This is probably the article I have dreamt of writing the most since the beginning of the blog “Just One More Year”. In fact, I have been formulating this in my mind for years. This goes back prior to when I first thought of creating a PF blog and becoming an avid reader of ERE and Mr. Money Mustache. This is our public proclamation to ourselves and the world that …..We’re Debt Free!!!!!
The back-story is that I have been in some form of debt repayment strategy for three decades. The last ten years of my life, I have dedicated much focus on paying additional principal on loan payments and staying out of credit card debt completely. I have to tell you, it has been hard to keep the faith and motivation that whole time. We had a few missteps that included buying some cars, a sailboat, and other splurges along the way. Hey, you have to live don’t you? YOLO baby!
We also set back our debt free date by 6 months by purchasing a used truck and camping trailer over a year ago. We felt it was worth it to begin camping sooner, to make sure our plans for extended camping would still appeal, prior to leaving our employers.
We scrimped in many other areas of our life to justify and pay for those splurge items. Our internal justification system is well refined at this point; we can talk ourselves into nearly anything. A good example of this phenomenon is just a few weeks ago we nearly upsized our home – instead of downsizing! We are not free from the hedonic treadmill monster that catches us in our weaker moments.
However we are now free – Debt Free that is!
We knew that becoming debt free was a crucial step in the process for us to leave our employers. We discussed this in detail in Step 5: Become debt free and celebrate freedom. It is one of our 7 important steps we feel is necessary to achieve financial independence and retirement.
I have seen some good-natured discussion and ribbing on blogs about whether it is actually possible to be debt free. If you own your own home without a mortgage, you still “owe” money for taxes and utilities. Try not paying them for a while and see what happens. The county/city could take your home away from you for failing to pay your property taxes. The utility company can sue or file a lien against your property for non-payment.
It is amazing how simple a statement “No Debts found” seems in an app, yet what a challenging course it has taken to navigate to this point.
If we have any income of any significance, we need to report that to the IRS and pay our share based on today’s tax code. If we don’t pay our taxes, that becomes a debt that never goes away. Even declaring bankruptcy does not clear that obligation. The government has an army of auditors, enforcement officers, attorneys, etc. at their disposal. They have plenty of patience and can wait, doing everything in their power to get paid at some point, garnishing your paycheck if needed.
We are debt free from the perspective that we are no longer obligated with loans or mortgages. We use credit cards strategically and always pay in full prior to their due date. The year 2015 was the last time we will EVER pay interest! Maybe that is the new definition of debt free – paying no interest expense.
BTW- debt free means to me that all “debts” are gone, i.e. investment, mortgage, student loans, credit cards, etc.
We called Dave Ramsey and he interviewed us!
I read The Total Money Money Make Over years ago and really enjoyed the logical approach Dave Ramsey took in his book. He hit a nerve when he said if money were logical, then most of our debt problems would not exist. I am a finance person that spent years of my career running the financial aspects of $100M companies. To me it all seemed logical. This is not the case with personal finance!
Personal finance is 80 percent behavior and only 20 percent head knowledge – Dave Ramsey
I discovered Ramsey’s radio show and pod cast and listened to him off and on when time permitted. Typically, on his Friday show he takes nationwide callers and “Nashville TN walk-ins” that tell their debt story and end with a resounding “We’re Debt Free” scream. I can really feel the joy these people feel being debt free.
I have an active imagination that allows me to go off into bouts of fiction on occasion. These articles are some prime examples: Talking about priorities with my pal Buck , Jet setting frugal style to Las -Vegas , On priorities: Our friend Buck stops here
So today’s muse is about the fake interview I would have if I could get through (and if I actually dialed, their call screeners answered, and they put me through) to Ramsey’s radio show to tell my story to his listeners. I know his format so well, heck who needs him to interview me. I will interview myself! So instead of millions of people hearing my debt free scream, hundreds get to read it instead. I will use lots of exclamation marks to demonstrate the emotion!!!!!! 🙂
Hello Dave, thanks for taking our call!!!!
Dave: Folks, we have Bryan and Dianne on the line from Sedona Arizona to give us their debt free scream today.
