My Journey To Being Debtless

The first step for me in this reinvention was to find a way to make a system that I knew works work for me. I love Gail Vaz-Oxlade of “Til Debt Do Us Part”. However, we had tried her jar system and it hadn’t worked. It all fell apart when my eldest child started kindergarten. Suddenly, I had a four-year-old with me during my normal “mornings off” and I couldn’t get our jar money out of the bank. This step was necessary because the money involved small bills not found in the ATM. Also, interestingly enough, my bank doesn’t seem to be that high on keeping ten dollar bills in their handy money dispensers. I don’t even try to fathom how that works. Getting money out by going into the bank was a hassle, and eventually wore me down. We live in a society that makes life harder for those that don’t use the conveniences. I finally concluded that we needed to make a change that would help us make the most of a good system.

The Magic Jar System has five categories: Food, Transportation, Entertainment, Clothing/Gifts, and Other. To make the system work for us, I had to find a way to make each jar come out with an equal number divisible by twenty. Finally, I decided that since I couldn’t make the money fit, I fit the jars to the money. I took out two of the jars. Now, we only had to worry about three jars: Food, transportation, and other. Fitting our budget amount equally in those jars worked just fine.

Another problem came with food. With the economy the way it is, food prices can vary by the day, and what was an adequate amount of money for three adults and two children to live on for a week becomes just a little to little. However, we’ve managed to find ways to cut down on what we spend without sacrificing having great food to feed the children.

One of the most annoying aspects of food shopping for me is meat and best before dates. Even an apartment-size freezer is such a waste of electricity in my house, but that means that the freezer in our fridge has very little available space. I’d plan out a week worth of meals, only to find that the meat for the meal on Thursday would go bad before then. I don’t always have the freedom to go shopping that day, so it became a struggle of “what do we do that day”, and “take-out” sometimes became the answer, eating away further at the food budget.

To correct this, I began planning what meals I would make that week, not what days I would have them, then planning the order based on the best before dates of my ingredients. Of course, some ingredients I just get the day off, if necessary. However, as I said, that can be just a hassle, and I like my life as simple as I can get it. Meal planning is, so I’ve found, essential to keep within a food budget. If I know that I have a lot of those more expensive items that I don’t have to buy often needing to be bought in one grocery trip or another, I might need to find less costly meal ideas for that week. If not, I end up blowing my budget.

The key seems to be not only working on a budget but keeping to it. By taking out the cash for the week that is within my weekly budget to spend, and by not depending on debit or credit cards, I know that I am not living beyond my means. That is, I am not spending more money than I have.

In this day and age, it is a lot easier to get into financial trouble. There is a degree of accountability that has been removed from us, and now that the economy has gone bad again, the lessons learned by the Great Depression are being remembered. For several generations, we have not had to worry about not being able to afford things. I know many people my own age that look at debt as a fact of life. That is so complete opposite to how it should be. We have to get out of the habit of living beyond our means. People talk about setting goals all the time, but how many of us know what “setting goals” actually entails? It isn’t enough to say “my goal is to be debt free”, and leave it at that. That isn’t a true goal. A goal has certain characteristics:

Specific
Measurable
Time-bound
Achievable
Realistic

If all of those five points are not checked, it isn’t a goal; it becomes a desire, a dream, or an intention. So, I needed to put my desire of debt freedom in such a way that my brain could process it. I decided on the analogy of a journey. In my journey, my destination is debt freedom. I’ve never been there, so I need a map. On this map, I’m going to have landmarks so I know I haven’t gotten sidetracked, or can back on the right track if I do get side tracked. The “map” is my structured goal. Without further ado:

To free of all debts other than my mortgage within five years.

This is specific, measurable, and time-bound. However, what about the other two? Is it achievable and realistic? That is where the “work” of goal-setting comes into play. It is actually rather easy to make something specific, measurable, and timely. The hard part comes in making it something you can do within the realm of the possible and within your current means. To do this, I needed to add to the end of my goal how I was going to do it in five years. The revised goal is:

To free of all debts other than my mortgage within five years by making structured payments on a consolidation loan.

I owe $32,000 dollars. This has been consolidated in a single loan. I pay on this loan bi-weekly, and it has a term left of 3.5 years. Therefore, my goal is realistic (as the payments are within my means) and it is achievable, because I’m not going to acquire more debt in the meantime.

Of course, there is more to it than that. That is where we get into “the landmarks”. Please stay tuned!

Any journey has it’s setbacks, and sometimes you just have to restart with a fresh, new perspective.  This is actually my second attempt at writing this blog.  This time, I’m going to set a realistic goal for myself.  For write now, the update schedule will not be written in stone, but will involve at least one post a week.

What is this blog about?  It is a look into my journey into debt freedom. I made a lot of mistakes in my financial life, based on the same social fallacies that get most of us into debt, falling for the same consumerism traps that get us all in deep trouble. However, I plan on ending my days without leaving debt for my children. Especially in these hard financial times, we must start considering the legacy we are leaving for ourselves.

The good news is that I’m a 27-year-old woman with a nearly perfect credit rating. The bad news is that this is considered something special. I’m in debt. I own my house, and this year I refinanced all my debts into a single loan of around $35,000. I am paying that loan off in just under four years. After that, I will only owe on my house. By that time, I hope that I will be in the position to sell my house in order to purchase one that meets my family’s current needs. I have two children, a husband, and our lifemate*, all contributing to the household income, so we hope this won’t be too hard.

Our philosophy is as follows: Debt is not a default.

This is important to me. Being in debt, credit card, line of credit, loan, etc., has become a standard, a consumer default that most people seem to fit into. I knew plenty of students that struggled to get approved for student loans that were handed credit cards with ridiculously high credit limits without a second glance. I under that there is a difference between a student loan and a high interest credit card, the amount of the student loans needed were a fraction of the debt that it seemed inevitably was racked up.

Can’t afford it now? Buy it now, pay later. No payments, no interest! How many people actually pay those off before the “no payments until” date comes around? If the majority did, these sorts of deals wouldn’t be offered. Companies can afford to offer such deals because there is something in it for them. Most if not all companies are in it for their own bottom line. If a deal seems too good to be true, it’s because it is. The company is getting something out of it. Usually that “something” is interest. I’ll put that through an analysis in a future post.

So, back to the point of this “intro” post, I am going to use this journal to help describe my journal to debt freedom. What I do, how I do it, what tools I use, how well it works, how it fails, how I pick myself up, and how I finally get there. My hope is that others will be able to get something out of my journey that helps them in their own.

* “Room mate” is not the proper term to describe him. He’s a permanent member of our family by group decision; he’s our best friend and came to live with us to help with the children when my youngest was diagnosed with Autistic Spectrum Disorder.