Ashamed of the amount

Most people, it seems, will admit to having debt. It might be that’s credit card debt, a mortgage, student loans, or something in between. But most people won’t tell you how much debt they have, even when they’re trying to get help or working on paying it off.

That actually gives me hope, in a strange sort of way. Because I think it means that deep down, we know that even though debt is extremely common, it’s not good for us.

Debt is damaging

Debt is damaging, both to our financial well-being and to our sense of self. We feel the stress, and it absolutely impacts us. Our bodies and our hearts know that debt isn’t good for us — just like eating an entire chocolate cake is not. (Although no one would claim that chocolate cake, used properly, is a tool for success. I don’t believe that debt really is either.)

Chances are, if you’re an avid reader of debt blogs, you’ve gotten past any shame you may have felt about your debt and have moved on to making it go. away. You’ve owned up to the amount (at least to yourself and your spouse) and are facing it head on.

And that’s what it takes to get that number down to a big fat zero. Don’t let your feelings hold you back. Use them, instead, to move forward.

It takes determination, time, and sometimes a little outside perspective.

Like any major change you make in your life, you can’t expect it to happen overnight. Of course we’d all love to wake up one day to find that our debts had magically been repaid, and that we’d acquired an anti-debt prevention shield that protects us from all future debt, but we don’t live in the movies.

Real life takes work, and getting out of debt is no exception.

Worthwhile

The thing about changing your life the old fashioned way is that it’s worth it. Working hard at something — which includes making the kind of changes it takes to become and stay debt free — does more than just build mental and physical muscles.

It builds character and confidence.

You feel good about yourself and what you’ve accomplished. You feel good about having gained the tools and skills to find a way to tackle whatever comes your way. You know that you can overcome adversity.

Looking at things differently

The debt free approach is so worthwhile, because it allows you to look at things differently.

And that leads to contentment. So look at things differently. Keep at it, and you will become debt free.

December 2011 was one of the greatest months I have had in a long time. It was the month that I paid off exactly $95,778.50. It took me a little under 3 years to get rid of this debt. There were times when I felt like saying to heck with this debt; I am going on a shopping spree. But then I would listen to a Dave Ramsey show and hear people scream “I AM DEBT FREE!” and that would get me right back on track.

Taking a hard look

February 2009 was when I took a hard look at my finances and made the decision that I was going to aggressively pay off my car loan and my mortgage. My goal was to pay it off in 2012, but I managed to pay it off a bit sooner. It’s amazing what happens when you track your progress.

I never did a written budget before 2009. I just calculated my inflow and outflow in my head. That was budgeting to me then. Once I actually put all of my numbers on paper and saw exactly where my money was going, I was able to determine beforehand where I wanted it to go.

Motivated by progress

Once I saw the progress I was making, it motivated me even more. This is when I got really intense! I focused on paying off my car loan first. It was around tax season time and I knew I would be getting a tax refund, so I put the full amount on my car loan. I also cut back on a lot of my wants like shopping and eating out. You’ll be amazed how much money you could save if you don’t go shopping or eat out for one whole month.

Slowly but surely my loan was eventually paid off, then I began to attack the mortgage. There were several things that I did to pay off my mortgage. The bank that I had a mortgage with offered what they call 20 + 20. This is a prepayment option where you can increase your mortgage payments by 20% each year as well as pay an additional 20% of your original principal balance each year. I took full advantage of this program.

Other factors

I’ve gotten several raises at work over the past few years and rather than increasing my life style, I took that extra money and every three months I would make an additional payment on my mortgage. What’s great about additional payments is that it all gets applied to your principal balance, unlike a regular mortgage payment which is principal and interest.

Interest rates played a huge factor in getting rid of my mortgage as well. I kept a close eye on where interest rates were headed. The moment interest rates dipped, I did what is called a Blend & Extend. This is where I blended my mortgage rate with the going rate to get a lower rate. I did this several times throughout my mortgage. I kept my mortgage payments the same so more of my mortgage payment would go towards principal and less to interest which would allow me to pay it off sooner.

One last thing before I forget is payment frequencies. I set my mortgage payments at bi-weekly versus monthly. Bi-weekly payments allowed me to make 26 payments per year, which helped me to pay down my mortgage faster. I paid half a payment every two weeks instead of a full payment monthly. Since I made two extra payments per year I paid extra on my principal and less on interest. Bi-weekly payments also helped me to stay organized because I scheduled my mortgage payment to come out of my account the day after I got paid. Budgeting became a whole lot easier when I did this!

1. Quit borrowing
2. Spend less
3. Make more money

The corresponding responses to those suggestions often go something like this:

1. But I can’t do that because…
2. Well I suppose I could, but I don’t really want to.

Very few people say, “Great, thanks! I never realized I could spend less on things I don’t really need.”

Instead they argue and rationalize about why their situation is different. After all, they really need a $150 monthly cable package because sometimes junior has to watch a TV show for school. They’re different, and surely there’s some other, more palatable way to get out of debt? Something that allows them to live their exact same life while magically shedding thousands of dollars in debt?

Well, no.

There is no magic pill.

A secret

But there is a secret when it comes to getting out of debt: no one wants to make the necessary changes.

They just do what it takes anyway, because they want to be out of debt more.

And I’ve never heard anyone say that they wouldn’t do it all over again. Sure, they might say that having to get a second job sucked, or that it was hard to say no to evenings out on the town with friends. But, so what?

