The story of how I became debt free isn’t as compelling as the tales of many other personal finance bloggers. I didn’t overcome $30,000 in student loan debt or pay off thousands of dollars in credit card bills because I went to the mall a lot.
I did have student loans and some credit card bills that took me a few years to get rid of — but that was right after graduating from college, and admittedly they weren’t for vast sums and weren’t extremely difficult to pay off.
Other than a home mortgage and a credit card bill that my wife and I pay off each month as we earn credit card reward points for hotel stays, we live a debt free life.
There are some life choices I made early on, along with some debts that made me rethink how I think of money. Here are some of them:
Borrowing little for student loans
Paying for college gave me an early view of potential debt in many ways. I purposely picked an in-state university to go to because it was cheaper than going to college out of state, and I worked as much as I could in the few years before starting college so I could afford it and wouldn’t have to work during college.
My parents paid half of my college costs, so that gave me a big start in trying to graduate debt free. I worked on campus during the end of my sophomore year and my entire junior year to help pay for expenses, but the pay was so lousy that I had to take out a student loan to make it through the last year or so.
I didn’t borrow much — I don’t remember the exact amount but I’m sure it was less than $5,000 — and unfortunately I graduated with debt.
Like most grads, I didn’t have a high paying job and it was difficult to pay off my student loans. I couldn’t afford to go out to bars or nightclubs with friends when I wanted to, doing everything I could to pay off my debts. Within two years, I had paid off my student loans and was debt free — for awhile.
A low income
This may sound like a simple reason to avoid debt, but it often leads to debt: Not earning much money.
While many people may use their credit cards more to pay for a lifestyle they can’t afford, I made a conscious choice not to use credit cards too much because I knew I didn’t have the income to pay the bills when they came due.
This isn’t to say that I didn’t use credit cards unwisely — I’ll get to that in a minute — but as a journalist who recently graduated from college and wasn’t making much money, I knew I already had to be frugal on my low salary. I guess if I had an income double of what it was at the time, I may have had more room in my budget to play around and go into debt because I was sure my monthly bills would be paid.
But when you’re unsure if you can pay for groceries, rent, car payment, student loans and other household bills, it somehow makes throwing money down on non-necessities a lot more frivolous. Being debt free, I discovered, was a little easier if I didn’t have money to begin with.
Too many bar charges
A monthly credit card statement can be sobering. I don’t mean this as a pun, but seeing line after line of bar charges on my credit card bill in the first few years after college was a sobering reminder that I was wasting my money.
I was using my credit card to keep up with friends who were better off than I was financially, and I had to put an end to that for a year or so while I got my credit card balance back in check and vowed to live debt free.
A major car repair bill
One of the biggest things that got me thinking about how much nicer it would be to live debt free was when I had to take my car in for repairs and I didn’t have enough money to pay the final bill.
The bill was so high that I had to call the credit card company to ask for my spending limit to be raised. It was and after spending about a year paying that expense, I vowed to live debt free. I never again wanted to be forced to have to pay interest for something that I could have saved for and paid off entirely at once.
The road to debt free
After that expense, I slowly started funding an emergency fund to pay for car repairs and other emergencies that come up in life as a way of meeting my goal to be debt free.
I’ve sometimes had to use a credit card anyway to pay for a necessary expense — but that’s the main point, that even the credit card has been used for emergencies only and only when they’re necessary. No more bar tabs to throw on a card.
Using a credit card to pay for a car repair is a rarity, and one I’ll usually only do so I can earn reward points and already have the money in an emergency account to pay the credit card bill in full when it arrives.
That emergency fund has led to creating other funds for other purposes, including our daughter’s college education, vacations, taxes and home repairs. It’s all part of a plan to live a debt free life, which is a lot easier when you aren’t using credit cards to pay for everything you see.
Oh gosh, as someone who also graduated into a low-paying career (at least to start with) I couldn’t identify with all of this more! I wanted to avoid debt, but living within the means of an entry-level salary was super stressful at times. I’m so happy I did, because I’ve avoided the ongoing stress of carrying a credit card balance – which would have been way worse – but it definitely does seem like when it comes to debt and getting started in your career, it’s stressful either way, haha.
Kudos on avoiding any major debts, and on getting the credit card situation under control so quickly! Awesome post 🙂
Thanks, Des! For me, keeping the credit card for emergencies only and then establishing an emergency fund was the most important step. If only there were a better way for low-income grads to deal with expenses early in life.
It is really in our hands whether we can be debt free or not. What I personally do is I always allot a budget for every expenses so that I know where my money goes. By doing this, it’s easy to budget and compute money.