Wednesday, September 05, 2007

Our Debt Journey

Congratulations to Emma who has recently become debt-free! WTG girl! You've worked hard and should be proud of yourself :)

I decided to add our debt ticker to my blog - I don't normally blog about it because to be honest I'm quite ashamed of having so much debt. The ticker has been in my signature over at No More Debt but I'm not posting as much over there atm, so I'm adding it here to give myself a visual kick-up-the-pants!

I grew up in a family where debt was bad - if you wanted something, you saved for it. My parents still don't have a credit card (they do have a debit card though). I didn't have a credit card until after we were married - we used it 'responsibly' though (as much as you can!) - paying it off each month. We had two fairly high incomes and for about 7 years lived well - overseas holidays, far too much take-away food, buying any 'toy' we wanted - books, computers, books, cds/dvds, did I mention books? :) etc etc.

Our initial debt (apart from mortgage) came when we were in the process of building this house. We were with a so-called 'financial advisor' (never again!) who had told us we needed x% deposit and then just before we signed, we found out we needed substantially more. So we borrowed $30,000 from a family member. This debt became our 'family pet' - it was always there but we never really made much of an attempt to pay it off. It makes me sick when I think of it now - we could have paid it many times over when we were both working. In fact we started to save the money a few times to pay it off, and always 'needed' that money for something else before we finished..

When I finished work to have Billy we cut down our spending - but not enough. We were still spending more than we earnt. Completely obliviously too. We went through any savings we had, the CC gradually crept up until we couldn't pay it off each month. It was *finally* sinking in that we needed to do something but I still wasn't ready to do too much about it. In Feb/March 2005, we had a bit of car trouble, and "needed" to buy a new ride-on mower (the old one blew an engine), so we had nearly $7000 in credit card debt :(

That was my rock-bottom, and my turning point. I think it was then that I found Dave Ramsey's site - he's an American, christian financial "guru" with a step-by-step plan for getting out of debt. We (I say we, but really me because I'm in charge of the finances) saved a $1000 emergency fund, and started getting "gazelle intense" on the CC debt. I stopped using the CC, used only cash or the debit card and gave Pete an "allowance" - nicely called "sanity money" so it doesn't sound as demeaning lol.

The CC debt was finally killed in August 2005! Which leaves only the 'family pet'! We've paid off $12,259 of it to date, $17,741 to go. We now have $1000 in an emergency fund, money in a separate 'sinking fund' account so we can always pay bills as they come in, and are living within our means.

Currently we're not quite as "gazelle intense" about paying off the debt - there is a small amount going in every month, but most of our "excess" money is going towards setting up Pete's microbrewery. Once that's done, we'll be able to start paying into the debt again. However, going right down to 1 income with me giving up work to homeschool will make it very slow. I'll start selling on Oztion again for a bit extra (not sure what I'll sell this time, books weren't really that successful), but it will be mainly reducing expenses even more to find the money. Hopefully the brewery will start paying for itself after a while too!

So that's our journey - we've paid off nearly $20,000 in 2.5 years and still have almost that to pay off before we are debt-free apart from the mortgage. I won't think about the fact that our car is 8 years old, as are all our major appliances lol. Mostly though I have learnt a lot about myself over the last couple of years and I've found I really enjoy being frugal!


Susan said...

Kez if it makes you feel any better our debt sum is very similar to yours.

we are in the proccess of rolling it into our home loan if we can to save on interst then destroying any other CC's.

For us, it was when we seperated last year that pushed our finances. my hubby didnt cope too well and spent way way beyod his means. Thats not all of it, a good chucnk was also us living beyond our means when tgether and also badly organised finances.

We are rectifying it though and working on never being like that again.

Miserly Mum said...

Kez, I love reading your blog and think it is very brave of you to share your debt journey. I have made some decisions that I regret with regards to how we spend our money but I am trying very hard to turn that situation around as you can probably tell. Your doing fantastically well and you should be very proud !

Kez said...

Thanks Susan - it feels better knowing I'm not alone lol. Good luck with your journey - life changes really throws things out, doesn't it?

Thanks Miserly Mum - I enjoy reading your blog too!

emma.jean said...

Hi Kez,

So sorry it has taken me so long to read this post... well done on a fantastic achievement... I can relate to the feelings of shame, but I felt a lot more ashamed when I was not even admitting my debt, let alone doing anything about it.