not just the accumulated interest each month.
In September 2004, I told my company I wanted to change careers. With 3 kids and college coming in just 6 years, I needed to not just increase my income by 10-15% a year, I needed to find a way to make 4x what I was making, especially if I hoped to ever retire.
In February 2005, our landlords told us they wanted to sell the house, and they offered to sell it to us at a reasonably good price (for our area - it's an outrageous price anywhere outside of CA, Boston, or NYC).
In May 2005, I was promoted and got a raise.
In July 2005, we bought the house we were renting with a down payment from my parents. We also took out a $44,000 HELOC.
In March 2006, it started raining *inside* my now-10yo car. We took out a $20K car loan and bought a brand new Subaru, giving us roughly $65,000 in secured debt on top of what we still owed on the DMP.
In June 2006, I was promoted to my current (and final) position. I received a raise.
In January 2007 and in January 2008, I received two more raises.
In April 2008, I paid off my DMP 15 months early and paid off the rest of my HELOC.
In July 2008, I will pay off the remaining $9800 of my car loan, and the only debt will be my mortgage (until Oct 2008, when we will replace DH's 9yo minivan with a $10,000 down payment and finance the rest with a car loan).
In August 2008, we will go on our first family vacation overseas.
It has been a challenging four years of learning to do things very differently, including learning how to be the person who has this kind of job. It doesn't come naturally to me, and it requires a lot of hard work, mentally and emotionally.
I think when people talk about making sacrifices, they're usually talking about cutting back expenses and learning to do with less. We already had learned to do with less (we still never eat fast food, go out only on special occasions with the family, have date nights only once or twice a month, don't buy CDs, music, movies, or videogames, etc.); for us, it was about learning to DO more - work longer hours, handle more job stress on my part, work nights and weekends when I had to, handle things more at home on DH's part without any help from me. The sacrifices have been personal time, relationship time, and downtime of any kind. But when I think about what we as a family have achieved, working together, I am very proud of what we've accomplished. I couldn't have imagined four years ago that we would be where we are now. It has taken four years of really hard work, but we have gotten there.
Hopefully one or two things in this will help someone.
Kelly

Kelly,
That is a wonderful and inspirational post.