A Story About Paying Off Debt and the Obstacles Along the Way

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Our Financial Journey Two Years In

From a budget-friendly hike we took back in April 2017
Amidst all of the current craziness/life anxiety, I suddenly remembered that we started our financial overhaul two years ago. It feels like it's been eons. It feels like yesterday. It feels like I should acknowledge our progress in some way, so here I am.

The situation back in April of 2017 looked like this:


We’d moved to our town six months prior and were still in our new-place honeymoon phase, basking in the cool mountain air and taking every opportunity to wander through the pine forests. Our tiny apartment was dingy and hadn’t been updated since 1985, but the view out the front window was priceless. We were earning a solid combined income - Fortysomething was working as a contractor, I'd just started an academic advising job - and we were generally feeling pleased with the trajectory of our lives.

But our finances were another story.

We’d never had a budget and generally had no idea how much money was in our bank account (on average, not much). We'd splurge on last-second getaways and goodies from Target, and thus, we lived paycheck to paycheck. We went into overdraft more often than I’d like to admit. We had no savings, no emergency fund and very little in retirement. We had over $50K in student loan debt and at least $26K in credit card debt.

Although it seems batshit insane to me now, we were not at all concerned at the time. We lived in blissful ignorance. It helped that we’d managed to dodge the kinds of expenses that can wipe out a paltry bank account in a matter of minutes.

And then one day, after purchasing an overpriced, brand-new piece of furniture, it suddenly dawned on me that we were in code red territory. We couldn't afford it. We'd be paying it off for months. We had no money but we were buying expensive things.

Then I became concerned.

At first, I didn’t know what to do, so I watched every episode of ‘Til Debt Do Us Part and Money Moron than I could find on YouTube. Then we took everything we’d learned from our DIY Gail Vaz Oxlade crash course and created a budget and a tentative 5-year debt repayment plan.

We jumped in with enthusiasm, knowing that it was going to be a long road and that we’d need to conjure up major motivation to make it happen over the next few years. But we got started, and we followed the plan.

For the past two years, we've followed it with fervor. Sure, we've had some missteps along the way. Sure, it's gotten really fucking old at times. Sure, I'd like to splurge on a nice vacation at some point. Overall, though, we've been consistent. We've resisted backsliding.

We stuck to our budget, cut our expenses, and found some frugal hacks we could live with (like checking out books from the library rather than buying them at the bookstore, purchasing clothes at thrift stores, ditching most of our subscriptions, walking instead if driving, etc.) We took advantage of the local outdoor scene and did all the free outdoorsy things. We paid off our smallest debts first and celebrated every win, which helped us stay motivated. We built up some savings.

Taking advantage of our parks pass


Two Years Of Imperfect Consistency


After nearly 730 days, I’m here to say that two years of imperfect consistency can make a giant difference. Here’s the rundown:

Debt

Debt then: >$76,000
Debt now: ~$37,000

When we started our financial overhaul, we had about $50,000 in student loan debt (two student loans - one for me, one for Fortysomething) and $26,000 in credit card debt (three credit cards in total). We also had a small balance of $1,500 remaining on our car loan.

Now, all of our credit cards are paid off. The car loan and my student loan are gone. We're just chipping away, penny by penny, at Fortysomething's student loan.

Over these two years, my attitude about debt repayment has changed. I still think it's important, and I still think people need to get rid of their high-interest debt as fast as they possibly can. But I'm no longer of the opinion that every other financial maneuver should get sidelined while you pay off your loans. If you don't have savings, you run the risk of having nothing to work with in the event of an emergency. If you're not contributing to a retirement fund, you lose out on compounding interest (the good kind) and tax breaks.

My perspective is a lot more nuanced than it was back in 2017, but I'm glad we went all-out on the first half of our debt. Not having a monthly credit card bill or car payment is huge. It frees up a lot of space in the budget for other things (like saving).

I'll admit that we're far more focused on savings and retirement than on the student loan right now, but we hope to go back to making large debt payments later this year.

I didn't start tracking our debt repayment until June 2017 - so actually, we probably had well over $76K of debt in April of that year.

Savings

Savings then: $0
Savings now: $8500 and counting

I kind of can't believe it (what were we thinking?), but we didn't even have a savings account when we started our financial journey. Once we finally opened one, we built up our cash reserves slowly, mostly because debt repayment was the real priority for us. We started with the Dave Ramsey-mandated $1000, then moved into the realm of $4-$5K once we'd paid off our credit cards in summer 2018.

Now we're sprinting to build this baby up to $10K or more. That's mostly because I don't know what to do about my job, and I want to be able to cover several months of expenses in the event that I decide to quit. I kind of wish I'd started this process sooner, but then again, at what point does one really feel secure enough to walk out on a regular paycheck without something else lined up?