Things that are worth doing usually do require effort. They don’t happen by magic, but when you get there, they’re worth it. And you’re happy to have done what it took.

So do the hard stuff, and enjoy the reward later. You’ll be glad you did.

After all, when you’re not in debt, you have a whole heck of a lot more money available. And you can do whatever you like with that money, instead of sending it to the credit card companies. You can feel good about your money.

So what is living like no one else?

When you decide to live like no one else, what you’re really deciding is to make your money work for you (instead of the other way around).

For me, it’s not really about sacrificing at this point, although I do feel like I’m making an “oh poor baby” kind of sacrifice by delaying the kind of travel I like to do until after our house is paid off. (Which had darn well better be this year.)

Most people, though, would not consider “only” taking short trips to Las Vegas, Denver, and Washington, DC this year a “sacrifice”. I know that, and I’m very happy to go on those trips. But when you prefer to take 2-3 week trips to places like New Zealand or Europe, and you love love love travel, AND you can afford to do so, it IS delaying the thing I enjoy most in order to get to where I want to be faster.

But that’s already an example of the kind of living like no one else you can do when you’re not living like everyone else.

Because everyone else is in debt, generally speaking. They can’t afford to pay cash for big family trips on a regular basis, because they’re too busy paying their credit card debt, having $150 monthly cable bills, and $5 workday latte stops instead. Not counting debt payments, that’s at least $3100 a year — more than enough for a week in Paris.

It’s about changing how you feel

Sure, I “gave up” cable. Years and years ago, because I don’t like TV, and because I decided that I didn’t want my son exposed to hours of nonstop advertising on a regular basis. It had nothing to do with getting out of debt. It had more to do with him waking me up as a 4 year old to tell me about this great cleaning spray that we should go buy right now.

And sure, I don’t have a new car — and I haven’t had one for more than 20 years. In fact, I don’t have a running car at all right now. But that also has nothing to do with getting out of debt. I just love my car, and it was damaged in an accident. Getting my car fixed is not an emergency in my book. I can get a ride to work, and walk home. Or walk/ride my bike both ways if need be. And I can borrow my husband’s car to go to painting class, which is pretty much the only place I go that’s more than a few miles away anyway.

Now, back when I first tried to get out of debt, I absolutely made some sacrifices. I lived for the month of July without AC (in daily 110 degree weather for those who aren’t familiar), while pregnant, because we didn’t have the money to get a new unit. Trust me, that was NOT fun. And boy was I pissed when I discovered that first company we called was just trying to scam us into spending more than a thousand dollars. The second company was able to fix it for something like $35 instead. But had I not drawn that line in the sand, we would have gotten scammed and been another $1000+ in debt. And there’s more. I know that it can absolutely be hard to change. I was hard for me, and I struggled to do so for years.

But in the long run, it’s I matter of deciding what you want your life to be like. To me, that means being content and without the constant stress and pressure of debt.

Be content

Living like no one else is really about being content in my book. It’s about doing what truly makes you and your family happy, and stepping out of the rat race. Be content, instead. If you have to do some work to get there, trust me, it’s worth it. You’ll wonder why you didn’t do it sooner.

And if you get sick of people pressuring you to be normal, maybe you need different friends. Why should you be normal, when normal is stressed out and broke? That’s not the life I want. I like my life now, and I’m going to like it even more when I can travel the world even more easily because we’ll have a paid-for house.

So go ahead, live like no one else.

Common feelings

When you hear debt-free stories from people who make more than you do, you might think things like this (and I know I used to):

• Well of course I could pay off debt if I made that kind of money. Duh. I’d like to see a realistic situation described for once.

• I can’t even imagine what it would be like to bring home that much money each month. They make more in four months than I make in a year! How hard could it be to get out of debt when you make that kind of money?

• I’ve never even had the things they “cut back on” in the first place. What am I supposed to cut?

• Great. So there’s basically no way I can get these debts paid off since I only make $______.

The thing is, it’s not about how much you make. It’s about how much you spend and borrow.

Dispelling the high income myth

If you make $100K a year and owe $450K in debt, are you any better off debt-reduction wise than someone who makes $32K a year and has $140K in debt?

Proportionally speaking, no.

Yes, you’ll have a bigger shovel (to borrow one of Dave Ramsey’s sayings). But you’ll also have a bigger hole.

Now true, someone who makes $100K a year is going to find it a lot easier to pay off $5K than someone who makes $32K would, but it would be highly unusual for someone with a debt-minded mentality to owe so little compared to their income. It’d be much more typical for their debt to be proportionally larger too.

And yes, they’ll probably have more places that they could cut back than you do if you’re making less.

(Maybe you’re not sending your kids to sleep away camp, horseback lessons, tennis, piano, and tutoring. Maybe you’re not taking annual family vacations to 5-star resorts. And so maybe there’s no way you could cut those things out.)

But unless you are living below the poverty line, you probably DO have things you could cut. (And if you ARE living below the poverty line, your best shot at getting out of debt is finding a way to bring in even a little bit of additional income.)

How to get out of debt, no matter what your current income is

It’s not about how much you make right now, or about how much someone else makes. If you want to get out of debt, what matters is what you do with whatever amount you are making.

In other words, it’s all about the choices you decide to make, and about taking a step back and looking at your situation objectively.

Probably you need to track your spending, budget, make a plan, and then stick to it until you’re debt free. And you can do that at any income level.