I’M DEBT FREE!!
I just wanted to announce to the world that I am DEBT FREE! Debt free except the house, that is. It’s such an awesome feeling to know that you do not owe another lender any money. When I first started out on my own with finances, I just assumed that student loans and auto loans were just the normal thing to do and it’s true. Debt is really just normal in America. It’s very abnormal to be debt free.
My debt free fire really started with my auto loan. I really disliked Chase Auto Finance. They would apply my principle payment as monthly pre-payments! A large tax return helped put Chase to bed 3 years before I was scheduled to pay it off.
Once the auto loan was paid off in early 2010, I rolled that payment into my student loan. That brought it down from a 10 year payoff to roughly a 5 year payoff. I thought to myself, 5 years to get rid of $16,000… There has to be a faster way to get rid of this. That’s when I discovered Dave Ramsey in August of 2010 and really got fired up. I listened to his radio show via podcast on my way to work. I’ve also followed JD Roth from GetRichSlowly.org for about three years now and watched his progress of paying off debt and working towards his dream job. If thousands of people can become debt free and pursue their dreams, I knew I could too.
At first, I wasn’t totally on board with Dave’s plan. The thought of cutting up credit cards struck a little fear within me. What if there was an emergency? What if I needed to rent a car? What if? What if?… That’s when it hit me: fear was paralyzing my decisions. I had some money in my emergency fund, but I did not want to part with it “just in case”.
By October of 2010, I had one foot on the debt free boat. I used $2000 from my “extra” mortgage payment to jump start my student loan payoff. The “extra” mortgage payment is from being paid bi-weekly: 26 pay periods in 52 weeks equals one extra month’s salary. This got me motivated like you would not believe.
By December of 2010, I cancelled three store credit cards and cut them up to display to my friends on Facebook.
Since December, I have not used any credit cards what-so-ever. By March, I cancelled and shredded 2 out of my 3 credit cards. I had this idea to keep one open “just in case” I run into any emergencies with my small emergency fund. I am looking to cancel this credit card by the end of the summer.
Just this past month I made my final student loan payment to Sallie Mae of $4,283.46. How did I achieve this? I took $2000 from my vacation fund, $1200 from my tax return, and roughly another $1000 from scrimping and saving. I paid off $16,000 in roughly one year from May 2010 to May 2011. The outcome: DEBT FREE EXCEPT THE HOUSE! I still plan on going on vacation this summer, but I figured I would just work harder and save more to get there.
Right now I am on Baby Step 3 of Dave Ramsey’s Total Money Makeover. Baby Step 3 is where you save for 3-6 months of expenses in an Emergency Fund. If I keep up with my current plan, I should have 6 months of expenses saved in about a year.
I can sum up the feeling in two words: worth it. The feeling is so amazing; it’s like a weight has been lifted off my shoulders. If it feels like you’re not getting anywhere, I know the feeling. Just keep pushing forward and you’ll succeed.
It all starts with a plan and a budget! My plan was (and still is) to be debt free and the budget got me there. Just think of it this way, how would you get to your vacation destination without an itinerary (plan) and a map (budget)?