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Very early in our relationship we were gifted Dave Ramsey’s Financial Peace University online course by our in-laws.
We knew nothing about personal finance.
At the time, we had an irregular income. I was working as a freelance writer and my husband, Andrew, had a full-time job with pay based on performance.
I would check our bank account balance once a week and maybe throw together a haphazard “budget” to make sure we had enough to cover food, rent, and utilities. The rest, we spent.
We watched the Financial Peace videos without much interest, mostly so we could tell our in-laws their money wasn’t wasted. We learned a little more about budgeting and saving, but I don’t think the information really clicked.
Dave Ramsey’s advice really didn’t apply to us, we thought. The only debt we had was Andrew’s single $1,500 student loan. We didn’t use credit cards (because we had no credit). And we were young. We didn’t need to think about retirement yet.
Many years later and many thousands of dollars in debt we realized how we had squandered that gift and wished that we had paid more attention.
More Money, More Problems
Shortly after Financial Peace University, I received a huge windfall. I had an offer from a digital media company to buy several of my freelance articles for $11,000.
We had never seen this kind of money before.
And I’m sure you can guess what we did with it. Wisely invest and save for the future? Ha!
We bought new computers, went to Disney World, moved to a bigger house, and spent the rest on dinners out, new clothes, and loads of consumer goods that we didn’t really need. We did manage to pay off that pesky $1,500 student loan, but we saved absolutely nothing.
Back to School
It was about this time that we decided to go back to school, a long and painful process that has only recently ended in tens of thousands of dollars of debt.
We were doing okay financially, but we weren’t getting rich and our income wasn’t guaranteed. We wanted more security, and neither of us had a degree at the time.
After enrolling in our local community college, we decided we wouldn’t take out any loans. We remembered that Dave Ramsey said something about debt being bad. We qualified for Federal Pell grants and our tuition was completely covered at no cost to us.
It was about this time that my freelance work started to dry up.
I decided I would take out $10,000 in student loans. We would live on this money along with Andrew’s income, so we could focus on school and I wouldn’t have to find a real job.
This is where our problems with debt began.
We justified the loan to ourselves by looking at the paltry “monthly payment” we would have after graduation – only $150 a month. No problem! We could handle that just fine.
We continued with school part time, and I frequently changed my degree plan. I liked Accounting, then I hated it. Then I decided Office Management was for me. But wait, I don’t like dealing with people.
Eventually, I dropped out and decided to get a job. I was tired of being poor and not sure what I wanted to do. Andrew followed me after one more semester.
And now the first payment came due. It was only $150. We were doing okay.
Building Credit…to Get More Credit
We started thinking more about our finances. I pulled our credit reports and found we had several old entries for doctor’s bills, an old phone bill, and a few other stupid mistakes. I started to clear these up by contacting creditors and paying off old balances.
Then I read somewhere that if you want to build your credit, you should get a secured credit card.
I went one step further. I applied for a Capital One card – the one they advertise for people with poor credit. Instant approval with a $500 limit!
It was our first credit card. I was so excited that I applied for Andrew, too.
At first, we used our credit very sparingly. I was wary of borrowing money, as I should have been.
But then our limit was increased to $1,200.
And then to $2,500.
Soon, we had a card at every major department store.
Our credit score was going up every month, and we were paying the balances off before we were charged interest. We felt like we were in control. We still had no savings and $10,000 in student loan debt, but we felt like that was okay because we were still using our credit cards “responsibly.”
Moving on Up (Or Not)
Our in-laws came for a visit from Colorado. They made us an offer we could not refuse. If we moved to Colorado, they would give us a place to stay while we finished college – and they would pay for everything.
We were so excited. We wouldn’t have to worry about working a full-time job. Instead, we could focus on school, get the degree of our choice, and finish without borrowing any more money.
After selling almost everything we owned, we packed whatever would fit in our car and moved to Colorado. Our family, friends, and home were left behind for a chance at a better life.
We moved in to my in-laws’ basement. We found crappy part-time jobs so we could pay our cell phone bills and car payment.
