Type of Life You Want-Getting Out of Debt

This is a continuation of Life You Want to Live- A Financial Education. It is not a post about kink but how Mister K and I live the life we choose, and what we did to get there. Debt is a huge issue in today’s world, and something that is almost completely unavoidable without the right lessons.

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Seven out of 10 Americans are one paycheck away from being homeless

Pres Michel

The above quote should be a wake-up call. Not just to Americans (of which I am not), but to all worldwide. As a society, we’re constantly bombarded with advertisements for the next best thing. These ads depicting sexy men and women who appear perfectly well kept. Living lives filled with luxury and much more than simple needs and comforts. Even our children have this idea implanted in their minds that without this toy, or these shoes, they’ll never fit it. Never be as good as the kids next door.

In our attempt to keep up with the Joneses, we buy things we don’t need, for space we don’t have, all to impress people we don’t like (this line may or may not be in a popular movie named Fight Club). It’s a constant rat race and ultimately, we keep putting ourselves back in the box with all the other lab rats. Simply because we’re taught that is what we are supposed to do.

Discovering the Flaw in the Plan

I can honestly say, I fell for it. The concept that if I had a new car, a big house, and a six-digit salary, I would be happy. But guess what, I wasn’t. What the big house brought me was 250,000 of debt and that’s not including the interest. On a 25-year mortgage, the interest alone was close to 145,000. That means that I would pay almost two thirds more than my house was worth.

I had the car, and the price tag to match. 60 months of payments and it could all be mine, for $199 every two weeks. Do the math on that and you have a total of $23,000+. The car was worth $15000 and dropped to $12000 the minute I drove off the lot. Not a very good investment.

I got the job with a six-figure salary, but it cost me close to $80 000 in loans to do it. As a 23-year-old single mother, I was told I should be happy. But I wasn’t. I was anything but. I wasn’t happy because debt followed me around like a dark cloud. The idea that I was living the good life seemed preposterous. I was so far in the hole, that even the possibility of a holiday, time away from the job that stressed me out, seemed so far out of reach that I didn’t ever plan on one. Sure, I had a house and a car, a good education, but if I lost the job tomorrow, it would all be gone. And that’s exactly what happened. The government made cuts to healthcare, and suddenly first-year nurses were no longer employed.

Going Back to the Basics

Going back to the post –Financial Education, I wrote about how we were all taught that to have a good life, we needed to do well in school, get a good job and work our way up the ladder. I also mentioned that I’d been instructed by a highschool teacher about how to save. When my career fell through, I was certainly glad that I had those lessons. But somewhere along the way, I forget that most important question, “what type of life you want to live?” My answer years previously was, “one where I live beneath my means and never have to borrow, beg or steal.”  But looking at it honestly, I had to borrow quite a lot to get a piece of the good life.

That is where I was when I found the book that changed my life: Rich Dad, Poor Dad- What the Rich teach their kids about money that the Poor Do Not. And I was brought back to that second question from my high school educator. “What are you willing to do to get it.” At 23, with another mouth to feed, out of work, with my savings dwindling every day, I want to say I was willing to do almost anything, but that’s not true either. I wanted what I was told I deserved. I had put in the work, got the degree, how could I not be successful?

Reading Rich Dad, Poor Dad, I came to see that I was relying on an outdated idea. For our parents, the concept of getting what you wanted by doing the same as those before worked well. But that mindset didn’t work any longer, simply because everyone was doing it. What I needed to do was make money work for me.

Changing Circumstances

It was around this time that Mister K and I started talking about moving in together. He had separated from his now-ex-wife a few years prior and in the process, took on his own lump sum of debt. An amount very close to mine. Together we would owe close to half a million dollars. And for what, some wood covered in shingles and a couple of cars that were losing value simply from being used as they were intended?

We knew we didn’t want to live without the living part. Existing wasn’t really what we were looking for. We enjoy travel and good food, being outdoors and trying new things. A life of debt payments would never grant us that.

Figuring out Options

Our options to get out of the pit we were in were not great, but one needed to be made.

1. Claim bankruptcy and lose our good standing with the banks; a choice taken by many simply because it’s an easy out.

2. Continuing to work more than we should and have a life that felt like less. Less time, less money, and less enjoyment.

Or

3. Sell it all and start again, and slowly crawl our way out.

We chose option 3.

Selling my house was much more of a process than Mister K’s. My mortgage being so new, I still had a few years left before I could legally sell without paying a penalty. We decided to go ahead anyway, an ordeal that cost almost $15000 in total. We sold our cars and paid off the loans for those and then focused on the stack of useless items advertisements had encouraged us to buy. T.V.’s and electronic systems, furniture, knick-knacks, and anything else that wasn’t a need.

Knowing we liked the country, we found a piece of land that we could rent, luckily with a house in place that was for sale. The owner wanted to eventually move it so the land could be rezoned, but he was happy to rent it to us, for ridiculously cheap. The house was valued at $24 000 and in all fairness, should have been condemned. For months, we camped out until we were about to do enough work and make it livable.

Big Changes = Big Results

But that day came, and it wasn’t glamourous, but it was ours. Our house. Paid for 100%. It’s still on the same piece of land, and the owner no longer want to rezone. He still only charges us a very reduced price and it includes our water and waste removal, a cost we’re happy not to have. We’ve been working on that home for the past 15 years, but it finally looks the way we want, with all the comforts that we could have bought, but decided to save for instead, just to keep out of debt.

All of our extra money went to paying off the remainder of the accumulated financial obligations. The student loans that I was supposed to pay for 25 years, were paid off in 8.

In 10 years, I was able to give up my job and come home with my kids full time. Something we’ve done for the past 4 years.

Where There’s a Will, There’s a Way

To this day we follow the 30/30/30/10 method that was taught to me by my high school teacher. We’ve had to learn to budget for what we have, plan for what we’ll need, and save for what we want. Three years ago, we took a family vacation to Mexico, and next year hope to travel across Canada on a three-week trip.  Our debt is less than $5000 now and should be paid off in full by the end of this year. The sacrifices were huge, but the payoff has been worth it.

Because we have learned to live beneath our means, life is much different than it was when I was a kid. My children have never once heard “no”, simply because we couldn’t afford something. Instead, I always ask them, “what are you willing to do to get it?” A good lesson and something I hope they take with them going forward.

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This post is part of May More’s ad hoc meme #Lifematters #Moneymatters and consists of four parts. Next is budgeting where I’ll talk about what the 30/30/30/10 method looks like. See you then!

If you missed the first part of this post, you can read it here.

For more #Lifematters posts, click here.