One of the reasons I started Personal Finance Utopia was to share my story of how my wife and I battled out of heavily oppressive debt. I wanted to inspire and encourage others burdened by massive amounts of debt to not give up hope.
Our struggle to break free from the bondage of debt was intense. We pushed hard and made many sacrifices along the way. But it was so worth it!
A Quick Recap of our Journey to being Debt Free
In early 2009, we decided to fight back against our whopping $140+k debt. The debt consisted mostly of student loans the biggest of which was my wife’s $100k consolidated loan with a 8% interest rate! A little less than 3 years later (at the end of 2011) we made our last payment. We accomplished this feat by living off my salary alone and fully devoting my wife’s salary to debt repayment.
The sense of relief we felt when making the last payment on my wife’s student loans was like floating on the clouds!
However, even though we paid off the bulk of our debt, we were not entirely debt free. My wife still had a car loan and some Federal student loans (at a much more manageable interest rate of 3.375%). Even though we were down to a few hundred dollars of cash we could have continued our push to be debt free. Instead, with the expectation that kids would soon be on the way, we shifted our focus to saving for a home down payment because we knew it would take several years to amass enough money.
Thus, for nearly 3 years we were in savings mode. Along the way we managed to pay off what was left on my wife’s car loan. Unfortunately, my car kicked the bucket after 10 years and we had to take on another auto loan.
We ended up buying a house in September of 2014. We still had what was left of my wife’s Federal student loans and the car loan. So, what did we do after getting settled into our new home? That’s right, we got back to eradicating what was left of our debt.
I’m proud to say that as of June 23, 2015, we are completely debt free*!!
All told, we paid off over $165k of debt principal over the 6 year period and also managed to save up for a down payment.
* Note – Yes, I am classifying us as debt free even though we have a mortgage. Unlike other forms of debt, such as student loans or credit card debt, there is an asset tied to our mortgage debt which can “go away” if we sold our house. We have approximately 20% equity in our house so selling would not be a problem. If we were forced to do so – poof – the mortgage debt is gone. Thus, in my mind, we are debt free.
How it Feels to be Debt Free
- Less Fear of the Unknown – None of us knows what the future holds in store. While blessings often come our way, so do the unfortunate strokes of luck. When you are debt free, you are in a better position to financially handle any setbacks that may arise. For example, if I were to get laid off tomorrow, there’s no doubt it would be a tough situation to handle. Yet, because we are no longer buried under a mountain of debt, I am confident in our abilities to navigate the turmoil until I found another job.
In years past, being let go from my job would have been exponentially devastating. It would have put us further in the hole financially and really wreaked havoc on our future. Having actually been laid off I can attest to just how horrible of a nightmare this situation can be (I think I probably lost a few years off my life!). Fortunately, I landed back on my feet and we were able to make the aggressive push to being debt free.
Now that we are debt free I no longer have the same fear of being so dependent on a company or manager for my job security. If I lose my job, or if any other unexpected expense comes our way, the increased cash flow from being debt free allows us to be flexible enough to handle it. Don’t get me wrong, I am not worry free about the future. It’s just when you are debt free – the fear of the unknown is eased.
- Excited about the Future – I am excited about the future for me and my family. I feel like the opportunities are endless and grow each day. Right now we are focusing on building up some emergency savings. Once we get past that goal, we have so many choices.
We could start contributing more to our retirement accounts like my 401k or a Roth IRA. Or perhaps we could invest in dividend stocks or tax-free municipal bonds. Maybe paying down some of the principal on our mortgage makes sense. Simply getting the power of compound interest to work even more so in our favor is a phenomenal feeling.
We can even afford to make the occasional splurge that would have been harder to swallow before being debt free such as a family trip to Disneyland.
A point of clarification – you can be excited about your future while you are aggressively paying off debt. We certainly were. That’s a different kind of excitement though. It’s one where you are limited by the bounds of trying to become debt free. Once you are debt free, you get a sense of opportunistic excitement where the choice is yours on what you want to do with your money.
- Different Mental Approach – I have a different mental approach about finances and life in general now that we are debt free. It’s difficult to describe and was a natural result from getting to debt free status. I am still frugal by nature and mindful of expenses, but I don’t stress as much if the electricity or grocery bill is higher in a given month than it should be. Before, knowing we were stretched thin and in dire need to divert as much cash as possible to debt repayment, I would often get worked up over finances. Now, I feel liberated to the point where I know we won’t be knocked off track in situations like those. I am certainly not financially care free. Rather, I am less nitpicky – the trivial things do not bother me as much.
- Physical Health – Your physical well-being is influenced by many factors such as diet, exercise, genes, etc. A huge component to physical health is your mental health. Large debt balances can cause extreme amounts of suffocating stress which can, in turn, negatively affect your physical health. Becoming debt free isn’t akin to discovering the fountain of youth. However, you stand to gain improvements to your mental and physical health. I did and so did my wife.
You Can be Debt Free Too – Do Not Give Up
Hopefully my description of how it feels to be debt free provides some motivation and encouragement for you. To get to the debt free “promised land” isn’t easy. It takes dedication and perseverance. You absolutely can do it though. There is always a way and the best time to get started is now. To help, I suggest reading our debt story for inspiration, having a money mindset and, perhaps most importantly, read what I believe is the secret to getting out of debt.
If you are debt free, how do you feel or how did you feel when reaching the accomplishment? If you are still suffering with debt, how do you imagine it feels to be debt free?
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