On Monday, I wrote all about our journey into debt. Going into my husbands planned surgery, we had an emergency fund set aside to deal with the costs. I also had other savings and investments that I hadn’t tapped, which were sitting and growing while this debt was also growing. As far as I’m concerned, we were treading water, and had started slowly sinking into debt.
And then, my husband almost died in March 2012. And everything changed.
A Brief Overview Of The Financial Emergency
In that article, I wrote all about the financial steps I had to take to cover the emergency. He had still been getting unemployment due to all the extensions associated with the Great Recession, which suddenly ended. I had to pay for child care for our then-four year old, at nearly $1,000 per month. We had excessive medical costs, with a $7,000 out of pocket maximum on the insurance. And then there were so many costs not covered by insurance-hospital parking, transportation, new clothes to accommodate the post-surgical “appliances”, over the counter medications, devices to help him pick up things off the ground/put on his socks, installing railings so he could use the stairs, remodeling the upstairs bathroom to install a walk in shower, among others. So our income went down by over $1,000 per month at the same time our expenses suddenly increased by $1,000 per month, and I had over $10k in expenses directly related to the emergency.
Bottom line was, the amount I had put aside just to deal with this emergency wasn’t going to be nearly enough. I had to drop my 401k contribution, which had been around 12%, down to only enough to get the match (6%). I was prepared to drop it to zero if needed. I stopped college contributions and all savings/investments. And I paid the minimums on all debt, let those student loans continue to defer, and used the credit cards whenever I needed to. The goal here was to survive and try to come out the other side of this mess not in bankruptcy.
During 2012 my husband had a total of three surgeries, two hospital stays (along with a brief pop back into the hospital from the rehab center), short-term live in rehabilitation, in-home nursing care, physical therapy, occupational therapy, medical devices, and many other things. In total for the year, he was away from home for nearly two months. The entire year was spent just treading water.
Getting Serious About Getting Out of Debt
That whole time, I kept having to pay off that stupid car loan. That credit card needed to be paid, and those student loans were lurking in the background, silently accruing interest. Once I was able to finally get our heads above water in 2013, I got sick of the whole thing. I was determined to wipe it out once and for all, and never again owe anyone anything.
So I got serious. The child care expenses had ended, as he got well enough to start caring for our now kindergartner. I was able to raise my 401k contribution back up to where it was before. College savings were restarted. And that debt was going fast.
You see, when I get focused on something, it gets done. Get my undergrad with high honors by going to school full time while working full time, living on my own? Done. Buy a condo? Done. Get an MBA while having two kids? Done. And getting out of debt was going to get done too.
Since 2012 had been spent optimizing my expenses, I had plenty of spare money, and it all went to the debt. Soon the credit card was gone, replaced by using checking for all expenses. That car loan, which had been $7k in February 2012, was soon gone. And the $25k in student loans were paid off before the first payment was ever due. The interest never even had a chance to capitalize.
We became completely debt free (except for the mortgage) by October 2013. Our previous 30 year mortgage at 5.375% was replaced by a 15 year mortgage at 2.75%, so at the latest it would be completely paid off by my mid-forties. Now, of course, you know I’m planning to destroy it in the next few years. Then I will owe no one anything.
How I Did It – The Top Ten Things That Helped
There were a number of steps I took in late 2012 and throughout 2013 that were key to getting rid of the debt so quickly. Here are my top 10:
- Have Passion: I got completely, utterly fed up – and scared. The worst that could happen to someone, had happened to me. The debt was a burden that I really could have done without during that time. I was determined to get out of debt and stay there, and that determination did not fade over time.
- Learn, Learn, Learn: I’ve always been interested in saving, investing, and financial independence. At that time, I’d read many books on the topic, but this event kicked it into overdrive. I started taking out everything I could from the library – not only to learn, but to keep me motivated on the path
- Use The Commute: I had (and still have) an hour and a half in the car every day going to and from work. This is when I started listening to financial podcasts, not only to learn but also to keep my goal top of mind every single day. Dave Ramsey and Clark Howard were my choices at the time. Dave especially was key to motivating me to get rid of this debt once and for all. I’m still a voracious consumer of financial podcasts, check out this page for my current favorites
- Optimize Expenses: In the aftermath of the emergency, when I was treading water, I had begun the process of optimizing my expenses. Everything was cut to the bone. All recurring expenses – insurance, home phone, internet, etc. – were examined and optimized as much as possible to free up money toward this goal
- Use Windfalls: Every windfall, no matter how small or big, went to this goal. There was no using it to “reward myself”, or get a treat. The treat was going to be getting rid of this debt. Make sure to use windfalls to help you reach your goals, not get farther away from them
- Extreme Couponing and Buying Used: This was the time I started getting into extreme couponing and dealing. Hip2Save, freebie sites, and Money Saving Mom were my best friends. Yes, I made some mistakes in buying things I didn’t need, but overall I was able to save quite a bit. I also stopped buying anything new. Clothes, books, etc. all came from thrift stores and consignment shops.
