Friday, July 30th of 2021 will be a day I’ll never forget. For starters, I now keep track of my financial milestones so it will be captured on the timeline. But after 58 years of living and 37 years of debt, I will be completely debt-free of car loans, home equity loans, credit cards, mortgage loans, rent, and any other kind of debt that I’ve had since I bought my first car. By the way, that first car was a brand new 1984 Chevrolet Z-28 with a 15.5% bank loan. I was a junior in college and I think the payment was about $252 per month. What was I thinking and why did my dad help me with this entire transaction? That $252 new car payment in 1984 is comparable today at about $750 PER MONTH! What a nightmare, as this began my life of debt.
My wife went into the bank on Friday to wire transfer (those were the bank instructions) the final payment. When she told someone at the bank what she wanted to do they said they normally do this via appointment. She said “I’m wiring money to your bank, you don’t need an appointment for that.” We determined that when he figured out we were paying off our mortgage that he would try to sell us on products, especially a home equity line of credit or loan. Remember this … banks do not want you being debt free!
This milestone is a big one. I’d put it on par with hitting a $1,000,000 investment portfolio, which I should hit in a few years. I remember how we felt in 2018 when we paid-off our $86,000 home equity loan. Talk about a big weight lifted off our shoulders. Knowing we owe nobody should free our soul. Perhaps that tightness in my chest will allow me to breathe a little easier. Most importantly, our savings rate from here on out will be glorious. So glorious that 65% or higher is achievable.
This Chart Is Beautiful
The beauty of my debt reduction chart is the swiftness of taking out $248,000 in hard debt. At $248,000, we had:
- Mortgage
- Large home equity line of credit
- Two car loans
- Credit card debt
It was all there, the standard debts that bury the average American. This kind of debt doesn’t go away without some serious focus and rethinking of how money is spent. And remember, I had two kids in college as I was crushing this debt. There is no real secret but I will say a rising income helps. But we know people that make way more than us that have tons of debt. The rising income helps take it out faster, which is just logical.
The statistics of debt in retirement are horrible, which is one of several reasons we wanted to be debt-free before I retired. I think it’s fair to say that debt is killing dreams, especially retirement dreams.
- 3 in 10 retirees devote more than 40% of their monthly income toward debt
- 1 in 4 retirees have a mortgage with 20-years remaining on the term
- 50% of baby boomers intend to enter retirement debt-free but only 25% actually do
- The average retiree holds more than $20,000 in non-mortgage debt
- About 60% of student loan co-signers are over 55 years old (they are on the hook for the debt)
I was reading one of my many articles last week and I saw that Dave Ramsey created some traits of a debt-free person. I’m not sure how I fit those traits but we’ll find out. I do know that the old me and the new me are two different people from a financial standpoint.
Dave Ramsey’s Traits of Debt-Free Living
Last week, I told my boss (and her boss) that I was going to be debt free on 7/30/21. We were just doing small talk at the end of a conference call at the end of a long week. It just slipped out. My bosses boss congratulated me and said we are achieving something few people ever achieve. My boss was amazed because she said she just refinanced her house and was a long way off from being debt-free. And remember, my boss is a woman that makes nearly $500,000 annually.
Being debt-free is special and it takes work. A Dave Ramsey article came into my view and it was about traits of people who experience debt-free living. Do you need a 100% perfect score to be living debt-free? No, but many of these traits are needed to achieve any kind of financial success.
They’re countercultural
Since we always had debt in some form, I’d say we were not countercultural until recently. Might I still use debt under the right circumstances? Perhaps I would but only because I know I could pay it off the next day if we really want to do that. Still, our stance on debt has changed and I’m encouraging my kids to stay away from the debt-devil.
They use self-control
We kind of had self-control when we were younger but “things” always popped up. Kids need this, dog needs vet services, tires needed changing. We really didn’t do much for ourselves – we were a one income family. We were pretty envious of those taking big vacations … we only took a few small ones. Today, we have self-control especially since we know the payoff in a few years will make everything worthwhile. No debt with a pension, social security, and an investment portfolio in retirement will be worth it.
They’re confident
We were never confident in our money plan because we were just trying to keep our heads above water. As I’ve said many times, we had a net worth of $115,000 at 48 years old. We’ve created a plan over these past 10 years and one of those puzzle pieces was to crush the debt. That was a goal set 5 years ago and today it’s been officially crushed. I will say we never compared ourselves to the Joneses because we had other priorities, mainly the kids. We are 100% confident now since we’ve become laser-focused on staying debt-free and savings more money for retirement.
They aren’t afraid to say no
Saying no has caused some conflict at times in the family but lately it’s become the norm. It’s the only way we could have crushed the $248,000 in debt within 4 1/2 years – no other way. You can’t do it all … vacations, new cars, college, big homes, RV’s, and retirement. I will say this, it will be a difficult shift to start saying yes more when I’m retired (something I’m going to work on now).
They set goals
The old me would set goals but life always had a way of side tracking them. That’s not the case anymore. We set goals and achieve them … my debt-free goal is a huge example of that. And let’s not forget, all of this debt reduction occurred while I had two kids in college and trying to invest some too. Realistic goal setting and forecasting is a must and using some of these other traits is important to achieve them.
They’re gazelle intense
My wife and I got tired of being tired about debt and having poor prospects for retirement. We did not want to become an American retirement statistic without a proper fight. We looked for expense leaks and we focused on the big stuff – home, transportation, and grocery. And we found it easiest to cut the food bill plus our restaurant spending. Those reductions got put into debt reduction and investments. But the point is, we were (and still are) focused.
They don’t care about stuff
We really aren’t materialistic, at least I don’t think we are. We’ve been trying to not be consumers and instead become savers. Debt doesn’t get reduced on it’s own. It takes a plan, an attitude, and alignment between husband and wife. I’ve already been consulting my kids that when they select a significant other that it’s critical they be aligned on financial values. One can’t want and get “stuff” while the other always sacrifices … it will not work.
They willing to make sacrifices
Oh have we made sacrifices … yes sir we have. Ten-year old (or older) cars, no vacations, old furniture, no nice clothes, and more sacrifices. These last ten years have been nothing but sacrificing. Our kids received a debt-free college education. We’ve tried to find small ways to treat ourselves for hitting some of the financial milestones in life. Many people hit those financial milestones over many decades but we hit ours in less than one decade. We are crunching decades of debt reduction and retirement savings into a short timeframe. The only way it could be done is with sacrifice.
They don’t compare
We aren’t a social media family (as I type on my blog). We couldn’t compete with people because we didn’t have the funds. Did you ever wonder how people could bring home $75,000 trucks or $125,000 RV’s? I just figured they inherited some money or went into debt. I walk the neighborhood every morning and see 3 car garages with 6 cars outside the garage. Americans like to buy things and it’s getting them into trouble.
They’re generous
We are generous and will be even more so when we are retired and debt-free. We do our best to take care of our family. I figured it’s important our family doesn’t become a drain on society.
Summary
Being debt-free has not really sunk into my soul just yet. I suppose at the beginning of next month when I’d typically pay the mortgage and don’t have to then it might feel good. It’s just hard to believe and doesn’t feel real yet. Funny thing is when I paid off the other debts (HELOC, car loans, credit cards) they actually had more immediate relief. I suppose when you pay rent or a mortgage for 40 years then the feeling of monthly payments is imbedded deep into our souls. It will take some time to realize that it’s ok to feel good about our debt-free life. Seriously, I hope a weight is lifted off my shoulders because it feels pretty heave still.
Thanks for reading!
Mr. TLR