When my wife and I were married in 2009, I couldn't resist spoiling my bride.
We were in our early 20s, and I wanted to make sure she had the fairytale wedding she had dreamed of ... and once we were married, that fairytale life.
Onto my cards went our engagement party, our wedding and our subsequent international trips to places like Canada and Japan. Being so young, it was a point of pride that we wouldn't take handouts from our parents, and it never occurred to us to talk about money beyond handing over the credit cards (well, my credit card). Having a balance just started to feel normal. After all, paying off the minimum $50 per month was much more attractive than looking at our ever-growing mountain of debt.
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About a year after our wedding, we realized that we were starting to reach the limits on my cards. We didn't have much left in savings, and we got the feeling that we may have been in over our heads. Our money had always been kept separate, but when we came face-to-face with the $40,000 of debt we had racked up together, things started getting tense. My wife would get anxious and wish I hadn't treated her to trips abroad and expensive dinners, and I would get defensive about my choices.
Our tipping point came in 2011, when we decided we wanted to start a family. We realized that as parents, it would be irresponsible for us to bring our child into the world unless we could get ourselves together—so we decided to eradicate that debt once and for all.
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A little over two years later, we're expectant parents without a cent of credit card debt and a positive net worth. Here, I'm sharing five of the strategies that made all the difference.
1. Set Your Finish Line Before You Start
Your eyes may glaze over, but setting clear goals was truly one of the key reasons we made it through in tackling our debt. Our goals included:
- 50% reduction of our credit debt within one year, 100% reduction within two
- Increase our income (which was about $80,000 at the time—twice the amount of our debt) to support the above
- Have our child born with no credit debt
When we started tackling our debt, we felt like we weren't making any progress—we would make payments, but the interest would keep pushing our bills higher. We had to get serious if we were going to battle the interest and pay the principle. So I listed out all of our liabilities, savings and recurring spending on a simple spreadsheet. Just having this list opened my eyes and showed me where we needed to make some major changes in our spending—like cutting back on extravagant date nights when that money could be better used elsewhere.
While reducing our spending, we also focused on our careers. I started devoting my free time to reading articles, listening to audiobooks and watching videos that would teach me the skills I needed for the senior sales management role I set my eye on, and after a few years of diligence I was able to move from sales support into account management and then into a senior management position. My wife, too, was continually promoted within her company, from general administration into finance and accounting. Together, we eventually increased our income by 150%—and then resisted the temptation to spend more.
In the beginning, it was slow going. But as we started having more money to put towards our debt and changing our daily habits, we saw the balance on our bills level out ... and then slowly start to decline. We used that momentum to pay off entire cards, which was a huge encouragement to keep going.
2. Get Disciplined Across the Board
Around the time we decided to start tackling our debt, I realized that my wife was very disciplined and diligent in all aspects of her life—everything from her working hard at her job to meticulously wrapping presents.
I ... wasn't. I was generally happy using high-level figures instead of breaking down costs to the dollar, doing things 'just enough to get done' instead of doing them thoroughly and, suffice it to say, you don't want to receive a present wrapped by me. Inspired by my wife's discipline, I started thinking that I too should start being "all or nothing," letting the discipline I instituted in my life carry over to my money.
I started getting up earlier than usual in the morning (sometimes at 5:30 a.m.!) and scheduling my weeknights on the Sunday before: when I'd have dinner, when I'd watch TV, when I would have personal time and when I would go to bed. In my experience, if you can keep a simple sleep schedule, you’re probably one step closer to sticking to other schedules and budgets.
I also practiced staying up and focusing on work or study at night, simply to stretch my mind and test my discipline. I found it was most effective to choose one place to associate with focusing (mine was our study), and do it in short bursts—only an hour and a half at a time.
Due to my strict schedule and focusing time, I opened up an extra two to three hours a day that I used to work on my budgets, do extra reading, listen to audiobooks, plan my sales activity for the workweek and even pursue entrepreneurial projects like writing business plans and starting a personal site based on my passion for sales.
