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Today’s reader success story is from Matthew and Tiffany. Follow them as they share their journey towards debt-freedom!
1. What is your background and financial history with debt?
My first experience with credit was not good, as I was only just 18 at the time. My parents co-signed a small visa card, which I used on a senior trip.
I had to pay it off before I shipped off to boot camp. After boot camp, my debt exploded.
It was almost criminal to give an 18 year guy a $7,000 credit limit! Biggest mistake of my life!
My girlfriend however, was always the frugal one. I was amazed that she had so much savings, but I thought, “What’s the need for savings, when you have a credit card!”
Despite the fact we both grew up in households that struggled to pay the bills, we both wound up taking very different financial paths. Tiffany works for a major gas processing company and I work in the security field, while both of us make very good money.
2. Why do you think it was so easy to fall in the debt trap?
It was easy for me, because I could have what I wanted, when I wanted it. I watched my parents struggle to put food on the table, and I thought the only way to have ‘success’ was to get it all now and pay as you go.
Tiffany on the other hand, understood the value of having money in the bank, and paying for purchases now, rather than later. Financial management was a lost language as far as I was concerned.
I absorbed the false reality of the marketing and the products I wanted, Tiffany was able to keep perspective of reality.
3. What was the defining moment when you realized you needed to get out of debt?
We were married in 2001 and her biggest mistake was letting me take care of the finances. Within 10 years, we found ourselves in over $85,000 in debt, not including the mortgage on the house.
I promised her at our wedding that someday we’d have “honeymoon do-over” as I couldn’t leave. (Right after 9/11).
In 2011, for our ten year anniversary, I had a great idea to take her to Hawaii, and also to pay cash for it. I knew we were deep in debt, and couldn’t put in on a credit card, so I started saving up for it, (while paying all the debts with the minimum payments).
We very quickly found out the joy of having so much fun, and having it all paid for. For more than a decade, I lived with the constant burden, promising myself that everything would be okay.
But on the flight to Honolulu, I picked up Dave Ramsey’s book, The Total Money Makeover, and was immediately ensconced at the presentation of the material.
As soon as we got back, I immediately wrote down all the debt we had, and just about had a heart attack at what I saw. Tiffany was mad and she was crying. I took care of the finances, and she had no idea, (and I honestly didn’t either) at the magnitude of the problem.
4. What were some of the main obstacles that you had to overcome?
We started the 7 step program ready to meet the challenge.
One of the biggest obstacles I had to overcome, was convincing my wife that I had what it takes to make this debt problem go away.
I say “I” because Tiffany always was very uncomfortable with the debt, but trusted me, and I put a huge dent in that trust. The next major obstacle we had to overcome was writing a budget.
However, putting feet to that was the best thing we ever did, because we came face to face with, and then began laying the ax every root of debt that caused it spring up.
I think that as a Christians, we came face to face with the fact that 95% of our debt was due to wants and keeping up with the Jones’ and not on actual needs that we should have been trusting God to meet.
Many people may say, “What about going out to eat, and entertainment?” We found that giving up that stuff was much easier, once we understood the magnitude of our debt.
We didn’t feel like going out because our debt had made us sick.
5. How much total debt did you start with and what did it consist of (student loans, car loans, etc)?
On January 31st, 2012, we began our debt snowball. When we totaled up every last dime (except the first mortgage) we were $84,855.20 in debt.
It was years of miscellaneous stuff on credit cards, personal loans, a second mortgage, a large 401(k) loan (very bad move!), and two auto loans.
6. How long did it take you to pay down your debt?
We went absolutely crazy with throwing everything we had our debt, using the plan outlined in Dave Ramsey’s book. I thought for sure it would take at least 4 years.
But amazingly, when you commit to it, and I mean truly commit, it was astounding at much we were able to pay off. In one year exactly, we paid off exactly $52,050.83.
In full disclosure, our gross income was just less than $120,000. We still have the 401 (k) loan and one credit card to pay off; about $28,157. We are still going like crazy on the debt, and we hope that by November we’ll be done.
7. What’s your best tip for someone who finally wants to get out of debt?
Well, our best tip, is we had to understand that debt is morally wrong and we had to stop making excuses for our debt.
So many people complain about the government being trillions in debt, when the huge majority of us are in the same boat as individuals or families because we choose to be there.
Yes, some can’t help it, but most can. There is no doubt that most people know there’s a problem, and may even know the solution; most don’t know how, or are afraid, to put feet to changing their lifestyle and getting out.
It’s like stepping off the boat, looking down, and finding yourself standing on water, it’s the most amazing and remarkable feeling in the world.
Dave Ramsey says getting out of debt is 20% knowledge and 80% behavior. After one year, we’re a firm believer in that!