Bryan: Thanks Dave for taking our call. We are such great fans and appreciate everything you have done for us and this country, to help people with their debt. (Most callers have some form of butt kissing comment to Dave first before he gets around to corralling them back to the reason they called)
Dave: “Thank you Bryan, so how much debt have you paid off?”
We paid off $845,487 in debt. If we go back seven more years, we had around $1.5M in debt!
Dave: “Wow, that is amazing…and how long did it take you?”
On November 1, 2012, we finally became super focused using the snowball method you have taught in your books and show. We seemed to wake up 3 three years ago. It took us 38 months to become debt free once on track, however I have been paying down debt for over 10 years at more than the normal payment rate.
Dave: “…making what kind of money?”
(I think you are getting a little personal there Dave since we have not shared our income with our readers) Let’s just say our household income was over $100k during that time.
Dave: “That is incredible. My quick math tells me that you paid off $22,250 per month over 38 months. You must have either made a lot of money or sold something.”
Dave, you are correct in guessing about us selling something. We sold a personal residence in California that became a rental property when we moved to Arizona. The sale was final in March 2015 and that enabled us to pay off over $500k in debt in one day. I have to say that was a GREAT DAY for us!!!!
Dave: “Man, you guys are rocking it. What kind of debt did you have?”
At the time, we had only a small mortgage on our home and a bunch of mortgages on rental properties. We had no credit card debt and never had any student loans associated with our educations. Oh, I guess we had a small balance on a car loan for about $7,500 that we paid off right away. I have also been paying child support for ten years. That ends later this year. (Maybe this is a debt? We have the cash set aside right now)
Dave: “That is amazing that you paid off so much debt in real estate that quickly. You must have a nice passive income coming in from that. How old are you guys?”
One of us is in our 50’s and the pretty one is in her 40’s. You’re right about the cash flow – we are finally getting to reap some benefits of our get rich, very, very, very slowly strategy. (Did I mention “very” slowly?)
Dave: “You guys are still young and have the rest of your lives to live like most people can’t. What was the most difficult debt to pay off?”
I think by far that would have to be the property in California. We worked with our tenants for nearly 4 years in a deal that would enable them to purchase that home. We were actually in escrow for an unbelievable eight months, dealing with and resolving one problem after another. It was primarily issues related to the HOA, the State of California, new lending requirements, the changing real estate market values, appraisals, and helping the buyers with some closing costs.
Dave: “How about you Dianne, it seems like Bryan is all gung ho with debt freedom. Did you or your friends think it was weird, aggressively paying off debt instead of buying new cars or fancy clothes?”
Dianne: It was challenging at times watching my friends spend money on indulgent beauty services, new clothes, and remodeling their kitchens. I was envious of them but then I would remind myself that they will likely be working many, many more years at their jobs than me. I kept telling myself that Bryan and I were trading off the precious commodity of free time and early retirement over immediate indulgences.
Dave: “Ok, we have Bryan and Dianne on the line from Sedona Arizona. They paid off $845,487 in mortgage and investment debt, over a million dollars at one point, in 38 months, making over $100,000 per year. Count it down…
Dianne and Bryan: “3,2,1…. We’re debt freak’n free!!!!!!!!!!!!!!!!!!!!!!!!!!!”
We have visualized our goals coming to fruition and our debt gone
My mind is constantly processing from a problem solving perspective. I would be ashamed to know how much of my life is spent planning and thinking about the day we finally became debt free. For me, it works best to visualize and brainstorm my written goals. This helps me look for creative methods and shortcuts to get us to our objective quicker.
We have a close friend that retired in May of 2015 and we have noticed that he and his wife have made changes in their lifestyle and decision making situations. They were debt free about a year prior to him leaving his employer and a well-paying job. There is a huge change when your life emphasis is directed to other activities, instead of focusing on escaping or hitting financial milestones.
The next six months I plan to write about the experience of becoming debt free, what it means, and how it will change our lives. It is interesting to see how easily we forgot what it was like to make house payments after becoming mortgage free nine months ago.
I wonder what will take the place of strategizing ideas about downsizing our home or becoming debt free? Do stay tuned as we share our new experiences and journey with our readers after accomplishing this major milestone.
Do we have many debt free readers out there? If not debt free, is this as big a focus for you as it was me?
Photo Copyright : Dirk Ercken