I must admit that we didn’t like Colorado much. We’re from Arkansas, the Natural State, land of forests and mountains, lakes and springs. We were living in dry, semi-arid southern Colorado with few trees and an unfamiliar culture. We still live here today, and one of our greatest wishes is to go back to Arkansas (but that’s a story for another time).
The Beginning of the End
Shortly after we arrived, we enrolled in classes at the community college. We knew it was going to be expensive because we were not yet residents.
We took the bill to my father-in-law, who promised he would pay for everything.
I will never forget the sinking feeling I had when he took one look at the bill and said, “I can’t afford this.”
We trusted him to understand the expenses of college before he offered to pay for it. But he didn’t. And he couldn’t. And this was the beginning of our financial world falling apart.
I won’t blame my father-in-law for the decisions we made after this, but I think things would have been much different for us had we never moved.
Our immediate reaction was to leave and go back to Arkansas, although we had no money and no home to go back to. Andrew talked to his old boss and thought he could get his job back.
We were hurt and confused and not sure what to do.
Borrowing Our Way Out
We made the decision to stay and try to pay for college ourselves. If we would have stayed in Arkansas or at least immediately moved back, we could have done the same thing without taking out a single loan.
Now, we were paying the non-resident rate and the cost of tuition was much higher than the schools back home.
We started taking out loans to cover the costs.
I couldn’t bear to live in my father-in-law’s house, so we moved to a tiny efficiency apartment. Both of us were working part-time making minimum wage and this wasn’t even enough to pay our bills. We relied on student loans and credit cards.
I think we were determined to get something out of this situation. We were too embarrassed to go back to Arkansas with our tails between our legs, and we were too proud to admit that we were in over our heads.
We did eventually graduate from community college – with more than $40,000 in student loan debt.
That’s right. We have two associate degrees and we racked up $40,000 in student loan debt.
After graduation, we managed to secure good jobs – the best jobs we’d ever had. We were making more money than we had ever made before. We felt like maybe it was worth it.
It wasn’t, I think now, but we had this illusion that taking out the loans helped us get these jobs.
Home Ownership: The American Dream
After about a year of paying the minimum balances on our loans, we completely paid off our credit cards and decided it was time to take the next step – buying a house.
Our credit was excellent by this time due to frequently using our credit cards and never being late on payments. We qualified for a mortgage and picked out a house.
We didn’t borrow the maximum amount we qualified for, which was a good decision. But in retrospect, we had no business buying a house we couldn’t afford in a place we didn’t want to live long-term.
We did it to show everyone that we were “making it.” We had tens of thousands of dollars in debt, but on the outside, we were buying a house. That had to mean were doing okay financially, right?
After we moved in, we needed furniture – which we financed. Then the yard was a mess and needed landscaping, so we financed that.
The Final Straw
Before we knew it, we were $65,000 in debt including student loans, credit cards, and consumer loans. This did NOT include the mortgage, which was another $90,000.
This was the situation we found ourselves in at the beginning of 2017. And instead of dealing with it, we took a $5,000 vacation to Disney World financed on a credit card.
When we came back from that vacation, we looked at our credit card statement and it finally hit us. We sat down and added up all our debts, which now totaled around $160,000 including the mortgage.
We realized we were paying about $1,850 a month in debt payments. Our monthly net income is $4,325 (at the time of this writing). After making our debt payments, we are bringing in around $2,475.
When we looked at our situation on paper, it was eye-opening. There was so much more we could be doing with that money than paying the banks!
We decided to get serious about our finances.
A New Start
Since May 2017, we have paid off $7,000 of our debt – leaving us with around $63,000.
With a strict budget and debt repayment plan, we are set to be debt free in two to three years.
This is our story, and this blog will document our journey to financial freedom and our move toward anti-consumerism. I hope you’ll join us, and maybe some of our mistakes can help you make better decisions.
Are you on a journey to pay off debt? Leave a comment below. We would love to hear from you!