Debt-Free Series: What I did

The biggest what is that I paid off over $65,000 of consumer debt! Smaller whats- I minimized the number of monthly payments I owe to people, I learned how to discipline and deny myself things that I want, I learned how to really understand the difference between wants and needs, and I learned that I do have self-control. So many good things came from this. Overall, I enhanced my quality of life by eliminating the financial burden that I had and would still have had I not paid off my debts the way that I did. I can breathe, I can work and have fun while doing it, I can give generously, I can take a trip just because without having to think twice (not frivolous spending but I have don’t have to be super cautious), etc. That feels so good.

So I mentioned that I adopted the Dave Ramsey Baby Steps. I won’t explain the step-by-step. You again should do your own research and the steps are very straight-forward and easy to understand. The idea of channeling essentially all of your financial energy into paying off your debts as soon as you can to free up your money to keep paying them off until you have no more and then focusing on saving just makes so much sense. (Read that sentence three times because whew!) Yes, there were times where I wanted to give up and yes I realized several times that had I not done this, I could have had so much more nicer things in the moment including furniture in my house that matched versus the makeshift I had (which I’m super grateful for). However, my why was so good for me, that I knew it was worth it to stick to the steps.

Another system/process I used was my boss’ digit debt reduction system (that link will take you to a book where he teaches the concept. A good read even if you're not a dentist). It’s really fun and cool and exciting and is focused on creating mental momentum for you by choosing payment amounts focused on place value so that you could see numerically that your payments are actually making a difference. So much of this game is mental. You’re going to want to feel validated in this. The digit debt reduction system was so good because it really makes you see the difference that each payment makes and that for me was encouraging enough to keep making more payments. It made making a payment a fun thing to do as weird as that may sound.

So payments. Essentially in this phase, I had to convince myself that minimum payments don’t exist. That’s not a real thing. I had to convince myself that loan terms aren’t a real thing. If you actually allow yourself to think that that thing won’t be paid off for another 6 years then guess how long it’ll take you to pay that off….yeah 6 years. So I trained myself to ignore the loan terms and treated each loan as if it were due to be paid in full by tomorrow. Otherwise, I would’ve played them off to not being a big deal and still be paying on those things today as they continue to accrue interest and a lot of it. Don’t get me started on interest. Interest = wasted money. Any extra money I brought in went directly to my loan accounts and I have no regrets about that.

A few times, I did consider finding some additional side hustles to make some extra money so that I could make some extra payments. I never did though. Truth be told, I am so blessed to have a great job that pays well so and I would calculate how long it would take me given my pay on the job and found that I truly didn’t have to put too much extra work in to meet my goal in a reasonable amount of time. I also booked a few acting gigs during this time and that extra income again went straight to the debt.

Another tool I used was Betterment.com. Betterment allows you to basically open a savings account but it’s an investment savings account. So you put money in and they invest it for you. If you know enough about investing then you do have the option to have a say on how they will invest your funds, but if you’re like me and have no idea then they will make decisions on your behalf. You also earn dividends on it just as you would in your bank’s savings account assuming that you have one. So if all else fails and the stock market crashes, you will still at least have gained money via the dividends earned. You can cash out at any time. From my research and experience, there is no way to lose here. I would add $10 here and there and maybe a $50 if I got some extra money in. Now that I’m debt-free, I’m putting way more into it but I started small. You can cash out at any time. It’s just a win all-around.

During this phase, I upped my retirement contributions. This wasn’t as much a debt-free thing but was more so a net worth and Everyday Millionaire thing, but I knew that I could live and pay my debts with a little less coming in so I went ahead and upped my contributions to my retirement. Again, being blessed, but my boss is so generous and agreed to a very nice match as it pertains to our retirement contributions, so I wanted to make sure to take advantage of that. This is great because even though this isn’t money that I’m necessarily using tomorrow, it is money that I’m storing up for later in life and it is pre-taxed. So the percentages that I’m paying and my company matches is based on my pre-tax number which if I contribute less and get the money now, it will be taxed. So a smart investment is to contribute decently to your retirement if your job offers that and especially if your job has a match to your contributions. You can take retirement out early at a cost but don’t.

Buying a whiteboard for my house was something so small but made a big difference. I started to graph my remaining balances so that I could visually see my progress while also seeing how much further I had to go. Seeing is believing so being able to see the progress you’re making helps validate that you are making a difference. It was also fun. I wanted to see my lines progress much faster so that motivated me to continue paying extra and paying more each chance I had.

In addition to my graphs, I also wrote on board what my deficits meant as it pertained to my income. I would use my paycheck amounts and calculate how many more of those paychecks it would take to pay off this account. SO actually and honestly this wasn’t realistic as I wasn’t always able to apply my full paycheck to my debts, but it at least put things into perspective and made those really big numbers seem reachable. When we’re paying off thousands of dollars like that, we have to make those numbers seem more tangible and chalking it up to how many paychecks it would take you to reach those numbers helps a lot. Even now, I’m doing that with my mortgage. Actually I altered it just slightly. I have my 6-month of expenses goal written down and I did the math to see how many times I’d need to replicate my 6-month expenses to be able to pay the mortgage off. Amazing that that number is only 18 months. So in reality, I could probably get the mortgage paid off in maybe 22 months or so. That’s nothing but is actually A LOT.

Last thing I feel worth mentioning is what I learned about amortization. When I mentioned interest earlier, it truly is the devil. When I saw how much additional money I’m throwing into the air at nothing by paying interest, it made me upset. The easiest way to do that is to go online and find an amortization calculator. There are dozens for free online. You input your loan amount, your interest rate, then your remaining loan term and it’ll show you how much interest you would have paid by the end of that term should you max out that time. It’s CRAZY! Once you see that, if that isn’t enough to make your blood boil and start paying off these accounts now then I don’t know what would do the trick.

So homework….your work is to research. Figure out a plan, a strategy, a budget, etc. and open up your Betterment account right now, also plug in your loans into an amortization calculator. This is where the winners are made. How serious you are about this will show by your willingness to implement something that will move you closer to the ultimate goal. Good luck on your work and next time we’ll talk about mindset and mentality now that you’ve made the decision to do this for real!