Got debt? So did Deacon Hayes; but in a year and a half, he'd shaken it off almost completely, something he documents on his site, Well Kept Wallet. How'd he do it? We spoke to him on that very topic.
Could you walk us through how you got debt-free so quickly?
The first thing I did was research. I wanted to find people that were successful with money and then learn everything I could from them. I read books, I read articles on the web, I watched videos, I even took a personal finance course to learn all that I could about handling money well. Through this research, my wife and I decided that the debt snowball was the best approach for us to tackle our debt. We listed our debt smallest to largest, and we threw any extra cash that we had toward our smallest debt. This built a sense of confidence that we never had before. Once we saw that first debt disappear, we knew that if we stuck to this plan, we could achieve our goal of paying off all $52,000 in 18 months. And that is exactly what we did.
It's interesting that you and your wife did this together. How do you recommend couples talk more openly about money?
We could not have eliminated our debt so quickly if my wife was not on board. She was an integral part in making this possible. I recommend that couples talk about the "why" behind why they want to get out of debt. For each couple, that "why" could be different. Some people want to get rid of the stress that comes with owing money to several lenders. Some people want to get out of debt so that they have money to save for retirement. Others want to pay off their debt so that they are able to have money to invest for their kids' college. Whatever that reason is, both spouses need to agree on the importance of that "why" in order to make progress moving forward.
When looking at your budget, what are you looking for? What gets cut and what stays?
For us, we cut anything that was getting in the way of us achieving our goal. We went through every line on our budget and tried to find a way to decrease the amount we spent for each category. The easiest place to start was our variable expenses like groceries, entertainment and dining out because these were expenses that we had more control over. We decided to use the envelope system to put boundaries around our spending for these categories, and that was a huge help. If there was no money left in the grocery envelope, then we just used food that we had in the freezer instead of buying more groceries. It is amazing how much we saved just by using the cash envelope system and limiting the amount of money that we spent on variable expenses.
When it came to fixed expenses, we were able to save a decent amount of money there as well. We canceled our cable and we just used Netflix instead. I called our internet company, and I asked them if they had a lower rate plan and they did. We saved almost $30 per month just doing that alone! I then called the rest of our service providers (like our cell phone provider and our auto insurance company) and asked them for a better deal, which we were able to get as well. Lastly, I sold my brand-new car that was slightly underwater, so that I could get rid of the $362 car payment that was attached to it. I bought a used reliable car for about $2,200 and I drove that the rest of the time while we paid off our debt.
Why is debt so common in America these days?
Debt is common because we have an "immediate gratification" culture. Why wait to buy something if you can just borrow money for it and have it now? The challenge with this mentality is that it easy to let the debt build up and for people to pay exorbitant interest rates to have things now instead of waiting. I know this from first-hand experience since we racked up $52,000 in debt.
What are some common misconceptions about personal finance?
One of the biggest misconceptions that people have about personal finance is that having a budget is restricting. A budget is just the opposite. It is freeing because you know that you have the money that you need to achieve your financial goals. It can be challenging to stick to a budget, but that is why you need to have a strong reason behind why you are budgeting. Once you understand the "why" behind what you are doing, then the "how" becomes much easier.
Are our attitudes changing when it comes to debt?
I am seeing a trend in people really being motivated to become debt free. People are tired of the lives being controlled by debt, and they are taking a stand. There are several debt success stories out there of average people doing whatever they can to eliminate their debt and take back control of their lives. Will you be one of them?