Wow, how time flies when you’re having fun (or saving money). Seriously though, I can’t believe it was back in 2012 when I paid off my last credit card after being in the hole for so long. I fought for four years to pay off those damn credit cards, along with the consumer debt at the same time. It was a constant struggle, but it has paid off in more ways than one. I still shake my head in disbelief when I look back to see where we’ve come.
July 2012 was when the last of the $50,000 on credit cards was wiped out along with the last of the $25,000 in consumer loans. Some still don’t believe me when I say we used the balance transfer game to wipe out our debt, but we did. Yes, we used debt to pay off other debt and it’s a method I recommend if you know what you’re doing and you’ve faced the truths about how you got into debt in the first place.
To say my life changed after paying off the debt would be an understatement. My wife and I have realized things over the past few years that wouldn’t be possible without breaking the debt chains. We own a beautiful home where we put down 20% to end up paying less per month than we did on our old, yet smaller, home. We’ve been able to travel more (going to Europe for all of May and just got back from Jamaica). We were able to finish our basement and pay it all in cash (no recurring debt). I was able to buy a Jeep Wrangler by financing it for almost nothing and then paying it all off within a few months just to see what a good credit score can do. The best part of all of this was I was able to quit my full-time job to run my own business, which has been a blessing.
None of this would’ve been possible if we were still messing with debt. Yes, we do have a mortgage, but we are easily able to afford the monthly payments and with the interest rates very low, there is no need to worry about paying it off aggressively. That will be for another day. All I’m saying is once that debt was gone, we were able to focus on socking money away for our immediate needs, our future, and just fun things we wanted to do. That’s what the beauty of saving money in your bank account will afford you. I’ve been on both sides of the coin and I would rather stay on this side. It’s much nicer and the grass is definitely greener.
Today, I just wanted to share with you what we did after paying off that debt. I’m not writing this to gloat or boast my accomplishments. I consider myself successful and that’s the only measurement I need to feel good about my choices. I’m sharing this for those who are still paying down a lot of debt and aren’t sure what the other side looks like. I want this to show you that things will change once you get out of debt if you choose to pick the right path.
We Saved $183,000 After Debt
I was looking back through many of the things we’ve accomplished since 2012 and I can’t help but smile. Most of them wouldn’t have been possible if we were still fighting the debt battle. We’d still have to keep a tight budget, focus on funneling our money into loan payments, and looking for ways to make extra money to accelerate the debt payoff. While I’m OK with everyone looking for more ways to make money, I want you to do it in order to increase your net worth or help you travel more. I also want people to continue looking for ways to earn more, no matter if they have debt or not. It’s so important to learn how to increase your income, no matter what financial stage you’re in.
So, since 2012, my wife and I have been able to save over $180,000 to do many of the things we’ve wanted to do. Our biggest project was the basement (part of my home office) and that was a necessity because our second child was going to be born soon. He ended up getting my old office, so the basement was necessary. The best part is we were able to pay for it all in cash. We saved up for it for some time knowing we wanted to finish it. There is no greater feeling than being able to pay for something like a big construction project with cash. No loan worries or anything else. Just write a check and keep moving on.
How We Saved Our Money
OK, I’m sure you’re more interested in how we saved so much money than what I’ve written above and I’m OK with it. I had to lead you into the story before I could share my tricks and tips. To be completely upfront here, the $180,000+ was actually all saved in cash. It did not include any money we put in our retirement investments and the reason I say that is because I don’t believe in raiding my investments to do things we’ve done. That money is there to grow on it’s own (thank you compound interest). I also refuse to pay any penalty for taking out a loan against my investments. No thanks.
Some might thing we’re crazy for hoarding nearly $200,000 in our bank accounts, but that was done for the specific reason of we’d need it to do these projects. We needed the liquidity and that was most important to us. Now that we’ve completed many of our big ticket projects, we’ll be funneling most of the cash into retirement investments.
Step 1 – Make Sure You Have a Saver’s Mindset
It wasn’t until I switched my spending mindset to one of a saver that we were able to make a dent in our debt. You see, most people who look to pay off debt do it because it’s a burden. The problem is many of them don’t know why they got into debt in the first place. If you can’t pinpoint your debt problems and fix them, you’ll never be able to save. Heck, you’ll rarely be able to stay out of debt for an extended period of time. That’s just how it goes. It’s all about the mindset.
