I thought I’d start these financial posts with an overview of where we’re at and where we came from.
My wife and I came into adulthood in the early 2000s when credit was flowing freely. Regularly, we’d get credit card offers with 0% interest and no payments for a year. Getting a home loan only required stating your income and not actually having to prove anything. It was a great time to justify getting yourself way in over your head with debt.
I remember a great commercial from that time that I found to be absolutely hilarious (view it at the end of this post). It was a man talking about all the great stuff he has and how amazing it is. Then he lets us know that the reason he has all of it is that he’s “in debt up to <his> eyeballs.” Although it was supposed to be a joke at the time, it hit a profound nerve with me. I think in the back of my mind, that is when I started to realize I needed to make a change…unfortunately, it took awhile longer for my subconscious to convince my conscious to follow suite!
Anyway, with all the easy debt available, we took full advantage. Within five years of marriage, we had already moved into our 3rd house, each consistently larger, with the most recent one being over 4500 sq ft. We had one child…and 8 bedrooms / 4 baths….there was a bit of a disconnect.
This was November 2007. We were paying about 50% of our take-home pay toward the payment on a 30-year loan. It was unsustainable, and thinking about savings wasn’t even an option at that point. We struggled to make the payment every month, and I’m not sure we could have kept doing so if I hadn’t been blessed with a large raise about one year into owning it.
Somewhere in mid-2009 was where we hit our lowest net worth. It was the middle of the Great Recession. We’d been able to make the payments on our home, but many around us had walked away. Houses with our same floor plan were selling for over $100k below what we owed. We had credit card debt. We had car loans. In all we were probably worth a negative $150k.
At that point, we decided to make a change. We started actively paying off our debt with a concentrated effort. We starting saving for retirement. We were lucky and the house by 2015 was worth about $40k more than we bought it for.
By this time, I had a different job that was about an hour commute each way. We decided to move while we had the chance. We bought a smaller home (4 bed / 3 bath and 3 kids this time) with 15% down and a 15-year term which was approximately 23% of our take-home. This gave us a lot more wiggle room for other items.
We had paid off all our credit cards by this point, but the house was a fixer-upper, so we again got drawn in by the temptation of debt. We put in a sprinkler system and landscaped the yard. We purchased all the items necessary to remodel the three bathrooms, and we’ve completed one so far with two more ready to go. In all we got about $20k into credit card debt again, and almost immediately regretted it… I think this time (with you keeping tabs on me) getting rid of debt is going to stick!
We were fortunate that I was asked to do some consulting work for a 6 month period, and using that we were able to max out our Roth IRA accounts and pay our credit card debt back down to about $6,100 at the end of June 2017.
I just started some more consulting (for three months this time), and I think we’ll be able to get the rest of this debt taken care of for good! We might even have enough left over to max out our Roth IRAs for 2017 early.
We also need to keep in mind and create a game plan to pay for some driveway work around the outside of the house, new siding for the house, and a fence to separate the front and back yards. With those things completed, our fixer upper will be in pretty good shape.
In the next post, I’ll show our status at the end of June 2017. It will be the start of where we’ll record the status every month. Also I’ll be stating a goal for the following month during each monthly status. This initial one will be: pay down the remainder of our credit card debt!