Thanks to the community who post here with words of advice and motivation, and thanks to the other personal finance websites out there that I read, I’m happy to announce that I’ve crossed a huge landmark in my journey out of debt and toward financial independence.
When I started this blog in January 2013, I also started adding up the debt I’d paid off to what I’ve added to my retirement savings to find my net worth. I’ve still got a lot of work to go and it has certainly been a long 20 months, but I’m proud to say that as of this month, that number has gone up a cool $100,000!
Today, I’d like to talk about some of the lessons I’ve learned.
(1) Find a community
I often say that the best plan is the one you’ll actually stick to.
The most important step in getting here this quickly was definitely the community I found through this blog. So few people in my offline life talk about debt that it would have been very easy to feel alone — to feel as though no one else was going through what I was.
When I have had especially tough months, I’ve often thought of just making the minimum payments on my debt until I died or somehow the problem fixed itself. It’s no stretch to say that the kind words of this community kept me on the right track by reminding me that there are others sharing my struggle. And if they can do it and if they’re believing in me, then I’m gonna make it too!
And as a result, here’s a chart of how I beat up this debt and added to my net worth, by month:
(2) Make paying off debt and adding to retirement automatic
I set up my paycheck withholdings to automatically send a big payment each to debt payoff and retirement savings at the beginning of the month. This way, as far as my brain can tell, my monthly salary isn’t $4,000; it’s $3,000 (for example). The result is that I’m never even tempted to spend too frivolously with that money because I never even have a chance to see it.
(3) Being aggressive was a good thing
What do I mean when I say to be aggressive?
Sure, there was no way I could have guessed that the stock market would do as well as it did these past couple years, and my investment strategy was far from aggressive. But I certainly fought aggressively to find new, creative ways to cut my expenses, doing everything from staying with roommates to buying everything used or making my own laundry detergent — all so that I would have as much money as possible left over at the end of the month to both pay down debt and save for retirement.
(4) I focused on debt, but didn’t turn down free money
Of course, even while I’ve been working as hard on my own to save money to pay down debt and save for retirement, I certainly wasn’t going to turn down any help my company was offering.
Debt has felt like the biggest financial emergency I might ever face, but even with my total debt down in the dumps, I’ve always made sure that the number I’m targeting isn’t just less debt, but a higher net worth. This requires looking at the bigger picture which includes adding to retirement savings at the same time. At a bare minimum, no matter how tough times got, I always made sure to contribute enough to my 401(k) retirement plan to take advantage of the company match.
And it was a lucky thing that I did too — of the $42,500 my retirement savings have grown since January 2013, only about 2/3 of the gains to my retirement accounts came out of my pocket. The rest came either from my employer matching my contributions or from market gains.
So where am I in absolute terms? Still nowhere amazing, as this chart will show:
Six-figure debt is still a terrible place to be — especially since I don’t make a six-figure salary — but I know that I’m headed in the right direction for sure. With the motivation to keep going, my next goal is obvious — I want to knock the next $100,000 off and finally lay this debt to rest for good!
How was everyone else’s October?