The Great Escape: getting carried away
It is official: my consumer credit card debt will be eliminated in less than a year.
And, around 6 months later, the bank loan will be paid in full.
That means that by the end of 2013 I will be (debt) free.
In addition, I am saving and that means that not only will the debts be paid but I’ll also have a little nest egg to boot.
The journey has been slow and arduous. The first year was really hard. Making ends meet every month required discipline and resolve. More recently, particularly since Amy got her job, things have got easier and now there’s light at the end of the tunnel.
This has however led to my, on occasion, getting carried away.
Playing it forward
The debt repayments are pretty much locked down now. There’s a plan. Regular payments are made and there is even a plan to expedite the final few months’ payments.
On the savings front there is a system in place: whatever we have left (above the agreed buffer amount in the checking account) at the end of the month goes into the savings account.
Things couldn’t be simpler really.
And yet, I get carried away, particularly around the savings.
What I mean by this is that I start to imagine how much money we could have saved up by the end of next year. I then start to perform calculations as to how much more we could save, if we tightened our belts further: £5k becomes £10k becomes £20k etc.
I get carried away.
The truth is that becoming debt free is the only real goal. Savings are a bonus.
Six months ago I would have been very happy to have £500 in the savings account. Today there is more. Yet, rather than see this as a wonderful achievement I look at the amount saved and say to myself, “we could save more”.
I start living in a future that doesn’t yet exist. I become anxious. I forget the present and the real goal.
I become greedy.
Be present: enjoy the moment
This year, with the debt repayment plan in place and with the additional income from Amy’s wages, we made a conscious decision to have some adventures, to enjoy some experiences, to spend a little (within our budget of course).
So far we’ve visited Bilbao in Spain, Berlin in Germany, and (not so sunny) Bournemouth here in the UK. We’re also going to be in a position to visit family in the US at the end of the year for Christmas.
As a result this year has been a good one, so far, with lots to do and enjoy.
This is important.
So when my head runs off into the future and all I can see is pound signs I find it helpful to bring myself back to the moment, to take off the blinkers, and to remember that life is happening now.
It’s about balance: debt repayments, savings and (yes I said it!) spending.
Gratitude
It’s also helpful to be grateful, and I am. Things have slowly fallen into place:
- debt repayment plan
- additional income from Amy’s job
- savings account
- quarterly budget reviews
- 0% interest credit card
As each month passes the prospect of being 100% debt free gets closer.
And for that, I am truly grateful.
The joy of uncertainty
We set up the savings account because it felt like the right thing to do at the time.
Truth is we don’t yet know what we are saving for. Sure, the funds act as a safety net and can be used for larger purchases (e.g. trip to the US at Christmas) however overall we don’t know what we’ll do with the money that we save.
I would like, at some point, to leave my 9-5 and try something new. Perhaps the funds will be used for that, perhaps not. I’ve recently discovered ancient philosophy (those Greek and Roman dudes rock!) and right now would like to go back to school to learn about it more formally; perhaps the money will be used for that, perhaps not.
The truth is: it is OK to not know what you are saving for. It’s enough to know that saving is the right thing to do, right now. The purpose for the money will be revealed at the right time.
There is joy in that uncertainty.
Who knows where this journey will lead. The lessons learned around money have been, at times, harsh. It takes a second to get into debt and years to get out of it. The Great Escape strategy has forced me to focus on the necessary and to eliminate the unnecessary. It has facilitated my knowing what I need, what I want, and what’s important.
And, what I do know is that I will keep doing the next right thing in each given moment.
Afterword
I’d love to hear from you about your experiences with debt repayments, savings and spending.
How do you find balance?
Do you ever get carried away?
And if so, what do you do?
Steve, I really enjoy your posts and see a bit of myself in you. I admire the way that you plan things out and take time to reflect on your goals and the motivation behind them.
After putting myself through college and grad school with odd jobs and a combination of scholarships, grants, and loans, I recently started a full time position. My wages are quite decent and are 5x what they were just a month ago. At first I was elated and started to do some things I had been putting off, like $1700 worth of car repairs, and buying some fancy food to celebrate. I am paid monthly so have not yet gotten my first paycheck and got a bit carried away putting these things on the credit card, and have had to dip into my savings for this month’s payment. I pay off my credit card balance every month but have $35,000 of student debt that starts compounding interest 6.5% once I leave school. I haven’t officially graduated yet, since I am working on getting my thesis past committee review, so I could put off paying back my loans until after, but with my job I’m ready to get started paying it down.
I’m now settling into thinking about how to strike a balance between paying off my student loans, saving, and spending. I’d like to pay down my loans more quickly than the 10 year term of the loan to save on interest, and to have my future earnings available for things like maybe buying a house or starting a family. Originally I was planning on paying $1000 or more per month so I could pay off the debt in 3 years. Now I’m thinking that this aggressive repayment should be balanced with saving, so that in case I lose my job or need to take a leave of absence I will have savings to cover my expenses. I also want to take care of myself so I can be effective in my job and enjoy life… so am trying to budget what kinds of expenses I want or need for my lifestyle.
Thanks for the thoughtful comment Kandis.
What I’ve found is that it is important to strike a balance between debt repayments, spending and savings. At the start of this journey money was really tight so savings were out of the question. This led to a difficult year financially, although it did force us to cut back on all the unnecessary expenditure (e.g. Netflix subscriptions). As things have got better saving some money each month has become possible. This led to my considering whether we should be more ‘aggressive’ with the debt repayments rather than saving but as you say the savings actually provide some security for a rainy day (or just in case something unexpected happens). Of course the savings don’t go anywhere so can be used for debt repayment further down the line if we wish.
Ultimately I set a plan, and have stuck to it and that’s what I intend to do going forwards (stick to the plan). Monthly budget plans (reviewed quarterly) have helped tremendously with this.
I wish you well with your debt repayments and budget. If you need any help please let me know.
Steve