We all have one, right? The moment when we realize something has gotta change!
For me, it came around the spring/summer of 2016, when the financial planner we met with gathered all our information and told us that we were in debt up to our eyeballs ($174,011, to be precise, with student loans and car loans). The planner was relatively optimistic though, and told us if we buckled down we should be able to get it paid off in 5 years or so.
5+ years seemed like an eternity to spend under this ‘crushing amount of debt’ (our planner’s choice of words, but appropriate, I think). I was determined to find a way to pay it off sooner!
And so my obsession interest in personal finance began…
Getting started
About $162,511 of that $174,011 debt was from student loans, with the remainder coming from our auto loans ($11,500). I was preparing to graduate and my husband had graduated the year before. We didn’t have any children and were in pretty good health. In other words, it was a perfect time for us to develop a strategy to pay off our debt quickly. The trouble was figuring out where to start! The main benefit of meeting with the financial advisor was that it had forced us to organize all of our information, so we sat down to review it all again…
The debt monster
| Loan | Interest Rate | Balance |
| Car loan 1 | 9.5% | $6,750 |
| Student loan | 9.25% | $7,250 |
| Student loan | 8.5% | $22,000 |
| Student loan | 7.75% | $17,554 |
| Student loan | 6.55% | $5,049 |
| Student loan | 6.49% | $27,000 |
| Student loan | 5.9% | $20,500 |
| Student loan | 5.35% | $1,230 |
| Student loan | 5.1% | $20,000 |
| Car loan 2 | 4.59% | $4,750 |
| Student loan | 4.41% | $12,625 |
| Student loan | 4.25% | $2,024 |
| Student loan | 3.6% | $12,833 |
| Student loan | 3.15% | $14,446 |
| Grand total | 6.15% (weighted average) | $174,011 |
Our stats
Mrs. Saving Spree: 27 year old female, healthy. Monthly take home pay before taxes/deductions: $7,180 Mr. Saving Spree, 28 year old male, healthy. Monthly take home pay before taxes/deductions: $3,400 No children, 2 pets. 1 dog, 1 cat Importantly, I (Mrs. Saving Spree) is active duty military, so my husband and I get the benefit of free health care. The downside is moving at the whim of the U.S. government, making it difficult for Mr. Saving Spree to find a job and establish longevity.
Our first budget
I hate budgets. Calling them “spending plans” does not improve my feelings about them, either. I dislike budgets for the same reason most people do – they are just rather tedious. However, they are crucially important to managing your finances. If you aren’t budgeting, or at least tracking your expenditures, you will never reach financial freedom. Here is what our very first budget looked like:
| HOUSING | |
| Rent | $925 |
| Electricity | $125 |
| Water/Trash | $60 |
| Internet | $75 |
| Phone | $150 |
| Maintenance | $10 |
| Total | $1,345 |
| TRANSPORTATION | |
| Car loan | $100 |
| Gas | $100 |
| Car maintenance | $20 |
| Parking/tolls | $60 |
| Total | $452 |
| FOOD AND PERSONAL | |
| Groceries | |
| Clothing | |
| Dining out | |
| Entertainment | |
| Personal care | |
| Total | |