The time has finally come!! The debt interview series is here!
Every week we’ll chat with someone who has decided that in a world overflowing with debt, they would separate themselves from the pack.
These folks attacked debt, they’ve changed their lives and they’re here to tell you how! We’ll explore the methods they used to become debt free, and we’ll leave with knowledge and inspiration!
Prepare to meet our first financially savvy participant…(drumroll)
Chris from Money Stir.
Tell us a little bit about you
My name Chris, and I live in Montana. I’ve been married for about 14 years, and have two daughters ages 7 and 10.
I’m a PHP web developer without a college degree and work as an employee out of my home office remotely. My wife is a cosmetologist, and we run a local beauty salon.
Combined, we make in the mid-range of $100k-$200k per year.
Let’s talk about your debt:
- How much debt did/do you have
- Break your debt down in detail (car loans, student loans, personal loans, etc…)
It’s hard to know precisely how much consumer debt we’ve paid off over the years, but I estimate that it is in the $100k+ range.
Most of the debt was on credit cards, but we also had a few personal loans we paid off. A few months ago we paid off all debts except for our mortgage, which is a huge step. Last year alone we paid off about $50,000 of credit card debt.
Over the past 15-years, we were in and out of credit card debt. It was a fantastic feeling to get rid of that debt, and we are excited about getting to a stage where we can build a positive net-worth.
When and why did you decide to become debt free?
When you work hard, and the best you can do is make a negative number be “less” negative, it doesn’t feel like you are making much progress.
We got sick and tired of always feeling like we were behind. Our credit card debt would go up with our increased income, and it felt like we could never get ahead.
Even though we bring in a good chunk of change now, I started off making $8/hour. We’ve gone through multiple life phases:
- Having two children, where Andrea stayed home while they were young
- Andrea went to cosmetology school
- We’ve moved numerous times, and I’ve switched companies a few times
I mention this because life has natural ebbs and flows with different life phases. You encounter unique challenges in each cycle, and it can be easy to get caught up in the moment without thinking about the long-term financial future.
What I noticed is that my credit card debt problem was masking more significant issues. These problems stemmed from the difficulties I experienced as a kid. I was finding joy and excitement in spending more than I made, and it became my therapy in dealing with my internal struggles.
I started to realize the things I was buying was not making me happy. At best they would provide temporary relief from life. Instead of ignoring the problem, I envisioned where these choices were going to lead my family and me. We stopped the credit card debt cycle so we can focus on what matters most to us.
So the real question becomes why would we get motivated to pay off our debt, achieve that goal, and then end up getting into more credit card debt? I address this issue below. 🙂
Describe the process you used to pay off debt
Through the years I have experience with all of them. Earlier in my career, we would primarily focus on the snowball method, which tackles the smallest debts first.
Especially if your total debt amount is high relative to your income, where it will take multiple years to pay off your debt, this is the method I prefer.
Seeing the number of accounts with negative balances go down can be hugely motivating.
As our income grew, and especially over the last 1-2 years, we primarily focused on paying off the highest interest rate credit cards as fast as possible.
Last year alone we paid over $5,500 on credit card interest! In this case, since we could dump a large amount of money towards our debt every month and see fast progress, this ended up saving us a ton of interest by focusing on the cards where we were paying the largest amount of credit card interest.
I feel regret paying off our consumer debt, and then repeating the process multiple times. It was a massive amount of work and wasted time our money could have been compounding.
The good news is we are on solid financial ground right now, and we are sick of funding credit card companies.
Do you have any debt remaining?
No consumer debt is remaining. The only debt we have is our mortgage.
How did you celebrate paying off your debt?
Racking up more credit card debt! At least that is what we did in the past. This last round we didn’t do anything directly to celebrate getting debt-free.
We charged on and are almost done filling up our emergency fund and saving money to help replace the roof from hail damage last year.
Andrea and I have a trip planned to NYC later in the year, as a part of a work trip.
This trip is probably the closest thing we have scheduled for a celebration, but it is probably going to pale in consideration to seeing our net-worth go up every month.
What are your top tips for anyone just starting on their debt free journey?
Typically overspending is not just a money problem. Don’t focus on just getting the debt paid off, but think about how and why you accumulated debt.
Some debt, like student loans, aren’t usually pointing to bigger problems. But credit card debt is a different beast.
If you focus on just paying off your credit card debt, without thinking about how/why you got there, you run the risk of repeating the same mistakes from your past. Here are some questions that might help you work through this:
- Do I expect the things I buy to make me happy?
- Am I an emotional spender? For example, are you looking for “sales” on items that you don’t need? Or are you going to the store to shop when you are depressed?
- Do I purchase things for the social status they provide? For example, are you buying luxury new cars to impress friends or neighbors?.
- Am I justifying always buying the best of the best, even for things that I rarely use?
- How full is my garage or storage of things that I rarely use?
Figuring out the “why” behind the behavior is more important than getting rid of the debt! Otherwise, your past most likely will go on repeat in the future.
Whoa… That was big. Stop and reread that!
Taking a closer look at what is going on, instead of just focusing on the numbers, also has the added benefit of helping you figure out what matters most. In the past, I got so caught up in paying off our debts and didn’t think very much about what was going on. Which ended up not solving the core issue and having the past go on repeat.
Outside of that, I highly suggest creating some kind of system to monitor your spending to help you keep on budget. You can also see spending patterns that are making progress more difficult, and adjust your budget accordingly.
What are your financial plans for this year?
Here are our current plans:
- Fill up our emergency fund
- Save extra money to replace our roof
- After much thought and debate on whether we will pay off our mortgage early or invest, we decided we will dump all extra money into index funds.
We are currently torn on whether we are going to pay down the mortgage to get rid of our PMI payment ASAP, or investing all of that money right away. But that outlines our current plan.
Thinking about the future and where you want to go can help tremendously in building motivation to work towards your goals.
What’s your ultimate financial goal?
At this stage, our goal is to build our net worth and save as much as possible. Based on my calculations, we will save around 55% of our income, but I think we might be able to increase that amount over time, especially as we get raises.
We want to get to a spot where we don’t have to work our regular jobs to sustain our day-to-day lives. The best case scenario is that we get to this spot by our mid-40’s, but it might not happen until our mid-50’s.
In either case, we will be in a much better financial position than if we continued on the path we were on.
Where can people read more about you?
I blog at Money Stir. I don’t mind talking about numbers, but what floats my boat is thinking about the psychology behind our behavior and how to get the most out of life.
I love hearing stories about people turning their lives around because that is what we are trying to do. Some people may think I am too transparent with our struggles, but if I can give hope to one person, it is 100% worth it.
Leave us with what helped inspire you to continue paying off debt.
Seeing the path my behavior was taking our family helped tremendously in getting to a spot where I would do anything to change the trajectory of our finances.
I realized that Andrea and my girls are worth more to me than anything. Our money problems were dragging us down, and our spending didn’t represent what mattered most to us.
What do you want out of life? Money is not the most important thing in life, but the ironic thing is that if our financial habits are working against us, we can’t do anything but focus on money.
My toxic debt habit wasted valuable time and made our lives more stressful. As they say, the best time to get on a sound financial path was yesterday. The 2nd best time is right now.
Even if you are looking at a massive wall of debt, or have realized how much time you’ve lost, know that your financial situation will be better if you can start turning things around.
Don’t give up! Your financial future depends on it.