Our debt lessons
It’s exciting to approach becoming debt free, but it can also be hard. Learn from our debt lessons and save yourself time, money and the heartache better left to a Pat Benatar song.
Our debt lessons are your debt lessons
When we learned the gravity of our $51,000 of credit card debt, we ignored it like a drunk uncle, worried about it like Woody Allen, talked about it like Oprah and were overwhelmed by it like the Denver Broncos in Super Bowl XLVIII (yes, we’re still pissed).
We eventually gained the focus of Michael Phelps’ abs and became debt free.
As we climbed out of debt, the following four debt lessons became apparent to us. If you’re becoming debt free, here’s how you can become debt free faster. Learn from us, so you won’t have to learn the hard way.
1. It’s easier to get into debt than to get out of debt
“Duh,” you say! Hear us out. On several occasions after paying off our debt, we found ourselves in debt again. Although we never came close to amassing $51,000 again, we were still anti-investing. Whether it was an emergency or poor money management, our debt didn’t stay at $0 after we first hit $0.
A few times over, we had to climb out of debt again.
The debt lesson is that we became too lax with our spending and rewarded ourselves too extravagantly for our accomplishment. We thought we deserved it and too quickly adapted to spending unconsciously.
Your debt lessons: Remember that each success requires a resolve to hold fast to the principles that got you out of debt in the first place.
2. Becoming debt free makes you a target
Becoming debt free was a lengthy process that required laser-like focus to make monthly payments, eliminate non-essential spending and quit credit cards. As we did those, we improved our credit scores and became credit-worthy.
Banks, credit card companies and lenders soon circled overhead. Our mail, email and voicemails were flooded with refinancing deals, “convenience checks” and pitches from telemarketers calling to sell low-interest credit offers that lasted long enough to be left to our heirs. (Maybe not.)
We exercised caution. We canceled all but one our oldest credit cards, reduced our lines of credit and locked them in a fireproof safe out of John’s 5’4” reach. Yes, he’s the same exact height has Madonna. Finally, we virtually and literally trashed all credit card offers immediately.
Call the Direct Marketing Association at 1-800-407-1088 to be removed from mailing lists or go to www.DMAChoice.org to skip the Direct Marketing Association telemarketing. Either way lets you cancel junk mail, including credit card offers — which has the dual effect of saving paper, if you’re a paper-saver.
Your debt lessons: Cut, call and cancel all temptation.
3. Saving money happens disproportionally faster than paying off debt
We were angst-ridden as we paid off our debt. A nagging voice in our heads, like the backbeat of every Top 40 song, incessantly said, “You suck!”
Once we paid off our debt, that voice disappeared like Mariah Carey’s. We were accumulating funds instead of watching them leave faster than they came. We built an emergency savings account and started investing.
This is when the fun began!
Wait until you get to watch your savings and investments grow. Like us, you’ll be calculating your net worth with every paycheck.
Your debt lessons: Your assets will appreciate disproportionately faster than your debt will depreciate. The reason is that your return is better when you eliminate 20%+ interest charges. If you need to improve your credit score to find lower interest rates, get this free tool.
This leads us to our last point.
4. Mo’ money, mo’ money, mo’ money
Just after we paid off our debt, we weren’t earning more money. We were just keeping more of the money we were earning. We had and saved more money because we didn’t have to make interest payments. We essentially gave ourselves a $10,000 raise.
Your debt lessons: Spend your cash on the present and invest in your future with these 21 steps.
It’s great to be back in the black and a member of the Investing Class. When fees don’t suppress savings and investment growth, money and financial independence grow exponentially.
We know you’ll reach your debt free goals and knowing these four debt lessons in advance will make the journey better.
Other debt lessons for you:
So many of our Financial Gym clients struggle with staying debt free. I think this post highlights some of the issues they face. I’ve also notice that some clients who are working to pay down their debt feel like they are constantly depriving themselves of the things they want, so once they are debt free they treat themselves and set off the vicious debt cycle all over again. We try to instill the idea of “You’re not saying no, you’re saying yes to a debt-free future!” Do you have any other tips on how to stay motivated without feeling like your constantly making sacrifices?
Bridget, thanks for the comment. We agree that the path to getting and staying out of debt may not appear to be on that is packed with fun. On the other hand, not all fun needs to break the bank. We found loads of free or cheap things to do that helped us feel like we were still living a very full life. We also set Milestone Rewards. Here’s a video to show what we did. https://debtfreeguys.com/2015/10/our-second-favorite-thing/
I thought that you weren’t supposed to cancel credit cards because that would leave a negative mark against your credit score.