Top Tips for Debt Free

Last week we celebrated our second anniversary of becoming consumer debt free.  It was an intentional plan that started back in the summer of 2010 and fifty months later we had accomplished paying off $109,000 worth of debt.

The journey started years earlier when my wife and I got married and started a family. We never really had a plan for our money, overspending over the years to get to that point. We didn’t communicate often about money, other than to say what credit card to use to pay for something we didn’t have the money for. We had five credit cards at one point, juggling minimum payments until they became too much to handle even with a six figure income.

It was at that point we knew we had to make a change. We began to educate ourselves about all things personal finance, built a plan and dug in. We involved our three children and kept our eye on the end goal of being debt free.

With two years under our belts, being debt free is even sweeter than I ever imagined. Stress has been reduced in our lives, the money fights don’t occur often, and we are better prepared to handle what life throws at us. I say “we” because it has truly been a family effort. I think the thing I’m most excited about is the head start our three teenage children will have with personal finance knowledge. I can’t wait to see what they will do with it.

Credit Cards

Credit cards were the tools we used to sink into six figures worth of debt, but what we’ve learned over the last few years is that it wasn’t the plastic card in our pockets that was the problem, the real problem was our behavior.

Once we learned to change our behavior and break our bad habits with money we can use credit cards responsible. They are just tools like a debit card, checks, cash, etc. For a period of time we cut up our credit cards because we didn’t trust ourselves to use them responsible.

We now, believe it or not have four credit cards. We pay off all credit card balance in full each month. We only use credit cards to purchase items with have cash for. We do this to take advantage of rewards and save money on travel. An item that has a lot of priority in our lives. We saved over $2000 on airfare this summer following this method.

Even two years post our debt payoff we still need to be diligent about our spending. It can be very easy to slip back into old habits and overspend using plastic. We never want to go back to that place ever again, so we continue to track spending and communicate often.

Cost of Holding On / Letting Go

I recent read two great articles by Carl Richards, one about the cost of holding on to something and another a follow-up about letting go. I even dropped him an e-mail. The really helped me put some closure on my year two experience of living debt free. It has been great from one stand point, less stress, better communication, but a job loss hung around for several months. It happened right at the point that we were really feeling confident about our new debt free status. I’m grateful that we were debt free and had savings when the event occurred, but still it was lingered.

Reading and listening to Carl was just what I need to stop wasting energy on those things in the past. My former company, my co-workers, being downsized, etc.

You might be asking how is this related to money. Well I was spending so much time thinking about these things, wasting time and energy it was costing me focus. It was clouding my ability to focus on things like moving forward, make more money, saving money, pursuing things, etc. I know that may sound a bit vague, but try it yourself, read and listen to Carl’s articles than let something go. Once you’ve put it to bed, take that extra time and invest it somewhere else more productive.