According to Merriam-Webster, the definition of debt is “a state of being under obligation to pay or repay someone or something in return for something received : a state of owing”. From Skittles to flour, from dollars to time, we have all experienced a form of indebtedness. One time I owed a buddy $10 and forgot about it. More than four years later, while reminiscing about old times, I took out my wallet and handed him a $10 bill. He was grateful and confused. I told him that I still technically was in debt to him because I made a promise to pay him back all those years earlier. It may have been four years later, but the “state of owing” was finally settled. I say all this because, after really digging into where my debt free journey started, I have come to find out that I have been in “a state of owing” many times over since childhood. It wasn’t until 2014 that I came to understand “big person debt”.
I would describe “big person debt” as pretty much anything money related starting in high school. A credit card can be opened in high school. Student loans equivalent to a home down payment can be accrued. More credit cards can be opened. Car loans can be taken out. The store will let you finance everything! As Dave Ramsey says,
“just because you can make the payments, doesn’t mean you can afford it.”
Because these debts can be acquired during high school, many people are essentially jumping into the next big part of life stuck at the start line. Maybe the high school scene has changed since the mid-2000s, but nobody was talking about heavy financial topics when I was there. Those examples listed above? Yes, that was me; living an adult life stuck at the start line.
Don’t get me wrong. I have enjoyed most of the adult life so far. Some times have been great and some times have been not as great. It’s what I call the wild ride. With my lack of seriousness towards debt, I have done a lot of awesome things at the expense of making little to no progress on being debt free. I have essentially crossed the adulthood start line and taken a few strides. From the start line up to this point there have been several lessons learned.
1. ACQUISITION OF KNOWLEDGE: In high school, money was something you made to pay for gas, fun, and extracurricular activities. Not having sufficient knowledge of finances or what financial success looked like put me at a disadvantage early on. Never did I seek to understand the ins and outs of my money at the macro and micro level. I would not put blame on anyone for that, but the cultural norm is to never talk about finances and live like everyone else. Everyone has debt! That’s all I knew. Financial Peace University provided the knowledge to win with my money.
2. ACQUIRING KNOWLEDGE AND MISBEHAVING: Nobody can change the world if all they do is talk about it. Action is required. In my intro post I talked about how I hopped on and off this debt free journey at my leisure. I learned what it took to win with money, but I behaved disproportionately to what the long-term vision was. A prime example is when I met goals during my debt repayment, but then I would take a break to save up money for a trip somewhere. That is not how this works. If I want to be debt free then I have to be intense all the time. I’ll say it again for the people in the back, “intense all the time!” At the end of fun trips I still had debt to contend with.
3. BABY STEP 2: All this talk about knowledge. . . Well the biggest chunk of knowledge I received was the 7 Baby Steps to win with money. After saving $1,000 for a starter emergency fund (Baby Step 1), use the “debt snowball” method to pay off all debt other than the mortgage. The basic idea is listing all debts smallest to largest, making minimum payments on the larger debts, and attacking the smallest debt first with all you’ve got. Once the smallest debt is paid you roll those funds into the next debt so you’re looking at your minimum payment plus the extra that isn’t being paid to the debt below it (because you paid it off!). So if you pay $100 on your smallest debt and $20 on your next debt, you will pay $120 on the next debt after the smallest debt is gone. This is the step I am currently in and why this “Debt Free Journey” series even exists. I have been on and off this step since 2014 and why I haven’t won yet.
4. BUDGET AND BEHAVIOR: This goes along with the previous point and was mentioned in a previous post. The importance of a written budget cannot be stressed enough. If every dollar is not being told where to go then some of those dollars will escape and tell you later on where they went. This is unacceptable. I wrote about my experience budgeting $980/month (yes, that is per month) and how that was huge in helping me pay off my car. Know where the money is going and live on less than you make; budget and behavior.
5. LIVE LIKE NO ONE ELSE: Sounds weird. When I live like everyone else, I am losing. Granted, I kind of live my own life and do my own thing anyways, but when it comes to money this is important. The idea is, especially during Baby Step 2, that I live differently (i.e. drive a junk car, sell stuff, eat tuna and rice, don’t go out to eat, etc.) than everyone else right now so that later I can live and give like no one else. Later I can be generous during uncertain times (eh-hem, I see you over there COVID) without any worries. Living like no one else IS NOT EASY! Get over the hump and build wealth. Choose to eat ramen now so there are no worries eating at California Grill later.
6. DEBT DEFERRED IS STILL DEBT: Yep, it’s not going away just because I don’t want to or can’t pay it now. Living as though debt doesn’t exist doesn’t mean it isn’t there. See the previous point.
7. CREDIT CARDS AREN’T HELPING: That bonus 120,000 points after spending $5,000 in three months sure sounds enticing. If I am spending that much on rent and bills anyways, why not use the credit card and pay it off? Build credit! Well, the credit cards have been part of my debt free journey. They haven’t helped long-term. Plus, there is no value in travel credit cards that offer the same benefits I already get for being in the military. Get rid of the temptation and only spend actual money that is budgeted.
8. LITTLE VICTORIES: There is no winning without hope. The little victories matter. From paying off a low-balance credit card to saving up $1,000 for an emergency, those little victories do something in the human psyche to allow a person to believe the most difficult battles can be won. In Sun Tzu’s Art of War he says, “Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.”
There you have it. Lessons learned on this journey to becoming 100% debt free. I am going to low-key add more if I think of anything else. For reference, we started with seven points. But remember, folks, I do not claim to be a financial professional. These are my own personal experiences. Next up, I am excited to talk about some major accomplishments during this long, tedious journey. One of those accomplishments I have already spoken about in depth (paying off $15,000 in 4 months). Looking forward to sharing these stories and getting to the progress updates in real time (should see the first update mid-August). If you have questions, comments, ideas, or hate mail, please feel free to share.
Be strong. Love God. Love others.