After that last credit card was paid off, we were already in a saving mindset. All of the money we’d been giving to the banks, we started paying ourselves. We socked away money in our savings accounts to build up our emergency fund, but we went much further beyond. We had goals and in order to hit those goals, we needed cash. I wasn’t going to turn around and get back into debt, so we could have this or that. It’s one of the big reasons I saved while paying off debt.
Step 2 – Understand Your Wants and Needs
I’ve written about wants and needs before and it’s so important when you want to save money. Heck, it’s important in just money management. You need to know the difference between wants and needs or they will wreck your financial life. If you don’t know the difference, please read this article and hopefully you will start working on understanding your own. Remember, most things are wants, not needs!
Step 3 – Funnel Your Money into Savings Goals
Without money goals, how are you going to know what to do with your excess money? You see, we created actionable goals to make sure we could figure out where to put our money. Without those goals, we probably would have spent the money as we saved it on mindless junk we never needed.
We talked about creating savings buckets in your bank accounts before, but no matter what you do, just make sure you have a savings account.
When you have money left over each month from your regular budget, you need to funnel it into your savings accounts to fund your goals. On top, you should always have a savings line in your budget as it’s important to account for savings each month. You have to pay yourself before you pay others. Heck, I even treat my savings like a monthly bill.
Related: To make saving money easier, check out Digit. It will automate your savings and it’s a tool I use everyday.
Step 4 – Learn How to Increase Your Income
This is probably the most important step and one where people struggle the most. Seriously, without me going outside of my regular job and trying to increase my earning potential, we wouldn’t have saved so much since 2012. There are hundreds and hundreds of ways to earn extra money. You can check out all the articles we’ve put together here.
While it’s not for everyone, I’ve made money blogging, helping people with WordPress, selling things on Craigslist, and even testing websites. These are just a few of the things I’ve done, but I always try to learn new ways to increase my income.
Once you learn how to earn more, you can save more. This is where we thrived and continue to thrive. Earning more money allows you to quickly fill your savings account to reach all money goals.
The key to this step is to make sure you don’t spend the extra money you make on frivolous things. That would waste what you’ve done and be counter-productive. If you have the urge to spend, take that money and place it in savings quickly.
Step 5 – Don’t Forget About Long-Term Savings
While we saved a majority of our money as cash just sitting in our savings account, that doesn’t mean I left my retirement savings out in the cold. Just not true. I think saving for retirement is vitally important and something everyone should do. I have a few accounts at different places, but most of my money is invested at Betterment or Vanguard. Each system provides me with different features I’m a fan of.
Make sure to never forget about your long-term savings goals. Retirement is a real thing we all have on the horizon. This is why thinking about your retirement savings needs to be on your mind while you work on saving money. The $183,000 we’ve saved doesn’t count any of our retirement savings because that’s something I don’t touch and don’t plan on it until the time is right.
Step 6 – Monitor Your Money
Another important step is to make sure you monitor your money and your goals. You can use spreadsheets or tools online to help you. I use and love Personal Capital, but you can also use Mint.com for easy access to your money and seeing how well (or poorly) you’re doing. No matter how you monitor, just make sure to do it.
It’s so important to monitor where your money is going, how well you’re doing against your goals, and just seeing if you’re paying more money than you should be. It wasn’t until I put all of my debts on a whiteboard that I realized how bad off we really were. Seeing it can make you believe it.
The Moral of Our Story
I want to reiterate that I’m not sharing this to boast about our achievements. While I’m super excited to look back and see what we’ve done since paying off debt, I’m sharing this to help those who want to change their financial lives.
If we had continued our spending mindset and kept buying useless junk, we probably would be in a house we couldn’t afford, paying the bank huge fees on credit card interest, and still making the many money mistakes we made prior. This is a scary thought.
Remember, I was scared as hell when paying off debt. I didn’t know what the other side looked like. I didn’t know what to expect when the last credit card was paid off. Would we go right back into debt? Would I stop trying to earn more because my goal was completed? The fear inspired me to push harder and faster when it came to earning more, saving more, and investing more.
Paying off debt changed my life and the money we’ve saved over the last few years has shown that you can make a turnaround after debt and we’ve done it.
Join me by doing the same!
Do You Know Your Credit Score?
Even if you don’t plan on getting a loan, a good credit score can affect your ability to get a job, a place to live, and will save you money whenever you need to borrow. If you don’t know your credit score, you can get yours free at Credit Sesame. It’s 100% free with no credit card required to signup. I’ve been using it for years to monitor my credit score.