The Full Story, Part One - Digging the Hole

On Friday, June 11th of this year, Angie and I had the pleasure of speaking with Dave Ramsey on his radio program about how we became debt-free (except for the house; that’ll probably still be a good-ish while). In our brief, 2-minute conversation, we didn’t really get to dive into the meat of how this progressed and what it means to us to be out of debt. I thought I’d try to tackle that here.

On the radio, Angie mentioned that we started out with about $34,000 of debt. This is actually the amount we had when we first heard about Dave Ramsey. Our highest amount of debt was closer to about $45,000. We’d made a LOT of not-so-bright financial decisions, mostly because we weren’t thinking about the financial side of things at all.

We started right away with putting the honeymoon on credit. I had enough money in the bank for the honeymoon from savings and gifts, but when we went to pay for a weeks’ worth of hotel room rental, my bank wouldn’t let me put more than $500 on the debit card without approval, and it was Sunday night, so I couldn’t call them to get the approval. So we used a credit card. Now, the person who says you can use credit wisely would just say, “No big deal. You charge the room to the card, then pay the whole amount off with the money you had in the bank.” See, that’s what I thought, too, that night. But once the trip was over and we got back home, I thought, “you know, we’ve still got all this money in the bank, and we could really use some new furniture.” We already had furniture, but it was old and hodge-podgey, although in hindsight it wasn’t actually poking us with springs or anything; still, a set from Pier One would be much more our style. This may actually qualify as two bad ideas.

The next big bonehead financial non-decision was when we moved to a different state in the middle of our lease with no sub-lessor and no job lined up. We put the movers and several months’ worth of two rents onto credit cards. This is when we started to realize that there was a problem (ya think?). We had considered ourselves relatively generous in Athens; we now got to learn to accept generosity from family and friends who were shielding us from our own stupidity, to some extent. Throughout this time between the honeymoon and (eventually) getting a job in the new place, we’d occasionally put meals out or CDs or other little things on credit. That’s what it’s for, right?

When I finally got a job (which didn’t quite pay all the bills), we went almost immediately to the local credit union to try and get into some sort of credit counseling / debt-consolidation program. I’ve since heard that most debt-consolidation plans are actually scams. This program, though, was actually pretty good, for two reasons. Number one, instead of the debt consolidators taking the money and running or one of the other scams, the credit union’s folks would pay off all the debt on your behalf, and give you a single low-interest loan for the full amount that you’d then pay back, thereby honoring all your obligations but giving you a little breathing room. The second reason this particular one was so good is that we didn’t qualify for it and they told us why. That was the hard slap-in-the-face that put an end to our frivolous (but never actually extravagant) lifestyle. They told us that, at the rate we could afford, it would take us about 9 years to get out of all our “bad” debt (meaning not even including the student loans), and they didn’t let anyone in the program who couldn’t pay them back in 5 years. They suggested that we cut our already sparse expenses to the bone and get our income up (remember I’d just gotten my job; I think we already knew Angie was pregnant at this point, too). This was the winter of our discontent…