Slashing our debt – Molehills that turn into mountains
Our situation feels a bit dire. We have a mountain of student loan debts in front of us. We have some foothills of credit card debt as well. There are valleys where the savings should be. And we only rent the basecamp, we don’t own it.
First a quick assessment of the positives: we have had excellent medical insurance throughout the Dude’s turmoil, and all the hospitalizations and follow up care has cost us almost nothing. I have a very decent salary and a pension. The Dude has good, marketable degrees and skills. The debt is a known quantity and beyond the interest, I think we have stopped the bleeding. We are both smart and stubborn.
Time to start climbing
I have reached a level of fed-up that I wish I had known 10 or 20 years ago. But I am here now. I have picked up Dave Ramsey’s Total Money Makeover, and I am listening to his podcasts.
There are some things that I disagree with him about on a systemic level, but overall his advice is making a lot of sense for us where we are right now.
The Dude and I have had some issues along the way so far. I go deep and fast into a new concept and it takes him longer to get up to speed. I am terrified of falling off the wagon here and so I am going all in. That has caused some friction, especially because I have been doing a lot of work on learning and implementation, while also working full time and commuting forever. Unfortunately, it is really easy for me to feel resentment if I think we aren’t on the same page. We have had some good talks and he is working on learning the material. I am definitely still learning too.
We are currently compiling an emergency fund. Then we will start climbing Debt Mountain.
As we get started, we are pretty much no-spend. There are some car issues that are getting funded. There is still an occasional trip to Wendy’s or Taco Bell for the value menu. But no clothes, no entertainment, no coffee.
One of the places I am struggling is with Public Service Loan Forgiveness. Dave Ramsey says don’t do it. I get it. 10 years of payments is a long time. The likelihood that the program will exist and will honor its commitments is always in question. So why would I do it? Because if it works out, it would mean tens of thousands of dollars in forgiveness. And the forgiven balance is tax free.
But if it doesn’t work out, my loan amount will balloon even more because my payments won’t even cover all of the interest each month, let alone the principle. I am signing up for an income driven plan and will keep an eye on the progress over the next few years.
Whether or not we pay my loan or it gets forgiven, our plan is to have all debt paid off, including a paid-for house within 10 years. It is a big goal, but I have learned that I can have a single-minded focus when something really matters to me. And this really matters.
I am tired of carrying this debt. I want to be financially independent. The first step of that is to pay off the debt. After slashing our debt, we can save up for a house and a decent retirement. If we have those pieces in place and as long as we have the ability to do some travel, I will have achieved my financial goals. And I will do this one footstep, one foothill, and one mountain at a time.
UPDATE: Check out some of my budget successes here.
Read more budget success here.