As with all good stories, I'll start from the beginning:
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| Seriously? Could I be any cuter??? |
It was only five years ago when I was so in debt I couldn't even pay for gas in cash. A mix of great adventures and choosing the non-profit path for a career led to a perfect storm and a massive pile of "no money" tears. My four year degree cost me over 25K in loans and my ONE YEAR of grad school was an astounding $42,000. But I was the entitled American who thought "eh, I'll pay for that later" and instead built up even more debt with a semester abroad in Australia (aka the best drinking experience of my entire life) and six months as a volunteer in Africa. (note: volunteer who had to pay her own way.) Looking back, I certainly wouldn't change any of those experiences. Inevitably my master's degree got me my first job in animal welfare and played a major role in my quick promotions. Living abroad shaped who I am as a person. But damn, couldn't I have found a way to reduce some of that debt?
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| Dan shaping me into the future me. |
Because I had friends who paid for that semester abroad with cash, who paid their student loans while in school, who didn't just have roommates but shared rooms to save money and who went to an in-state school. To my credit, I worked my butt off. Took 26 credits my last semester in school just to graduate with two degrees in four years while working 30 hours a week and participating 15 hours a week in an animal behavior lab. But our culture doesn't discuss money - we don't even offer a class in school - and I was woefully unprepared for college. I'm sorry? I have to learn about the Mayans, random math equations and the french word for "boat" (all interesting topics I admit - especially the French since it helped me get across a flooded road. This one time...in Africa...) but not ONCE did we spend a semester talking about credit cards, debt, investing or how to really get a job once out of school. And it would have been nice since this all occurred while simultaneously being bombarded with advertising about what I needed to buy? And we wonder why Americans struggle to live below their means.
So the combination: higher education, three months of unemployment in 08, entitlement to a lifestyle out of my means and very easy access to credit cards = $71,500 in debt in 2009. $18,500 of that was credit card debt, $7K in car payments, the rest was student loans. And that doesn't include the $20K private loan from grad school that my dear mother was paying off for me and her monthly assistance in paying for my car and a $150 check each month in child support (for me, not my nonexistent baby - a very long story for another day - awkward....)
I moved back from Colorado in the spring of 2009, rented a room out of someone's house for the first time in my life (no more cushy living alone crap), spread out all my bills on my bed, looked at my new salary (35K with potential for a 10% performance bonus at the end of each year) and made a plan. Now, admittedly, it is MUCH easier to start down this journey when you simultaneously cut your rent (mine dropped from $875 to $550 in the move) while getting a salary bump (from $27K to $35K) but seriously, 35K is fairly piddly money in this culture so if I could pull myself out of it with that salary, so can you.
There are two common ways to get out of debt. The first is to pay off your smallest debts first to positively reinforce yourself faster so you'll keep paying off debt. The second is to pay off the debts with the highest interest rates first. I chose option one because the credit card with the highest interest rate had a whopping $13,500 on it and I couldn't start there or I'd drown in cheap wine every night (although if you can take this road, you should because you save more money in the long run).
The funny thing is when you start getting serious about paying off your debt, the normal response is typically, "but I don't have anything to cut" so I started tracking every purchase I made and holy crap could I spend money left and right on really stupid things - chocolate, dog food, chocolate dog food, etc. I set my first budget with limits on how much I could spend on the basics and cut everything else out. With my new budget, I miraculously had $700 a month to put toward debt (amazing how much money you save when you stop highlighting your hair) AND $300 to dump automatically into a savings account. One of my biggest challenges throughout the years would occur when I'd get a large check (tax return, bonus, etc.) and pay off my debt with it but because I never saved money, it only took one unexpected expense and I was back to the credit card. My new savings account was created to curb that.
This would be Keira's tactic
And before you ask, no, I don't mooch off of the boy - we have separate finances and share only grocery expenses (well, until this road trip). Yes, he paid a much higher share of our home including more of the utilities but I contributed $500/month toward the mortgage so that pesky rent expense did not go away just because I hit the romantic jackpot. That's not to say it isn't much easier to figure all this out when you have a safety net but it's not all about striking it rich.
