You know that feeling when your wife calls you at work and tells you she can’t buy groceries because there wasn’t any money left in the account?
It’s hard to believe this was our reality in the Spring of 2011. We were living paycheck to paycheck and only one major expense away from an absolute financial disaster. The worst part was we were too stupid to even realize how bad it had become because we were normal. Normal is driving around luxury cars with 6 year notes, taking trips to the Caribbean on Visa’s dime, wearing fancy jewelry that we financed, and letting the world know how well we were doing.
We would spend three hours researching the best flat screen television to buy, and about seven minutes a year to decide on our investment strategy for our pathetic retirement goals. We were running on the treadmill, and every year the treadmill got faster and faster. Then one day we couldn’t keep up anymore and we finally had that “Oh, $h!t moment”. We couldn’t buy groceries because we were broke. Who could have seen this coming?
I’ll never forget the embarrassment I felt inside because I knew we were doomed. I knew that we both had good jobs and we still couldn’t even pay for ourselves. How pathetic, right? That feeling of shame, embarrassment, and overall fear of the future caused something radical to happen. The next few months would be a defining point in our marriage, for our life, and for our legacy. It started the day Andrea and I got on the same page with money together. One thing we agreed on with our money…we were tired of being broke.
First Things First: We Needed to Create an Actual Plan for Our Money.
I happened to be pretty good with Excel and decided to create our very own budget spreadsheet. It was the first thing we did to start winning with money, and it’s the first thing I still tell people they need to do with their money. Creating that first budget made both our stomachs ache because it was when we first realized where all of our money had been going. We were one of the main streams of income for Target and Home Depot, because we literally paid the salaries for one employee at each store we visited. The budget also allowed us to see it wasn’t her fault or my fault. It was our fault. We were doing dumb together and now we could actually see it. If you think stepping on the scale for the first time in a decade is eye-opening, wait until you set up your first budget. However, looking back the budget was, and still is, the number one reason how we became debt free, how we remained debt free, and how we are now able to build wealth.
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We were so used to spending $1.50 for every dollar that came in, that we never really had any kind of savings. Hmmmm, maybe that’s why we were broke! We decided to squeeze everything we could out of our budget, sold most of of our crap on eBay, and hit $1,000 within 2 weeks. This was a huge deal for us because we were doing different things with our money. I remember thinking, “Holy crap, this might actually work!”
Credit Cards Meet Their Maker
Once we had that cash saved up, I opened up my wallet and threw 3 of them on the table, and my wife opened up her purse and threw 9 of them out there! Yeah, 9 of them. We got out a giant pair of black scissors, and cut all the cards into tiny little shards all over our kitchen table. I remember thinking to myself that we were actually going to do this. I mean, it would take way too long to glue everything back together, right? This was a turning point for us because we were not only talking the talk, but those scissors were causing us to walk the walk. That was in April 2011 and we haven’t carried a credit card since. Believe it or not, we now take vacations, rent cars, and buy stuff online…all with a debit card. Note: You will be told over and over again that debit cards just aren’t safe. However, Visa and MasterCard both offer zero liability to anyone who has fraudulent charges on both credit and debit cards. They’re safe, it’s there in writing, and we continue to sell ourselves on the belief that debit cards aren’t safe. It’s another debt myth.
Once we had a little cash saved up and no longer had the ability to go further into credit card debt, something happened that would change our lives forever. Here is the rest of our story:
We Went From Feeling Tired of Being Broke and Living Paycheck to Paycheck to Paying Off $52k in 7 Months
We created a form called the Debt Snowball that we had learned listening to Dave Ramsey. The debt snowball focuses on your behavior with money and ignores the interest rates. What?! Ignore the interest rates? I felt the exact same way, but then my wife reminded me: (our way wasn’t working…in fact our way of handling money sucked). So we decided to set up the debt snowball by listing our debts from smallest to largest owed, ignoring interest rates, paying minimum on everything, and attacking the smallest one with pure aggression! It looked something like this:
Debt #1: Credit Card for $500
Debt #2: Credit Card for $1,500
Debt #3: Credit Card for $5,000
Debt #4: Student Loan: $15,000
Debt #5: Car Loan: $30,000
We knocked out those first two debts really quick and closed out the accounts. It was two huge wins for us and we were feeling on fire. Then we got to the larger credit card and the speed wasn’t there. We wanted this debt gone ASAP, so we decided we were going to to take our lives down to bare bones. We called it “scorched earth”.
We called our friends and cancelled any and all upcoming vacations we had planned. You guessed it, we officially became the topic of conversation among the crowd we hung around because we were now officially weirdos. It hurt a little bit to hear our names get trashed by people we called friends, but we were on a mission (and they would get over it).
We then started Ad Matching at Wal Mart. This allowed us to take our $1,000 a month grocery bill down to $550. It was HARD, but we didn’t care. We wanted our freedom back.
I started working massive amounts of overtime. It was tough to be away from my wife and my 10 month old baby boy, but I wanted him to grow up in a debt free household. It was exhausting at times, but so was being in debt.
I started a pool cleaning business in my neighborhood. I went online and found out where all the pools were in my neighborhood. I made some simple business cards and went door-to-door. My wife would actually drive me to the house and I would hop out of the car, run up, and ring the doorbell. You can only imagine what our friends were really thinking of us now! Meanwhile, about 1 out of 10 doorbell rings would equal a “Yes” and I started generating an extra $1,000 cleaning pools. I hated every second of it, but in the end it was worth it.
Then it happened. In November 2011 we finally made the last payment on our car. It was to Bank of America. We hopped in the car we were paying off and drove up to the local branch. I remember both of us were giggling like two little school girls when the teller asked how she could help us. We got out our checkbook and wrote out that last payment right there on the spot. As we handed the check over to the teller, we both literally felt the weight of the world lift right off us. The shame we once had was gone. The laughs and jeers from our friends were now all worth it. The look on our parent’s faces when we told them we were debt free was priceless. Cleaning pools in the 117°F Phoenix summer was now justified and it was officially time to shut down the business! It was the next best feeling my wife and I have had together after the birth of our two kids. We were debt free. We finally had our lives back!
If a couple of financial idiots can turn their lives around, then I promise you can also. It’s not easy and you’re going to be made fun of. Your friends and family are going to think you’re nuts, and you may even agree with them at times. In the end, it’s worth it. I promise.
There are really only two choices with debt:
Live in Debt and make Payments for the Rest of Your Life
Get Out of Debt and Simply Live
The best part, you get to choose.
Chris and his wife are living proof that money problems and money success stories are based on your behavior with money. Be sure to check out more of what he has to say at MoneyPeach.com.