For the initial four years after our wedding, my spouse and I were engrossed in clearing a debt of about $45,000. A tremendous sense of liberation washed over us upon dispelling this financial burden. Subsequently, we saved for a year, amassing the down payment for our house and embarking on leisure trips – all costs handled in cash.
However, like many others, we inadvertently slipped back into an unwanted debt cycle.
Following the purchase of our house, we accumulated mortgage debt. Our financial status was further compounded when we discovered we were soon to be parents. Although we were diligent about our savings, it wasn’t enough to replace our two two-door vehicles, an inappropriate choice for baby car seats, resulting in submitting to auto loans. Gradually, we found ourselves entrapped in debt yet again. Despite having sufficient cash to cancel all our debts at once, we opted to keep our finances accessible for potential family crises. This is evidently the unpredictability that comes with parenthood and property ownership.
Refusing to let ourselves drift along with our financial landscape, we determined 2017 would be the year we regained control of our monetary status. Here’s what you should do if you find yourself caught in a debt cycle:
FORMULATE A STRATEGY
We were lackadaisical about settling our debts for many months, choosing to minimize payments to avoid confrontation. With a newborn requiring our focus, budgeting was hardly a top priority. We evaded budget management, assuming we’d eventually deal with it. Fortunately, the decision to formulate a debt-release plan came about, coincidentally aligned with our church’s choice to commence Dave Ramsey’s Financial Peace University.
PRIORITIZE BUDGETING
A significant first step was to re-establish our budgeting habit. This meant understanding the intricacies of our debt, income, and recurrent expenses. The initial task seemed daunting due to our long hiatus from budgeting. Nevertheless, we’re positive it would progress smoothly once re-established as a habit.
CUT BACK ON EXPENSES
Often, upon setting up a budget, you realize a considerable amount of money is dwindling on trivial things. A well-defined budget enables resource allocation to specific aspects, thereby restricting overspending. For us, it meant reducing our expenditure on take-out food, effectively channeling this money towards debt clearance.
BECOME DEBT-FREE TO STAY THAT WAY
Our current goal is to eliminate outstanding debt. We aspire to be debt-free (apart from the mortgage) within the following two years, if we follow our plan accordingly. This is a significant improvement compared to our previous four-year tenure under minimum debt payments.
The crucial lesson is to avoid debt as much as possible once cleared. This situation has served as a stark reminder of how easy it is to revert back into consumerist expenditure habits. However, it’s also comforting to know that reclaiming a debt-free status isn’t entirely impossible, provided you have a solid plan and necessary dedication.
