This is a big milestone for me. I’m completely worthless, guys…. FINALLY! 🙂
I now have a positive net worth for the first time in my entire adult life.
When I started this blog, I was in a ton of debt and didn’t have a dime of savings. Don’t believe me? See the crime scene for yourself.
November 2012 Net Worth
April 2017 Net Worth
Today, I have a small (and growing) retirement fund and have almost halved my total debt.
How I Did It
1. I had a wake up call, hit rock bottom, and found motivation.
I had a wake up call back in late 2012, when I did a bit of math and realized that when my student loans came out of forbearance, I would no longer be able to make ends meet. I knew that I had to start paying off these two debts. Dave Ramsey books and DVDs got me motivated. I wanted debt freedom more than I wanted stuff.
2. I reduced my expenses and financial obligations to free up money
A. Lowered housing expenses: This was a big one. I had to accept the painful fact that I could not afford to live alone with this huge debt over my head. It hurt to realize that, in my late 30’s, I could not afford to have my own place. I hated, HATED, the loss of privacy, but I had no choice. I had to turn to Craigslist. I went out and moved into a rented room in someone’s house. I’ve had roommates ever since. And yes, I hate it; but it’s the price I have to pay.
B. Lowered other living expenses: I have not had, and still do not have, a car. I walk everywhere or take public transit. I have no hair salon visits, have only had one vacation, don’t “go shopping”, etc. Yes, I have no life.
C. Reduced the number of financial obligations: In my housing search, I looked for rooms to rent that included all utilities and internet so wouldn’t have to deal with keeping track of those. I cut out miscellaneous expenses. Netflix…gone. Online services I wasn’t using…gone. Now, each month I only pay for three things – rent, student loans, and my mobile phone. (My public transit pass is paid for with pre-tax income directly from my pay.) I have only four other expenses which are paid once yearly: WordPress, antivirus protection, Amazon Prime, and file hosting / data storage.
D. Temporarily lowered my student loan monthly payment while paying off the credit card debt. I changed my payment plan from a 10-year Standard to a 10-year Graduated. This lowered my monthly student loan payment by $500/month and helped me gain traction with my credit card debt. Once the credit card was paid off, I changed my student loan payment plan again.
3. I increased my income.
A. I got a new job. I can hear the eyes rolling. Yes, I know that making more money is easier said than done, but it can be done. How did I do it? It was easy. I got fired. I made my first big dent into my credit card debt in March of 2013. In mid-April, I was fired by my employer. This was when I hit rock bottom. I spent the next four months on unemployment until I started my current position.
Back when I was still with my old employer, I didn’t think I’d ever get a job that paid more than what I had been making, which wasn’t much to begin with. I felt trapped. I was struggling with the work and sad where I was, but was afraid to leave and end up someplace that was even worse. Well, my old employer was just as unhappy with me and gave me the axe to put us both out of our misery.
I was angry and hurt at the time, but it ended up being the best thing for me. My new job, which is not perfect, but better, pays almost 50% more per year than my old job. How did I do this? The new job is in a (HCOL) high cost-of-living-area in another state, which was responsible for just about all of the salary bump as employers in these areas often pay higher salaries to compensate. If you can live in a HCOL area like this and keep your expenses very, very low (think multiple roommates, and no car), you can skim the difference in salary to put towards your debt.
B. Investment returns increase net worth. Ever since I started my current job a few years ago, I’ve set aside and contributed something to the 401(k) plan here, even if it wasn’t much. At my age, I never had the luxury of foregoing retirement savings while I focused on debt. Even though I don’t have a ton of money invested so far, every few hundred dollars of gains, put me a little bit closer to my future goals. Yes, market corrections and drops happen, and I will weather them when they do, but I always keep my view toward the long term.
4. I attacked my debt like Insanity Wolf
A. First, I attacked my high interest credit card debt and paid it off: Because of all the deep debt that I was in, my $30,340 of credit card debt had an interest rate of 19%! No credit card company would offer me a 0% balance transfer option. And why would they? What credit card company would give up hundreds of dollars each month in guaranteed interest payments?
It is only because of a deal that I got via my current employer, that I was able to get another credit card with a 0% balance transfer. With the interest gone, this helped me a lot to gain traction on paying it down. Yet another reason to be thankful for having a job. If you work for a large employer, check your employee benefits. After paying it off I performed a marathon session of bad dancing.
B. Next, I attacked my student loan debt and am paying that off with intensity. As soon as my financial situation stabilized after getting rid of the credit card debt, I focused on the 12 individual student loans (totaling $112,258) that I had accumulated with high interest rates. While I was focusing on paying off my credit card, I made the minimum payment on my student loans. It was disheartening to see that minimum payment on those student loans was comprised, almost entirely, of interest. I was throwing away hundreds of dollars (~$600) every month in interest payments.
A couple of readers of this blog (Thank you, guys!!) mentioned refinancing as a way to get a lower interest rate. I’m glad that I refinanced my student loans. Now, less money goes to interest and more goes to principal. Thanks to annual cost-of-living salary adjustments at my current job, I put a bit more money into my monthly payments every year. I am now making the biggest payments that I’ve ever been able to. Part of any bonus and tax return also goes to the student loan.
5. I focused on milestones to bolster perseverance.
When I started making payments on my credit card, I focused on having a balance under $30,000. After that, I looked forward to having a balance under $20,000, under $10,000, under $5,000, and finally under $1,000. I stayed focused on my mini-goals.
Having this blog and all of you guys cheering me on from milestone to milestone helped more than you can know. Thank you!
Remember, that while the basic steps are simple, living through it has not been easy. Stay the course.
What’s next for me? I have three major financial goals still ahead.
ONE. Pay off the remaining $77,421 of student loan debt sometime in 2019 and finally taste sweet, sweet debt freedom!
TWO. Starting sometime next year, max out all retirement savings vehicles, including the Roth IRA, which I haven’t contributed to in a long while now.
THREE. Save one full year of living expenses in an emergency fund.
Have you gone from being a Zero to, uh, net worth zero? How did you do it?
“Debtor’s prison is real, and opportunity cost is a bitch.” (DDSW)
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