Before I’m 40

In my earlier twenties I received my first credit card.  As a college student, working full time to pay my way through college, I still didn’t make enough to cover my books and tuition.  I qualified for student loans and took advantage of those as well, adding to the debt I was already creating.  By my last year in college I had close to $40,000 in credit card debt and $60,000 in student loans.  I admit, I wasn’t smart with my credit cards.  I went shopping for clothes, I couldn’t afford at the time.  I went on trips, all on plastic.  I got my hair done, ate out, got gas… everything on the card.  Soon I couldn’t afford the minimum payment, which the interest was causing that to increase at an alarming rate.  I had never been educated on debt and coming from a childhood of having nothing, being able to shop was exciting to me- until I had a breakdown.  I remember sitting on the bed with all of my statements, bawling my eyes out and then deciding it was time to do something about all my debt.  I contacted a credit counseling company and worked out a plan with them.  For a small fee, they reduced my interest on most of my cards, consolidated my payment and for the next 8 years I paid them about a thousand dollars a month until the credit card debt was all gone.  What a great feeling it was, to make that last payment!  I still had my student loans and a line of credit I kept (they allowed me to keep one card), but the $40,000 I had hanging over my head , was gone.

Here I am, ten years later and I still have my line of credit and student loans, plus a Jeep payment.  I think I have been comfortable having a little debt, for it hasn’t bothered me as much, since it has been manageable.  Each month I make the minimum payments and have money left over for saving and spending.  But, just recently, it hit me:  I could have so much more freedom, being debt free!  I could take a job that pays less, but maybe is more fun.  I could travel to the places I say I want to go to.  I could work less.  I can save up, so I can retire early.

By being debt free, I could pay for my future, rather than my past!

This time around, I do not need the help of the credit counseling company.  I know what I need to do and now it is finally time to do it.  Starting with the line of credit, that I have had since my early twenties, I am tackling it full force and paying it off!  Any extra money I have, after bills, savings and my three cash envelopes (food, fun and spending) will go towards that line of credit.  Once that is paid off, I will attack the Jeep balance and then my student loans.  My goal is to be debt free (besides the house, which will be tackled last) by time I am forty, which is in 3.9 years.  The debt totals around $90,000 between the 3, making it about $30,000 a year; which is actually doable on my salary.  If you need help with paying off debt, I found Dave Ramsey’s Baby Steps a good place to start:

• Baby Step 1 – $1,000 to start an Emergency Fund
• Baby Step 2 – Pay off all debt using the Debt Snowball
• Baby Step 3 – 3 to 6 months of expenses in savings
• Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
• Baby Step 5 – College funding for children
• Baby Step 6 – Pay off home early
• Baby Step 7 – Build wealth and give!

Baby steps is doable for me.  I like to be social sometimes and being totally deprived of life, won’t work for me.  Last night I went out with girlfriends and looked at the menu to find something in my budget.  I went with a cup of tortilla soup, that was $7, compared to the $25 carne asada everyone else got.   I was full after my cup of soup and every else complained of being too stuffed.  Maybe, being on a budget will help with my fitness goals as well!  When one of the girls talked of a weekend getaway, costing about $350 a person, I thought, even though it sounds fun, it doesn’t align with my goals right now.

Deciding to be debt free is a tough decision.  It demands commitment and better choices.  But, I see the freedom that it can give me and the lifestyle I want, so I am going for it!

What ways have you found to pay off debt or become debt free?  I would love to hear it!  Please comment below.