Debt destroyer

Oh hi!

I’ve been thinking about posting for awhile now, because mostly I want to bra-a-a-a-a-ag.

At the end of December 2019, we owed an incredibly embarrassing $27,347 in credit card debt. A lot of that was 0% debt, which seems like it should be not so embarrassing, it’s not debt, it’s a strategy, but no matter how many ways I tried to plan it out, the number just basically stayed the same, or even rose. I would say “if I pay $2000 toward this debt, it’ll be gone in 12 months!!” “!!!” “!!!!!!” and then I’d pay $2000 right when I got paid, and it would feel great, and then at the end of the month I’d realize that I had actually added $1800-$2400 to my other credit card, the one with interest. And then, after a few months, I’d transfer that new balance to a new 0% interest card. This is going to be great! It’s a strategy!

But it wasn’t working, it really wasn’t working. I kept robbing Peter to pay Paul except in this story, I’m Peter and I’m also Paul. Blergh.

But here it is, almost a year later, and our overall credit card debt, including the 0% cards, is $3540, and in our upcoming checks on the 15th, we’ll be paying about $3200 toward that (although we still have to pay for groceries and gas, and probably bullcrap things that I decide I need really really badly right now like a woodpecker feeder and new toys for our ridiculously small new puppy). We won’t quite pay it all off by January 1, but good lord. We are on track to pay off over $25,000 in credit card debt in one year – the remainder will be knocked out pretty quickly in 2021.

During that time, we also: replaced our gutters, which ripped off our house during a storm and were long overdue for replacement. Increased our 529 contributions. Bought a new lawn mower, a new dishwasher, a new washer/dryer (everything broke at once). Bought two sets of expensive homeschooling curricula because the world exploded. Bought an above-ground Walmart pool because what else were we going to do this summer? Spent approximately $87 billion on crafts so I could teach remotely while also, with my other hand, take care of three kids. Started horseback lessons for the kids because – outside. Ordered takeout like, a lot. Went to Disney World. Spent a ridiculous amount of money on bird seed. Paid for multiple stays in “cabins in the woods” to get out of our house, and then spent $700 on glamping equipment because cabins are nice but expensive. Tried to make up for “your childhood sucks because there’s a pandemic” with “here, have some more expensive toooooys.” We got a new stinking puppy. I don’t think we’ve been throwing every available dollar at debt – if anything, it feels like we’ve been living wastefully. So how did we do it?

I. don’t. know.

I mean, I do know. There are concrete steps that we took, but honestly, it feels like we’ve had the tools in place and just weren’t using them. By “tools” I kind of mean “You Need A Budget,” even though I don’t use that anymore. I mean a mindset shift, an increase in income, and one foot in front of the other.

The first, and most obvious: our incomes increased. Specifically, my husband’s freelancing took off, and he’s made about $20K this year. My freelance is about the same as it was last year, all told.

The second, and I guess next most obvious: our expenses haven’t really changed. I almost bought a house on a whim, but I didn’t, and our too-cramped house is $750 a month, our cars are the same high-mileage not-new cars they’ve been. The reason we got so far into debt is because for many years, we were making a low income for a growing family, dipping into poverty levels, and also trying to support my husband’s family abroad. We’re finally filling that hole in that we’ve been digging, and part of that is that we haven’t moved to a new fancy house and have new fancy cars, even though I kind of desperately want more space. Whatever, we’re fine where we are.

The third is a mindset change. I would have said that I was good at budgeting our expenses, and I was good at spreadsheets and tracking what we spent. A few months on YNAB changed my mindset completely. It seems so obvious now. What I used to do was pay for most everything with credit cards, and then, at the end of the month, I’d use my checks to pay for the credit card bill. I was good at tracking where the money went – how much we spent on electricity, water, groceries, etc. But it was kind of a passive way of budgeting – seeing how much we spent at the end and trying to cover it.

Now, my spreadsheet looks completely different. For each check that comes in, I have it broken down into the expected bills. If I’m getting $496 in a check (my current W2 check), each of those dollars is assigned to something before I even get it – so when I get the check, I just go to my list and pay the things on my list. It’s not always exact, sometimes the electricity is a bit higher or the water a bit lower or whatever. But instead of using a credit card, I actually write checks or take money directly from the bank. I also budget a decent amount for short-term emergency savings. There are still credit card expenses (grocery, gas, things from Amazon, toys and presents, etc.) that sometimes go beyond what I’d hope (they always go beyond what I’d hope), but just having everything planned from the start has totally changed how I spend.

This seems very minor, but it’s made a huge difference. I used to track my spending, now I plan it. So when I decide to buy a new washer, I look to see how much money I have in savings and, lo and behold, I have it (or, did have it, now I have to build it back up).

My savings doesn’t look as good as it should, because we kind of drained it for the washer/dryer/dishwasher two months ago and then, puppy. And, honestly, it’s a pandemic and we’re all doing the best we can. Christmas is going to be embarrassingly materialistic, and it’s birthday season around here. But it’s December 2020, and in December 2019 I thought we couldn’t possibly be where we are now.

So, hi! I’ll do a net worth thing at some point, but spoiler: I went over $100K in investments, and my husband’s work retirement account is at like $35K, so it’s kind of been a banner year for us getting on track.