Being debt free
Well, we did it... we are 100% debt free.
Our current situation:
Our previous situation:
Being debt free is just surreal as we both went to college for a long time and got advanced degrees, putting us in over $78,000 in debt that we've been working to pay off for a combined 5 years now. We also both have nice vehicles that we financed for four to five years, paying mine off this year. I was broke through college and lived on my three credit cards, racking up nearly $15,000 in debt. I closed each of my accounts when I graduated and had been working hard to pay down my debt before I even met David. David was in a similar situation, coming in to our marriage with nearly $10,000 in debt. We have always been a multi-six-figure income family, even when I quit working and were living day-t0-day well within our means, sending every extra dollar to our debtors, but it didn't seem we were making a dent in our debt. We were living in a reasonably priced town home back in Texas and didn't have extravagant bills so, it was really frustrating to see any real results month-to-month.
When we moved to California and took the job with Pixar, our income went up substantially, as well as our benefits so, we were able to come up with a 3-year plan to become debt free, which was wonderful but seemed to be so far out of reach as we had just given birth to Emily and were hoping to purchase a house within the next 5 years. Because we rent and have almost no commute to David's job, our Cost of Living was very similar to what it was back in Texas but a home here in The Bay Area that is move-in ready averages $850,000. David & I want to own our home before we retire so, we would have to put $200,000-250,000 down and would have to have little to no additional debt each month to afford the $4,000-4,500 monthly mortage payments. Talk about overwhelming! First we have to wait 3 years to be debt free and we have to save a quarter of a million dollars...? We felt it was completely out of reach and sort of accepted the fact that we would never own our own home even if we could actually get out of debt. Ugh...
When we got our inheritance from David's mother (she had bonds, stocks, life insurance, valuable personal property and a house she owned free & clear), it was like doors of opportunity had begun to open and that our dreams may come true afterall.
We are so lucky David's mother was prepared for her imminent death and feel so blessed that her preparations have given us a fresh start! The death of his parents was so hard on him but because such positive results have come of it, it's been a little easier to heal and move on.
Our debt situations really isn't much different from the rest of the population, which is scary because only a very small percentage of that population has the earning-potential that we have. How do others do it? Without inheritance or winning the lottery, how does anyone climb out of debt while living day-to-day and raising a family? Just a thought...
Our current situation:
- We own both our cars, paid off our student loans and paid off our credit cards that we both had before we got married and we honestly cannot believe how good it feels.
- We have also set up an ING account with 6 months of living expenses (at the advice of our FA) and are meeting with our CPA to discuss 529 plans for Emily.
- We have also increased David's 401(k) withholding percentage and set up additional IRA's at our bank for him and myself, as I'm not working and have a very small 401(k) plan with a previous job.
- We have accomplished all our financial goals at such a young age and are so proud of ourselves! We hope this new financial freedom will lead to us finally owning a home!!!
Our previous situation:
Being debt free is just surreal as we both went to college for a long time and got advanced degrees, putting us in over $78,000 in debt that we've been working to pay off for a combined 5 years now. We also both have nice vehicles that we financed for four to five years, paying mine off this year. I was broke through college and lived on my three credit cards, racking up nearly $15,000 in debt. I closed each of my accounts when I graduated and had been working hard to pay down my debt before I even met David. David was in a similar situation, coming in to our marriage with nearly $10,000 in debt. We have always been a multi-six-figure income family, even when I quit working and were living day-t0-day well within our means, sending every extra dollar to our debtors, but it didn't seem we were making a dent in our debt. We were living in a reasonably priced town home back in Texas and didn't have extravagant bills so, it was really frustrating to see any real results month-to-month.
When we moved to California and took the job with Pixar, our income went up substantially, as well as our benefits so, we were able to come up with a 3-year plan to become debt free, which was wonderful but seemed to be so far out of reach as we had just given birth to Emily and were hoping to purchase a house within the next 5 years. Because we rent and have almost no commute to David's job, our Cost of Living was very similar to what it was back in Texas but a home here in The Bay Area that is move-in ready averages $850,000. David & I want to own our home before we retire so, we would have to put $200,000-250,000 down and would have to have little to no additional debt each month to afford the $4,000-4,500 monthly mortage payments. Talk about overwhelming! First we have to wait 3 years to be debt free and we have to save a quarter of a million dollars...? We felt it was completely out of reach and sort of accepted the fact that we would never own our own home even if we could actually get out of debt. Ugh...
When we got our inheritance from David's mother (she had bonds, stocks, life insurance, valuable personal property and a house she owned free & clear), it was like doors of opportunity had begun to open and that our dreams may come true afterall.
We are so lucky David's mother was prepared for her imminent death and feel so blessed that her preparations have given us a fresh start! The death of his parents was so hard on him but because such positive results have come of it, it's been a little easier to heal and move on.
Our debt situations really isn't much different from the rest of the population, which is scary because only a very small percentage of that population has the earning-potential that we have. How do others do it? Without inheritance or winning the lottery, how does anyone climb out of debt while living day-to-day and raising a family? Just a thought...
OMG Amanda! I am so happy for you guys! I bet it is a great feeling to 100% debt free. Mark keeps telling me that we are in a better financial situation than most people, but I hate having monthly payments on anything! I guess I should be thankful that we don't have $1000s of dollars of credit card debt like the millions of other Americans do. That is a really smart thing to do with having 6 months of living expenses in a savings account...just remember that you are only insured up to $150k so you may want to have multiple accounts at different banks. Oh, for your 529 plan...do some research on the mutual funds that they will let you invest in...don't take any FA word for it because they are being paid to push particular products and each mutual fund may be offering them a different trail commission. My FIL is a stock broker so I have a little inside knowledge. Anyway, I'm super happy for you guys and if it feels weird not being in debt then I can just send you some of our bills!
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