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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