Take it from me, getting out of debt can be a great feeling. I’ve been completely debt free for nearly two years now – including mortgage free – and it’s wonderful. Not having debt of any kind hanging over my head is something that many people don’t experience until retirement…sometimes ever. However, becoming debt-free doesn’t have to be as hard as some make it out to be.
Here is how we got out of debt and stayed that way.
Cutting up those credit cards
I’ve heard that canceling credit cards will hurt your credit. Personally though, I don’t care. After college, I cut up almost all my credit cards. From store cards to credit cards, I sliced up all but two and melted them. I also called and cancelled the accounts since I didn’t want to have to worry about leaving them open, forgetting about them, and having new cards the cards fall into the wrong hands after I’d moved on and changed addresses.
And once they were gone, guess what? I didn’t miss them at all. I kept my best card that I used the most and that had the longest credit history (eventually cancelling even that down the road), and my bank debit card, and that was that. Later, my wife did largely the same thing. We pay cash for most of our purchases, and it’s worked out just fine.
Paying off loans faster
Ditching student loans quickly made it easier to get debt free and stay that way. My wife and I had a combined nearly $50,000 worth of student loans after graduating. We didn’t let this large number slow us in our race to pay off debt. Rather than sticking to the standard monthly payments, we sent in additional payments whenever we had the extra cash.
While this meant not taking vacations, rarely going out to eat, renting an apartment rather than buying a home, and scrimping on food and entertainment costs, we were able to pay off our loans in less than three years.
Only taking on debt when necessary
Since paying off our student, we’ve only taken on debt when it’s absolutely necessary. This one and only time we became debtors again was when we bought our first home back in 2008. However, we did our best to take this debt on the right way and combat it head on.
When we bought our home, we put just over 40 percent down (we’d been saving for our downpayment for years). This left us with a mortgage of $165,000. Using a 15-year fixed rate mortgage not only cut the timeframe for paying off our debt, but dropped our interest owed over time significantly while increasing equity in our home faster. In this way, when we took on the next step in our homeownership process, we were able to become mortgage free in just three years.
Soon after our first home purchase, we realized that not only had we purchased more home than we needed, but the housing market was continuing to worsen. Therefore, to recoup some of our costs, we decided to downsize homes.
We sold our pricier home, downsized to a small condo, and in the process, were able to purchase this property for cash. In turn, we now save ourselves on the order of $1,500 a month on home-related costs.
So while becoming debt-free can come as an incredible relief, it can also substantially reduce expenses both now and long-term.
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The author is not a licensed financial professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.