Retirement

Retirement funds then: $1,000 (somewhere around there - I wasn't paying attention)
Retirement funds now: $17,000

Okay, so YES, we are very behind. But that's not the point of this post. What I want to emphasize is that in just two years, while most of our disposable income was going towards debt, we were able to put $16,000 into retirement. And that's with pretty small contributions. Only recently have we ramped up our contributions to ~10%.

Honestly, it's this aspect of our finances that makes it so difficult to ditch this shitty job. In just two months, thanks to the employer match, I've socked $2,000 into my 401K. My health is important, but it's hard to say no to free money when I kind of need it.

I haven't shared our specific retirement fund numbers until now because I don't want anyone to swoop in with criticism regarding our lack of planning. On the other hand, I know there are other people in similar situations. We're late to the party, but hey, we're here now. Let's cheer each other on!

Net Worth

Net Worth in November 2017: -$65K (somewhere around there)
Net worth now: -$13,600

We still have a negative net worth, but look at that rate of increase! We anticipate hitting the $0 mark sometime this year.


The point is, you can make a lot of progress in a relatively short amount of time if you keep at it. That doesn't mean you have to earn hundreds of thousands of dollars a year. It doesn't mean you can't have any fun. It doesn't mean you have to be a perfect steward of your finances. It just means... you have to keep going, one step at a time. That is literally the only way to make it happen if you're a person with an average income and a lot of debt.

It's Not All About Money


Currently, the thing I'm most struggling with is this idea that money isn't everything. Historically, that hasn't been a tough concept for me. Until 2017, I just... didn't care about money. We didn't have a lot of financial security, but I didn't let money stop me from taking risks and having adventures, none of which I regret. I look at our debt and I see the bad. I also see the good it brought. (Unpopular opinion alert!)

In contrast, the past two years have been an unprecedented season of financial responsibility and restraint in my life. We've made our finances a top priority. But now I'm worried that maybe I should be prioritizing other things, like my health. Toying with the idea of taking a career break brings up a lot of emotions for me. It feels scary to pull back when we've finally built up momentum. It's like trying to run a marathon on a broken leg and not wanting to quit because you've come so far.

It's hard for me to walk away from financial security now that I've gotten a taste of it.


At the same time, I appreciate that our hard work has brought us to a point where we have more options. That's really the most important aspect of money, isn't it? Not that it allows us to buy more stuff, but that it gives us an opportunity to consider more possibilities. It gives us some breathing room, some freedom.

Anyway, guys, that's what I've got right now. Please ignore any and all awkward wording, misspellings, and grammar issues. I'm just glad I found the time to stop and reflect.

Thanks for reading. Thanks for your encouragement.
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16 comments:

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  2. Yes to this "At the same time, I appreciate that our hard work has brought us to a point where we have more options. That's really the most important aspect of money, isn't it?". I can go on about this but suffice it to say, having more options is a true signal of progress. Well done :-)

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  3. yessssssss. Five years ago I had $0 retirement savings -- March was the 5-year anniversary of the big freakout that led to opening my first IRA -- and now I have $62K. It feels so much better to be saving *something* and there are times when I've flung $1K a month in there and other times when it's been $100 but it's always something now. And it feels good, doesn't it? Good enough to put up with some work nonsense (though not *all* work nonsense.) I'm so happy you've made so much progress and stuck with it through some potentially very derailing events.

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  4. Yes to more options! I think on this a lot. I am cautious by nature (and always have been!), but I am really starting to appreciate and value the flexibility and the options that come with really picking up steam on this money journey. Congrats on all that you've accomplished!

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  5. well done! It does sometimes feel like progress is slow but its the consistency and the ability to stick at it that makes a difference over the long term. Its great to look back now and again and see how much has been achieved.

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  6. Way to go in building up retirement so quickly! And for your progress overall. I think it's smart to focus a bit more on building a cushion, given how things are going at your job right now. And while it's tempting to stick around for the free money... Well, from the levels of stress and mental anguish you've reported, it doesn't sound like that money is exactly free.

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  7. Good progress! Keep going, and once your get into the positive numbers there will be no holding you back!

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  8. You've made good progress over the last two years. Doesn't it feel good when you have some options and emergency funds? I think Til Debt Do Us Part & Money Morons are great places to start! Gail doesn't hold back and tells you like it is.

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    1. I love Gail! I don't think she's working in personal finance anymore, but she was exactly the inspiration I needed.

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  10. That's impressive! I love following your journey and am rooting hard for you all. I'm excited to read about when you pass that positive net worth line!

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    1. Ooooooh, I'm so excited to get to that point! Thank you for following our journey.

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  11. You've made great progress in only 2 years! Not only have you eliminated all your consumer debt, you've got retirement accounts growing and a sizable emergency fund. I think you've developed the skills and habits to be able to keep the ball rolling even if you don't stay at your current job. It may be at a slower pace, but you know how to get there.

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