Over the next four years, my salary jumped incrementally (more responsibility) and I received my bonus each year - which immediately went to whatever debt I was currently paying off. No more random trips because I suddenly had a big check. And by January of 2012, a mere 2 1/2 years after my project began, I had paid off all $18,500 in credit card debt and my car. I cannot even begin to tell you how liberating that is. I now only use a credit card to MAKE money with a nice cash back program I have. (FU credit card companies!)
Phase three (or eighteen I can't remember), was to bulk up my savings. I had been putting money all along into my savings account but I really wanted 10K stashed away in an emergency fund. They say six months is adequate and for me, that would have been a comfortable $6000 but my OCD self didn't like that number so I jacked it up. Of course, the beauty of paying off debt, is that each time you pay something off, you suddenly have even more money to put toward the next thing (the amount you put toward debt + the minimum payments you had to pay on the others) so by now, I was saving about $1100 a month easily. That 10K was saved up by spring of last year and it was on to this trip.
Jim and I decided we'd like 30K to do this "well". (More on the specifics of the road trip budget in the next blog - don't want to overwhelm the "non-numbers" people here.) We had to create our own budget as there's very little information out there about roadtrips (unless you're 80 and living in a huge bus of a camper and spending all your money at restaurants and museums). I think 30K divided by two is $15,000 so that was the amount required of each of us - Keira refused to contribute financially. (This was new savings for both of us - we were not allowed to use the sale of the house, our emergency funds or retirement accounts for the trip) Being the romantic breadwinner that he is, Jim would cover the capital purchases of the truck (15K) and camper (9K) - it seems engineers make a bit more than animal welfare professionals. Notice he bought a used truck and negotiated the shit out of it and a used camper.
So off I went, saving as much as I could because there's no better motivation to not buying another package of hostess cupcakes than the thought of retiring for a year. And this winter, I had more than the 15K saved plus 5K to come home to if it took awhile to find work and another 5K in a retirement fund (holy crap, retirement? Really?) Seems impossible looking back - I mean, that's over $45,000 in four years between the debt and the new savings that I would have normally spent on crap.
Overall, here's my advice. If you're living outside your means, there is a way to take control of it. I don't claim to have it as hard as many, not even close - I had a job the past four years, I don't have kids to raise or an expensive wedding to fund (choices I made btw). I grew up with a single mom who didn't receive financial support so I get it but everyone can find ways to save. For me, I stopped buying books and DVD's (agh stuff!) and started going to the library every week for those things. I stopped getting my hair did, canceled my gym membership, changed my cell phone plan to Ting (I only pay $12/month for what I was paying $75/month for before - do this now - http://www.mrmoneymustache.com/2012/10/11/our-new-10-00-per-month-iphone-plans/) and I even lowered the quality of my dog's food (gasp!). Not by much, mind you, but it seemed silly for her to eat better than me.
And most importantly, I chose to spend money on the things that really mattered to me. Travel has always been near the top followed by a comfortable place to live. My health is certainly up there - I pay good money for real food (although I would argue that you save money by cooking real food each night) and I don't mind paying for an awesome yoga class. But I don't shop - I HATE the mall so all of my clothes come from goodwill and I wear them long after they have holes. I don't care about cars so my little Ford just passed the 140K place. I stopped eating out all the time and when I do, it's for a fantastic meal. So find the things that matter to you and cut the rest of the shit out. I don't get the high-end purse thing but more power to you if you save up for them. I don't claim to be a money expert but looking back, it's all so simple it drives you crazy that you fell for it. One of my favorite blogs is Mr. Money Moustache who demolishes the idea that we can't all retire early and he does it with swear words. http://www.mrmoneymustache.com/.
You could argue that we could have put this 30K toward our retirements and it would have quadrupled in interest, blah blah blah but I'm also a fan of balance (Libra-ness in me I suppose) and I've always believed in living your life fully. This was the root of my financial woes in the first place but this time, I'm paying with cash.
"If it is important to you, you will find a way. If not, you'll find an excuse."
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