Now and Then: How My Current Financial Situation Compares with a Decade Ago

Many congratulations on freeing yourself from the credit trap. I’ve spent the last five years doing the same thing.

I fell into the same trap the moment I became an adult and could get a credit card. At 21 I found myself $10k in debt with barely $10k in yearly income. I had to go through a credit program to get out – and I still struggled with reduced payments and reduced interest.

From that point on, I was never cavalier about credit, but I did use credit to get things I wanted and cover large expenses. I learned early not to overextend, but still carried enough debt to make it a burden.

Save for a reasonable payment on student loans, my debts are gone as of tomorrow. I focused on paying off one debt at a time.

I just paid off my car two years early. I’m in my late thirties and have owned just four cars. I’ve driven them all until they were practically dead.

Then, I focused on credit cards. They’re gone now. I didn’t do it in the most advisable way. I put money into a saving account and periodically made big payments against my credit card debt. Along the way I made payments well beyond the minimum. I realize it would have been better to apply more money earlier, but I found it more satisfying to take away big chunks. It also made me feel more secure with money in the bank.

I’m now seeing a positive cash flow of $1,500 per month.

My next goal is to build savings for short-term security. I want to have enough cash to be secure for at least 6 months, preferably a year.

From there, the sky is the limit. Minimizing your spending and erasing debt is truly a liberating experience.

I have also recently learned about the psychological aspects of saving money. I’ve come up with four questions to protect yourself against with impulse buying, which you can find here.

Ten years ago we were seven years from paying off a townhouse, had $30K in funds, 8K in the bank and growing with no credit card or auto loan debt.

Then we bought a single family home a year later. We really had to stretch to get it but it was a great deal. Then soon after the car got totalled, the furnance went, etc., same old sob story many others have perservered through.

Technically our net worth has doubled, but that’s because of the 401K and equity in our home (which hasn’t shrunk as much as it’s gained).

I don’t have the liquid assests I had, and have struggled over the years to really get on top of the debt my wife has accumulated. Oh, was that a Freudian slip? I meant my wife and I have accumulated . I’ve managed to meet certain goals and fail miserably at others. My wife has met most of her goals. If things work as planned, we’ll be out of debt (except for the mortgage) in six months.

Just keep on planning (to include some of the fun stuff), keep on going. Surprises happen, that’s what the emergency fund is for, don’t be scared to use it.

10 years ago I was finishing the tail end of a prison sentence for credit card fraud.

My approach prior to that was to get what I could, how I could, damn everything else.

I had nothing. I was working for a horse trailer manufacturer, making $7/hr. No prospects of a bright future.

$20K of debt, and $6K of restitution to make. I had to work my way up from nothing.

Now, 10 years later, and MUCH wiser and mature… I am just shy of $10K in the bank, and in a very good job.

I wish I could have said I learned things quickly, but at that point in my life, I had to take the long circuitous routes to learn things… bang my head on the wall a few times.

I’m just thankful that I *have* learned the lessons that I did.

JD – I’m a lot slower to spend now, as well.

After reading “Debt is Slavery” I keep thinking of spending in terms of how many hours of freedom I’m giving up to buy the latest and greatest doodad.

It gives me pause.

Hi J.D,
Like others, I have to say that this was really a very helpful article. 10 years ago I was 30, had been married for 4 years, our sons were 9 and 4. I was making around 30K a year in a job that I enjoyed, but did not have much prospect of moving up ( I was doing software application support, and really wanted to move into the actual development ). In July of 1999, I took a big risk and took a contract job in Columbus, Indiana ( I talked it over with my wife and we figured that if it did’nt work out, I could always come back to Tucson and finish grad school). It worked out well. I would’nt say that we’re well off, but we have done OK. Today we’ve owned our home for the last eight years, we’ve reduced the mortgage by 12K. Our retirement accts have close to 100K combined, our cars are paid off. Our emergency fund is anemic, but we have very little CC debt (maybe around 1K or so ). In the ensuing years, both my wife and I have managed to finish grad school — yeeah !! ( that was tough with two kids, working full time). I have to say that in the last couple of years or so we have gotten a lot better about managing our money — thanks in no small part to you, and Trent over at The Simple Dollar. I think the big wakeup for me was when I was doing our taxes one year and I realized how much we made, and how little we were actually saving outside of our retirement accts. For us, we started off small, like not giving the bank so much money in overdraft fees (that leaky faucet will kill you !!), then getting a budget, and finally we’re at the point to where we can budget for most of the expected stuff and we’re starting to save for the unexpected. The managing money deal is a constant process. Like many here, I wish I had started a lot sooner. Oh well, better late than never !!

You know, I would really like to know more about this:

“But my deficit spending wasn’t a math issue — it was a product of subtle emotional and psychological problems that I had to work through before I could get my spending under control.”

This is the KEY. Would you please consider writing an article to the emotional aspects you had to heal before you could come clean, so to speak?

Thanks!

This is inspiring … my wife and I started on Dave Ramsey’s plan, ‘The Total Money Makeover’ last September. Since then, we paid off one of our two cars and have paid nearly $10,000 in student loans. We’re on a good path finally and we need to be with a 2-year-old girl and hopefully another one on the way in the next year. We have redefined the word ‘stupid’ with finances and needed to get smart. It’s a long process but we’re on the right path.