How I Delivered Away My Debt

Everyone has a different story about how they’ve dealt with debt in their life. Over the years, I found these stories/journeys useful in my own progress towards a better financial situation. I’m sharing my own story today in hopes that it might encourage you to deliver away your debt.

Getting Into Debt

Like many people, I racked up my debt during my college years. I took on unnecessary student loans ($20,000 total). I shopped and dined my way to around $1,500 in credit card debt, and I took over my car payment from my parents at graduation.

At the time I was comfortable with this debt because one day I would have a pay check. One day I would make enough to pay it all back, right? While that may have been true, it was still foolish debt. And I was simply ignoring the signs I was in debt.

I didn’t need as much in student loans as I took out. I had a full tuition scholarship and I went to a cheap state school. The left-over student loan money got spent on some stupid things, like a high-tech softball bat. Yes, there is such a thing.

How I Paid Off My Debt

Once I graduated I didn’t immediately begin getting out of debt. I hung on to some credit card debt and the car loan, while bouncing around from my first job out of college to some part-time jobs (after the initial career didn’t pan out). It was an uncertain time and I started regretting getting into that debt, as it wasn’t looking like I could pay it off so easily.

Two years removed from college I landed a stable job with hopes of finally fixing my financial situation. Thankfully the student loans were able to be deferred and at very low interest rates. The credit card debt, however, continued to balloon. I had around $3,000 at the time.

I set my sights on the credit card debt. My first plan of action was to stop spending more than I was making. I needed to make some sacrifices. This was easier now since I actually had a decent paying job and I still didn’t have any major responsibilities (i.e. wife, kids, etc). I lowered my monthly expenses to the minimum. My rent was only $400 a month. I convinced my Dad to take back my car and he gave me his old SUV. Thanks, Dad.

I could now solely focus on the credit card debt. I called the credit card companies and started requesting lower interest rates. It worked. Then I heard about credit card balance transfers. I took all of my debt and transferred it to one new balance transfer credit card. This was back when they didn’t have transfer fees. I then established an aggressive plan to pay off the remaining debt in six months. With a nice job and low expenses I was able to pull it off.

I found myself debt free except the student loans at 25. It was a good feeling.

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Acceptable Levels of Debt

Like I mentioned above, I had very low interest on my student loan debt (around 2.5%). This was around 2002, so banking interest rates were starting to climb. I knew my money would be better spent earning interest for me versus paying off those student loans early. Plus, I was getting tax deduction for the interest payments. I resided to just make the minimum payments.

I used this rationale to bring other debts back into my life. I got a new car and qualified for a 4% car loan. I got married and used a 0% intro rate credit card to afford the wedding we really wanted. These deals didn’t end up biting me, but they showed where my mind was at the time. I learned to justify taking on new, unnecessary debts. Mathematically, they weren’t foolish choices, but they weren’t leading me to debt freedom either.

In 2009, as banking interest rates and the stock market tanked, my thoughts on this type of acceptable debt changed. Not to mention, by this time I’d taken on a newer, more acceptable debt, and my income was fully capable of crushing my car and student loans.

So that’s what I did. From 2009 to just this last month we spent a lot of our excess income to kill off our low interest debts. Now we’re officially debt free except for the mortgage. It feels good and I feel like we’re more free than ever.

Another thing I’ve learned to do along the way is to use my credit card responsibly. Once I paid off our wedding, which was well before the 0% promotion ran out, I went through a two year period where I stayed away from credit cards.

Recently, however, I’ve started using my credit card to rack up cash back rewards. We use our card for everything that we can, and we pay off the entire balance in full each month. No interest. No late fees. No credit problems because we’re not using the card to afford a lifestyle we can’t normally afford.

Debt and My Future

Pretty soon we’ll need another car. When we do, we’ll have a choice to make. Do we take on more low interest debt, or do we just pay with cash? I’m leaning heavily towards a no debt future. I like the sound of it the closer I get to it.

I am comfortable with continuing the credit card use though. I enjoy the rewards. But I’m open to changing my philosophy there as well. We’ll see.

An Update About this Blog

My name is Philip Taylor. You may know me as PT from PT Money: Personal Finance. A month ago I purchased this site from Jeff. I’ll let Jeff’s last few posts stand as his message for moving on to bigger things. Never the less, I’m honored to be carrying Jeff’s message forward. His fascinating story of debt reduction will always be prominently featured on this site for every new visitor to see.

Going forward this site will feature other stories of debt reduction, as well as solid information and no-nonsense solutions geared towards helping people get out of their debt fast. I’ll be writing some of the articles as will a few other writers. I hope you’ll stick around and share your story as well. Both in the comments and, if you like, in a guest post of your own.