I’m Done with Debt
This guest post from Andrew J. is part of the “reader stories” feature here at Get Rich Slowly. Some reader stories contain general “how I did X” advice, and others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity, and with all sorts of incomes.
I am writing this for two reasons:
- First, GRS is like a big toolbox that I just discovered, already full of all the tools I need to build a strong, long-lasting financial future for myself, and
- Second, as a letter to myself, to remind me of where I am, at this point in my life, and why it's worth working so hard to not be here again.
Let me start by giving you my history.
In the beginning…
After high school, I lived at home with my family while I attended one of the area community colleges to complete my Associate of Arts Degree. I took a part-time job designing and maintaining a website for a local real estate company. I had no real reason to save any money at the time because my financial obligations were, well, none. At least until tax time came…
I was being paid as an independent contractor so no taxes were being taken out of my check, and when taxes came due, I owed almost $2,000. I took another job at a casino in town so I could save up the money needed to pay off the debt, and ended up liking where I was, so I stayed. Still, I didn't save any money. If I wanted something, I'd save just enough for it, then spend it all. I had a nice truck that cost me $550 per month plus gas (it took premium and got 12 mpg!!) and didn't think much of it.
I got a promotion at work two years after I started, got a decent pay increase, and decided it was time to make an investment. I got together with two friends (they were a couple I had known for several years), and we started looking at houses. This was in 2004 when the market was booming in California.
We got our finances approved and bought a nice four-bedroom, two-and-a-half bath house in a quiet cul-de-sac in a small town. The loan we got was an interest-only loan, and even though we knew the drawbacks of this kind of loan, we told ourselves that we were only going to hold onto it for a couple years, then get rid of it.
Well, within a couple of weeks of closing, the couple broke up and she moved out, signing the house over to us and walking away. Now we had to find roommates so we could afford the house. Within the first year, the other owner decided he didn't want to be there anymore either and sold me his share of the house. He took off, and I had roommates for a while until I met a girl.
Up until that point, I had credit cards but never held a balance on them. We started traveling, going out to dinner often, and next thing you know, she moved in and the roommates moved out.
Now this was about the time the economy started to tank. My debt had grown to over $20,000, and I couldn't even afford to pay the minimum payments on my credit cards. We put the house on the market but didn't get one offer. Then our relationship ended and she took off after cleaning out our bank account. I was left in a house with a $2,000 monthly mortgage without property taxes and insurance and decided that foreclosure was the way to go. I stopped making payments on the house and started to concentrate on the credit cards. After a few months of paying toward the credit cards, I decided to declare bankruptcy and write everything off.
In November of 2009, everything was discharged and I was now debt free. I knew this was the perfect time for me to start saving. I moved back in with my parents so I could save as much as possible but then I had to have surgery on my ankle. I had insurance, but they didn't cover all of it. I got over that, but just when I started to save up a little bit, the temptations of my friends got the better of me. I ended up going with a group of friends to Germany and Switzerland for New Years. I had a great time and am happy I went, but it wasn't good timing. The good news is that, unlike everybody else in my group, I paid cash for the whole thing; when I got home, I wasn't paying off the trip for several months like some of the people I went with.
I got to the point where I could start saving again. But when I filed my taxes, I realized I never changed my W4 form through work the previous year and still had my paycheck adjusted for being able to write off the interest on the house. This year I owed over $3,000. Again, I had no money in the bank. I was able to pay off the state but had to set up a payment plan for the federal return.
It was about this time I started reading the different articles at Get Rich Slowly. I started to realize that I make enough money to save rather quickly; I just really suck at budgeting.
So, I put together a plan on how to get out of debt, giving myself a weekly allowance, and paying off my current debt very quickly. I've accumulated a handful more bills from my surgery, but after putting together a plan (on paper), I can see that it is very possible to have it all taken care of in three months, while saving at the same time! More then anything, Get Rich Slowly has shown me that it is possible, and to look at the Big Picture and plan for the future. Just mapping out my budget lets me know exactly when I can pay something off so I can be honest with whoever is billing me.
I know it won't be easy at first. I've gotten used to spending a lot, and just running out and buying something if I want it. I've accumulated some nice things over the years, and now I've told myself to enjoy them. I was able to pick up a friend's old truck that runs well for only $700. I also have a motorcycle I picked up a few years back, when I didn't have a vehicle, so I could use it as cheap transportation. It works great and is very, very cheap to maintain and operate. My degree was in photography and I plan to get up and take more pictures.
All of these things can be done for next to nothing, which will allow me to not only save quickly, but also not sacrifice living at the same time. I want to go back to school and get my bachelors degree, and I don't want any type of student loans to do it. Debt has run my life for the past ten years almost and I'm done with it. I know at first it's going to be hard to tell my friends that I can't join them every trip or get together once a week for a cigar but, just like me, they'll get used to it.
I mapped out the rest of this year, being as accurate as I could, not taking into account any extra money that might come in, and have set a goal of having $10,000 in savings by the end of the year. I contribute to a 401(k) through work, and put in twice what they match just to build it up. I also have a Roth IRA I started a long time ago, but haven't touched in almost seven years. It's time I started making that money work for me.
I also have a gym membership and intend to keep it. Toward the end of my relationship, I got pretty unhealthy, and am now on a path to correcting that. I have a great friend that has pushed me to my limits in an effort for me to improve myself, and I am extremely grateful for him. I've noticed in the past few months since going to the gym that my self confidence has grown, and I just plain feel better about myself and also in the decisions I make.
In the future, the hardest part of all of this is going to be avoiding the temptations and reminding myself that it's all worth it. Once I establish a routine and get set in it, it'll be much easier for me. Without Get Rich Slowly to remind me it's possible and to help push me in the right direction, I don't know if I would have taken the first steps to get started. And for that, I say thank you.