Previous Episode

It has been a while since my last GlibFin post. Preparations for the new kiddo ate up a lot of free time and, more importantly, mental energy required to type out an article like this.

I’ve discussed how we got into the mess, some of the emotional hurdles, and the plan for digging out. Now for the actual results.

We started the debt payoff journey on April 1st 2017, paying off our $557 Target credit card balance immediately using the excess emergency fund we had (we went from $2500 to $1000 e-fund in compliance with Dave Ramsey’s plan). The rest went against our $10,491 Capital One card balance.

Then came the first gulf. We were only able to put $1500 or so per month against the Cap1 card, so it took 8 months to pay off. That was the forging time for our plan. The first easy win gave us an initial boost, but now we needed to grind away the burrs on the plan. Since we had both contributed to the budget plan and we both had skin in the game this time, it really took, and we were able to consistently pay down the card until we paid it off for Christmas 2017.

This was when the snowball started rolling. We balance transfered $10k of our $13,874 credit union card balance to the Cap1 card and paid that balance off by the end of February 2018 (end of year bonus helped out immensely here… We didn’t even think about it, just dumped it into the credit card). Then it took us another 4 months to pay off $10k on the credit union card (the $3800 from before + ~$6500 in ongoing expenses that we charged and paid off monthly). Our velocity had slowed somewhat ($3800/4months is less than $1k/month), but there were some complicating factors involved (student loans coming out of grace period, some one-time house repairs, 6 month old kiddo). While it was stressful to watch the number sag down a bit, it was also refreshing to see that we could make progress in the face of adversity. Our newly forged financial outlook was being tempered in the fire.

6/22/2018 was our last payment on the credit cards, and we were officially CC debt free. We haven’t carried a balance since, and we have enough money in reserve now that we could pay the entire credit limit in cash if needed. For some reason, that’s important to me. I have the control to pay off the entirety of any conceivable balance, no matter what. Debt is psychological, in part.

Next up were the cars. Wife’s car was first, which had started in 4/2017 with a $17k balance. I didn’t record the exact balance in 6/2018, but I believe it was around $12k. With all of the credit card minimum payments gone and with a renewed vigor from overcoming the hurdles in early 2018, we took off like a rocket when it came to paying off the cars. We were used to doing these 4-6 month sprints to get that “win” from paying something off and this was no different. 4 months later, we had paid off the balance of wife’s car, a roughly $3k/month payoff rate. Now we’re cooking with gas!

My car had starred at $27,769 in 4/2017, but was around $20k when we started in on it in October 2018. We kept up the 4 month trend, paying it off in February 2019. This one was aided by another end of year bonus, but we kept up the $2500-3000/month pace, and were feeling great. No credit cards, no car payments! It’s all starting to pay off!

Let me take a moment to pause and address a few things. First, everything was humming along, but that didn’t mean there was no conflict or change. During the time where we paid all this debt off, we changed course a few times and it took a while for me to come to terms with our less urgent pace. We had just paid off ~$75k in just under 2 years, but we had another $170k or so to go. We were looking at a 4+ year slog, and being only halfway through sucked. That said, we designed our budget to be tight but sustainable. Dave’s gazelle intensity looks very different for an 18 month sprint compared to a 4-5 year marathon.

This was especially important at this point in the process, when we had a single giant $184k student loan staring us down. We had paid off $10k or so through minimums over the first two years, but it was still years of work staring us down. Sprinting to the finish wasn’t an option.

Over the first year of paying on the student loan, we got the balance down near $100k. We were really hammering it, but even $100k is a huge number. We were wavering a bit, but mostly sticking to the plan, so I was happy with the progress. My conservative projections had us paying on it for another 20-22 months, for a total of nearly 5 years of paying off consumer debt, ending in November 2021.

In February of this year, we had hunkered down and planned on embracing the suck for another couple years. We were over the hump, and it was all downhill from there.

Well, long story short, things changed overnight. Almost on a whim (there’s more to the story), we decided to sell the house and move back from Virginia to Texas. We took a gamble on renovating the house so it would sell quickly, and it paid off big time! After paying off the remaining mortgage and the renovation costs, we had ~$140k in proceeds from the house. Rather than use that as a down payment on a new house, we decided to rent for a couple of years and use the proceeds to get us out of debt and to build up an emergency fund. We paid off roughly $265k in 38 months. It was quite a journey from barely being able to scrimp and save to put $1000 into our debts despite a healthy 6 figure income to where we are now.

Actually, there is a wrinkle in the plan. My employer pays some money toward student loans. It’s roughly $300/month until July 2021. Thus, instead of paying the student loan down to zero, I did the math (more complicated than it initially sounds) to make sure that the student loan will hit zero balance on August 1, 2021. Technically, we could write a check today and pay the loan off, but we’d be giving up a few grand in free money.

As of now, we’re down to about $22k in student loans with $27k in the account to pay off the student loans (the rest is the beginning of a down payment fund), we have a 6 month emergency fund set aside, and we’re playing catch up on some of the retirement investing that we missed out on since 2017 (we were only doing the 401k match) while also saving up to buy a house again.

Obviously, the path we took was a bit of a shortcut, but there’s no cheating in personal finance. There’s something to be said about suffering through the consequences of our bad behavior, but I don’t think there’s anything we’d learn in year 4 that we didn’t learn in year 3 or year 2. We made a tradeoff (renting for a few years v. continuing to pay on the debt), and it was the right move. It gives us opportunity to try and time the housing market, and we can also actually enjoy life. After 3 years of being in debt purgatory, we’ve taken a few months to enjoy our income. Sure, we put some away for a down payment. Sure, we are investing aggressively. However, we are debt free!

We haven’t gone hog wild, but we’ll tighten up some of the excesses in the new year. Maybe we’ll stop getting Amazon boxes every day.

Next article will be about how much investing opportunity exists for the average person, and how much you need to make to take full advantage of all of the retirement accounts out there.

As a preview, I make a lawyer’s salary and it’s hard to make the budget work while taking full advantage of all of the investment options.