3. Look for Quick Wins
Just like being disciplined in one area bled into others, so did feelings of accomplishment. I practiced "quick wins" around the house to accomplish things I didn't want to bother doing, like washing dishes or brushing my teeth. With every little task I checked off my list, I felt more motivated to reach my 'big win'—that freedom from debt just over the horizon. After all, if doing the dishes felt like such an accomplishment, how great would it feel to be debt-free?
And many of these wins were financial: I made a habit of routinely calling my insurance, credit card and phone providers to look for cost-saving opportunities. At first, I would just pick one while driving to work or at lunch and spend perhaps just 15 to 20 minutes on the phone, but I soon started making appointments in my calendar—once a year for most services, or ad hoc when I received an abnormal bill.
I made a habit of routinely calling my insurance, credit card and phone providers to look for cost-saving opportunities.
I literally saved hundreds—if not thousands—by making sure I understood new pricing plans or giving more information to insurance providers to get lower premiums based on new details. One time I saved $150 on a phone bill that had gone over by simply calling, making a case for my loyalty with the company and explaining aspects of the usage I hadn't understood. Another time, I saved about $300 on insurance just by getting a quote from another company and bringing it to my providers.
4. Work the System to Tackle Debt
I was ferocious at identifying ways to manage the debt, taking advantage of balance transfer opportunities to secure lower interest rates, automating over 10% of our household income toward debt repayment and savings and making extra payments whenever I could.
Balance transfers, which allow you to move your balance from one credit card to another for an introductory period of reduced or no interest while you hack away at the balance, required the most discipline. Before doing a transfer, I always called my existing bank first, and occasionally they actually extended a low rate to entice me to stay. If they didn't, I looked around for the best opportunity—ideally a card with no (or low) annual fees and the best interest rate. After choosing one, I set a calendar reminder to renegotiate after the introductory period or transfer again elsewhere. Then, after making the transfer, I had to be diligent in my payments. I knew if I transferred and waited a month or two to start making payments, fees would pile up as I procrastinated.
On the savings front, I made a list of all of our bills and then contacted each of the companies to arrange automatic payments from my checking account. Even though I was hesitant to automate them all at once, I started with the ones I sometimes forgot to pay to eliminate any late fees. Gradually, I asked some of my providers to change my payment dates to soon after payday, which meant after getting paid, my bills would be deducted immediately, and then I would know what I had left.
I also designated about 10% of my pay to go into a separate savings account automatically, then used those funds to disperse further payments where they were needed most. I used those funds to target the debt with the highest interest first, although when one of my cards was nearly paid off, I liked to focus on that for a quick win.
5. Be Impulsive When It Counts
Although counterintuitive to what got us into debt in the first place, we found that being impulsive has its place—and that place is deciding when you'll start paying off your debt. No time like the present! The sooner we took action, the sooner we moved from our issues and stress to a resolution. I only wish we had acted even sooner.
Impulsiveness isn't only about the big stuff, though. For example, one week I did an analysis of my spending and found that my coffee habit was costing me $2,000 a year. I was in the supermarket a few days later and instead of thinking "Someday I should get a machine," I decided to spend the capital upfront and buy a $120 coffee maker. Ironically, I put it on credit, but then I automatically directed the $40 per week that I would have spent on coffee anyway to my card, and within three weeks I paid it off. Since then, I'd estimate I've saved nearly $4,000 on coffee, just because I took the plunge and bought the coffee maker I knew I needed.
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In the end, I'm no financial expert. I was a young man who got drawn into the perceived glamour of what I could attain using credit—a man who simply wanted to spoil and provide for his wife.
Today, I'm a soon-to-be father who realizes that ultimately, there are more important and sustainable ways to be responsible and provide for his family in the long term—and that doesn't include credit debt.
LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc., that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Unless specifically identified as such, the individuals interviewed or otherwise listed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services and the views expressed are their own. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. LearnVest Planning Services and any third parties listed, linked to or otherwise appearing in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies. LearnVest, Inc., is wholly owned by NM Planning, LLC, a subsidiary of The Northwestern Mutual Life Insurance Company.