Yes, you read that right. I am officially debt free!
It probably has been over 10 years since I have been able to say that statement, but I can finally say it once more. In fact, I’m going to say it again… I AM DEBT FREE!!!
It feels really good to be debt free. Now I know that any extra money that I have will go towards my savings and maybe, just maybe, I might be able to reach early retirement… early-ish.
The beautiful thing about all of this is that I did in less time than I have initially predicted.
How Much Debt Did I Clear?
Let’s start with some perspective. According to the Federal Reserve, the average American household has about $44,000 in debt – not counting mortgage debt. This amount only includes revolving credit card debt ($7,949), student loan debt ($25,745), and vehicle debt ($10,392).
My situation wasn’t this bad, but it was half as bad. When I started this journey, two years ago, I was $22,000 in debt – credit cards, student loans, and auto loan. At that time, I thought I was never going to be able to pay off all my debt.
One of the reasons I thought this was because I was accidentally living paycheck to paycheck. I say accidentally because after I started tracking my expenses and having a written budget, I realized I had more than enough money left over at the end of the month to save and pay off debt.
The other reason was because I was quite content with having debt. I thought it was just part of being an adult. “Everybody had debt,” is a very common saying, and a saying that I now get to disprove.
I Had Lots of Help
One of the best tips I can tell somebody trying to get out of debt – or trying to achieve any goal – is to find a strong support system from friends and family.
There are a few things that people should do to get out of debt and become financially independent, such as reading personal finance books, reading personal finance blogs, tracking expenses, starting a budget, living within their means, etc. But these things will not keep you going, like having friends and family cheering you on will.
Make sure you surround yourself with people that have your best interest at heart and will support you on your journey.
Kate not only gave me emotional support, but she also helped me avoid paying hundreds of dollars in interest by giving me a loan.
Last November I had a plan in which I was going to be able to pay my student loans this year. I knew how much money I was going to put towards that debt each month and I knew I was getting a tax refund that I could use to finish paying the student loans.
The plan was already in motion, but I noticed that my student loans had 5% interest. I also knew that Kate had some money saved up – aside from her emergency fund – so I asked if she could lend me some so I could pay off my student loans right there and then without having to pay 5% interest.
I showed her my payment plan and showed her how she was going to get paid by April 2015 (6 months). Since she had her money in our credit union, which pays ~0.9% interest in savings, I said I would pay her back with 1% interest. She agreed and I saved myself 4% interest.
I paid off my student loans in November, but didn’t considered myself debt free yet because I still owed Kate – even though my money is her money and her money is her money… wait.
By paying off my student loans this fast, I saved myself over $700 in interest!
You Can Do It Too
We don’t all have a Kate that can give us a loan, but the loan wasn’t what helped me pay off my debt. It just helped me pay a little bit less in interest. I would have paid my student loans by the end of April with or without the loan because I already had a plan.
You just have to make a plan of attack and stick to it. It took me two years to do this, but two years go by real fast. It might take you longer, or you might be able to do it in less time, but I want you to at least try.
If you haven’t yet, please get a pen and paper, and figure out where you can cut back so you can have extra money to attack your debt.
I haven’t been debt free for long, but I can tell you that so far being debt free feels good. I’m going to try to keep this feeling as long as I can… or until I buy a house.
Are you debt free? Do you have a plan to become debt free?
[Photo Credit: Alan Cleaver]