My Finances Weren’t Always This Good: The Finale

19 Oct

This is the fourth of a “My Debt History” series this week.  If you missed Part 1, Part 2 or Part 3, check them out here, here, and here!

When I left off last, I had $13,000 left in car loan debt and $3,500 in credit card debt (accrued due to the post-college-young-single-lady-lifestyle, a new boyfriend, and newfound independence).

Like I said, I went on for about a year with all that credit card debt.  Gradually, I started to despise living paycheck to paycheck.  I was a professional accountant!  I should have a handle on my finances!

I was desperate to pay off my debt and couldn’t seem to wrap my head around self-control at that point.  I had heard of something called a 401K loan and picked some of my co-worker’s brains about it.

I didn’t know much about this type of loan, but I did know my job was very stable and I didn’t have any fear of being laid off (which I now know is the biggest risk you take when you take out a 401K loan).

I debated for a couple weeks and then pulled the trigger.  I took out the exact amount of money from my 401K that I was in debt on credit cards – $3,500.  There was a $50.00 service charge and I would pay about $200 in interest over the one year of the loan.  Since $150 was deducted automatically from my bi-weekly paychecks, I couldn’t get out of paying $300 back to my 401K every month.

The timing actually worked out perfectly because I ended up getting a pretty sizeable raise around the same time – from about $45,000 to $57,000.

I know that all financial gurus practically forbid you from taking out a 401K loan, but in this case it worked for me.  I took out a fairly small amount and my job was extremely stable.  (Note: I am NOT recommending anyone do this without talking to your personal financial advisor.)

During the year that I was paying back my 401K loan, I did NOT use my credit cards under any circumstances.  Ironic as it was, I was teaching myself how to use credit cards properly, while paying them off with a loan.

I took out the loan in May 2007 and my final payment back to my 401K was in May 2008.  As luck would have it, I received another hefty raise right around the same time.  It felt like such a blessing since it was just the extra bump I needed to get my last debt paid off: my car.

In May 2008, my car loan had come down to about $10,000.  I enjoyed the summer of 2008 and didn’t think too much about paying off my car.

However, something hit me in late August 2008.  I just got angry again.  I absolutely hated the fact that I had to make a car payment every month.  As much as I love Toyota, I hated logging onto their website every month.  I got serious.  I meant business this time.

I stopped buying ANYTHING.  By anything, I mean anything at all that I didn’t need to survive.

I spent $40 on groceries per week, I didn’t go out to eat with Lloyd, I stopped buying drinks at bars, I forbade myself from buying ANY clothes, I learned how to make coffee at home.  I only spent money on necessary food and utilities.  All my extra money went straight to my car loan.

It was around this time that I started my very first budget.  Something I’m sure you all have heard of, right? 😉 The budget kept me on track and gave me a mental amount that I could follow on a daily basis.

I made a goal to debt-free in December 2008.  I paid anywhere around $1,500 per month towards my loan – many times more than that.

It was hard – very hard.  I wore the same clothes over and over to work even though I wanted to go out and buy the latest fashion trends that fall.  I ate peanut butter sandwiches quite a lot of work (which…actually wasn’t too hard because those things are amazingly delicious).  If I wanted to have a drink, I’d drink whatever was in my fridge and meet my friends out later and just have water.  Lloyd and I really got into cooking dinners at home around this time.  It becomes very easy to stop spending money on anything when you combine a female’s wrath (toward debt) and a crazy ridiculous goal.  I tell you what, that combination gets things done! 😉

In December 2008, I made my final payment on my car loan and never looked back. 

It took about 6 months to pay off about $9,000 in debt with these things:

HOW I PAID OFF MY DEBT:

  • 401K loan (not recommended)
  • Substantial raises (read: work hard)
  • Lots of self-control
  • Highly restrictive spending
  • Staying busy
  • Making a Budget

As funny as it seems, I am so grateful for my debt history.  There is no doubt that it changed my way of thinking about finances forever.  I am now in more control of my finances than I ever thought anyone could be.  I was one of those people that thought it was normal to always carry high credit card balances.  I thought it was a way of life.  It’s NOT.  Now, I never have to be in debt ever again.

It’s coming up on one year since I paid off my debt, and I have no intentions of ever going back.  It helps to have someone in my life that shares the same values of debt-free like Lloyd.

I was never frugal or mooched off anyone.  I merely tighten the grips on my wallet and learned to tell myself “No!”.  I think this is the best way to pay off debt.  It worked for me and I know all you readers suffering with debt right now will become debt-free someday, too.  Realizing that being debt-free is the way to live is already half the battle!

Thank you so much for following along this journey with me!  I hope this series makes me a little more relatible to my readers.  Now you know – I was once there, too!

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8 Responses to “My Finances Weren’t Always This Good: The Finale”

  1. SS4BC October 19, 2009 at 11:59 am #

    Wow. What a great finale. Congrats on all your hard work Carrie!!! =D

  2. BDO October 19, 2009 at 2:22 pm #

    I hope this series will also help others to learn some great lessons, so it will “change [others] way of thinking about finances forever”. Keep up the good work!!

    • Carrie October 19, 2009 at 3:09 pm #

      My first time being quoted! Ha ha, I have the same hope. 🙂

  3. me in millions October 19, 2009 at 2:45 pm #

    PBandJ sandwiches ARE delicious. I completely agree! Great story. Thanks for sharing.

    • Carrie October 19, 2009 at 3:09 pm #

      I know! I love PB&J! I will never grow out of it. PB Toast is also one of my favs that I can’t seem to grow out of. 🙂

Trackbacks/Pingbacks

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