- Free Family Fun: This was the time I developed all my free family fun strategies, like going to the library and taking full advantage of everything they offer; having an in-home Chopped cooking competition; going to local events like our hot air balloon festival; family pizza and movie nights; and other such things. Having fun for free became par for the course
- Track Every Dime: For all of 2013, every single expense and income was tracked in Excel. Every morning I would record the prior days financial happenings. Every month, all income/expenses would be tabulated in a pivot table. I would compare the expenses to the budget daily, adjusting the budget along the way as required
- Why didn’t I use an app? Well, I tried, but I hated all the apps available. Still do.
- Side note – this is why you won’t see me recommending Personal Capital. I hate it, and don’t use it. Plus if you track over $100k in accounts through them, you’ll have a salesperson calling you trying to pitch poor & expensive investments. No thanks, I’ll stick to Excel and my index funds.
- Monthly Net Worth: Yes, today I track my net worth quarterly, but back then it was key to track it every month. That way I could see the accounts changing in real time, which kept me motivated along the way
- Keep At It: There were months that were more successful than others. Unexpected expenses would rear their ugly heads. The budget would get out of whack. The kids would outgrow their clothes, and we’d need to pop over to the consignment shop to get some new ones. When it got frustrating, I would look back on the net worth to remind myself of the progress I’d made. I’d think back on the hard times of 2012, and get angry at the debt all over again.
How It Ended
By the time October 2013 rolled around, there was no more debt. That 15 year mortgage was starting to work its magic, dropping my mortgage principal like a rock. All savings and investments were back on track to where they had been before the medical crisis. And we would never again get a loan for anything.
Now I’m determined to have that mortgage gone before I turn 40, pay for four years of my three kids college without debt, and reach financial independence ASAP. Life is too short to sit around worrying about my job, money, or debt. It’s time to be free.
I Want To Hear From You!
Do you have a debt freedom story to share, or are you currently working on wiping out debt? What works for you? Give your fellow readers some tips and tricks in the comments.
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15 thoughts on “Getting Out Of Debt Following a Near Death Experience – Part Two”
Great post, Liz! Here’s one part of your story that I think is critical–your self dialogue. In your past, you’ve done really hard things, overcome the odds, and achieved incredible accomplishments. Now, because your past self was so disciplined and focused, you get to tell your present self, “I am the woman that gets sh$#t done. If I want to kill this debt, I will.” That is such a powerful motivator and tool! And there’s no doubt you’ll teach your kiddos to do the same thing. I’m cheering you on as you work to kill that mortgage debt! (and wishing we were that close!).
Thanks Laurie! Great point. I tend to focus too much on the things I didn’t do well, and not enough on my accomplishments. Need to work on that!
Actually I thought you did a great job focusing on your ability to change your situation: “You see, when I get focused on something, it gets done,” etc. It’s so motivating! 🙂
It’s crazy how some of the worst things in our life can yield some of the best outcomes. Great post. Thanks for sharing your story and experiences!
I know-hopefully sharing my story will benefit others without them needing to go through what I went through
Through my work experiences as a CPA in tax, I’ve always been saddened (and surprised) at how many people are living on the edge of financial disaster. So many Americans completely have the capability to save an emergency fund or pay off their debt, but simply choose not to do so. These are great tips that anyone can utilize to get out of debt or just turn their finances around. Educating yourself is so key!
I bet you see all kinds of situations! I wouldn’t be surprised to learn that many people are completely unprepared. Many of my coworkers, who all make six figures (and many whose spouse does too) still struggle with money. You can’t out earn bad habits.
Hey Mom! Incredible story of dealing with a major life challenge, and coming out the other end with a Purpose, and Success. Too many folks “blame” circumstances, you tackled them head on.
I can’t imagine what you and your family went through, and I’m proud of you for how you all dealt with it. You’re a role model for all of us on how to manage crisis in our lives! Great post.
Thanks Fritz! I remember the intensive care doctor saying to me “We all wish this hadn’t happened. But it did. So now we need to deal with it.” She said it very matter-of-factly, and I would always think about it when I wanted to throw a pity party. Feeling sorry for myself wasn’t going to help anything, and I couldn’t go back and change things, so I could only move forward.
Got rid of the non-sense debt. Now it is the mortgage and school loans. They drive me crazy but we keep having minor emergencies (today the roof leaked in our home- we moved in 5 months ago!). Oh well, luckily a high income helps us manage and take bites out of our debt every month.
Kudos to you and thanks for sharing!
You can do it! I know all those setbacks can be frustrating. But just keep your eye on the prize and keep going, and you’ll get there.
I was paying down my loans aggressively right out of school. I had about $70k from undergraduate. Last year, after adding some graduate loans, we paid off $97k in debt in less than a year (this includes two car loans and three student loans.)
The two big things for us were 1) tracking all of our spending and 2) developing a plan and having a last debt payment date.
To track our spending, I too used a manual excel file. However, I do like Mint and I’ve used Mint for the last 5 years or so.
Great tips! I’ve tried Mint a few times but always go back to Excel. Something about manually tracking works better for me
Liz, thanks for sharing your remarkable story that we can all learn something from.
“…when I get focused on something, it gets done.” – love this! Focus is a big key to getting anything done.
We’ve eliminated all debt except our mortgage as well. We went to a 15-year from a 30-year about one-year ago. On track to eliminate it much sooner though.
Tracking everything – spending, mortgage amortization, net worth, investments, etc. – in Excel and Personal Capital helps us stay motivated and on track.
I love my 15 year mortgage-the payments make such a big dent in the balance!