- I sat at the kitchen table flipping through the mail, seeing bill after bill after bill. I tore open a couple of them immediately, wanting to see the terrible news in its full glory. I began to calculate what I could afford to pay and what I could not, I began to quickly realize that the pile of bills I just received not only wouldn't be covered by the current balance of my checking account, but that my next paycheck would not cover them either—and that was if I spent absolutely nothing on food, gasoline, or anything else. I sat there completely stunned for a moment; then I got up and went into my son's room, closed the door behind me, and sat down in the rocking chair across from his crib. He was so tiny lying there, less than six months old, and sleeping so peacefully there without a worry in the world. As I watched him lie there, gently breathing, emotions poured through me. Guilt. Shame. Embarrassment. Pain. I was failing this wonderful little boy, this child who had already brought incalculable joy into my life. He relied on me for everything, and because of my poor decision-making and my selfishness, I was letting him down. I closed my eyes and didn't realize at first that I was crying, almost uncontrollably. My wife came in and put her arm around me. Eventually my sobbing woke up my son, who also began to cry. Sarah held us both.
- April 2006
Let's make no bones about it: High-interest debt is a prison of your own making. Financial writer Michael Mihalik puts it quite simply: "Debt is slavery."1
Debt increases your risk while at the same time decreasing your opportunities. If you accumulate debt, an unexpected negative event in your life has much more impact than if you were debt free. Similarly, debt often causes you to pass up positive opportunities in your life, such as a job offer or an incredible bargain on a car.
I believe deeply in a debt-free lifestyle. The only additional debt you should ever incur is a home mortgage and, if you do have a mortgage, it should be paid off as quickly as possible. The greatest personal freedom you can have occurs when your monthly bills are as low as possible, and there's no better way to accomplish that goal than to get rid of your debts—all of them.
It sounds like an impossible goal. I know that when I was stuck in an overspending lifestyle, it seemed impossible for me, as well. When I finally realized that I needed to make a change, I still didn't believe it was really possible.
Then, in the course of about three years, we paid off $21,000 in credit card debt, $2,600 in additional consumer debt, $6,600 in car loans, and $17,000 in student loans. Along the way, our financial status became so secure that I was able to walk away from my full-time job and follow my dream of being a full-time writer, giving me an incredibly flexible schedule and much more time to spend with my children.
To put it simply, three years of focused debt repayment completely changed our lives. I have a new career. I have a new home. I have a much more stable marriage. I'm no longer scared at night about our financial position. I no longer dread getting the mail.
Debt was a prison, and we escaped.
How exactly did we do this? Here's a step-by-step guide describing exactly how we managed to extract ourselves from this precarious debt situation and put our lives in a whole new place.
Get Everyone on Board
We've all heard the horror stories. One spouse secretly racks up $20,000 in credit card debt, while the other one saves and scrimps. One partner talks about the large amount of money in the bank, while in truth there's not much saved at all. Married couples fight—and even separate—because one partner spends with reckless abandon while the other partner is constantly cleaning up the mess and working to keep the couple above water.
In each of these cases, the same problem rears its ugly head: The people in the household are on different pages with regard to the plan for long-term financial security. To put it simply, if you and your partner are not in agreement with your long-term plans, actions on behalf of those long-term plans are useless.
The best opening step in this journey is to simply sit down with your partner and do two things. First, identify the big goals that you have in common. Where do you want to be in five years? Do you want to have children? Do you want to have a nicer home? Do you want to have a different career? Figure out what you both want out of life. From there, look at your financial state—your debts and your income level. What needs to change for those dreams to come true? Don't get bogged down in the specifics at this point—instead, the point is to recognize whether or not you're both open to making changes in your life to achieve the dreams you share.
Remember, actions speak louder than words. Quite often, people will give lip service to the initiative of their partner, but won't make any real change to their own behavior. If this happens, there is a much deeper trust issue in your relationship, one that will require a lot of communication—and perhaps some counseling—to solve. You will not find financial, personal, or career success until you address it.
If you find yourself in this type of situation, move your focus from fixing your finances to fixing your relationship. Take some time to carefully evaluate the entire state of your relationship. Communicate calmly with your partner—don't let emotions run the day. Seek counseling and build a relationship based on trust where you both feel safe expressing your viewpoints and are able to work through disagreements in a rational and healthy fashion.
Without that, you will not be able to work together for a brighter future.