Have you ever felt that money controls your every move? That no matter what you did, you had this sickening feeling that money and your finances will always get the best of you? I think it's safe to say that we've all felt that at some point in our lives. Gregory Garland was no different as he and his wife struggled to manage their debt with the income they had coming in. Along the way, Gregory got fed up, rolled up his sleeves and with the help of his supporting wife, got his finances in a head lock and took them down WWE style. Here's his story on how he took control of his finances and why you can too.
Three years ago I finished my year of service with Americorp. I started a new job with Coca-Cola, got married, moved from Dayton, OH to Cincinnati, bought a house, and my wife was finishing her Masters degree. In June of 2007 (when all this was going on) we were $10,000 in credit card debt on 5 credit cards. We also had a mortgage ($87,000), Car loan (10,000) and massive student loan debt ($100,000), and my wife wasn't working. I was making $32,000 a year, but only part of that in 2007 since I started in May '07. We were able to make our bills each month, and we could afford our mortgage and student loan payments, but the credit cards were killing us.
Starting the Debt Consolidation Process
By the end of July my wife found a job teaching Kindergarten, which boosted our take-home pay. I consolidated my student loans (hers were the bulk of them, and were not in payment since she was still doing her MS program). We took my wife's new income source and the monthly savings from the consolidation and dumped it into the credit card balances. We started by paying off the smallest ones (a $500 Sears card, and an $1,100 Zales card) with money we had managed to save up. This freed up about $150 a month that were were paying to service interest on those two cards. We cut back our spending dramatically by making a budget and came by some unexpected money and by the end of that year we were able to scrape together enough to pay off the two next-smallest cards ($1400 5/3rd credit card, and $3000 Capital One credit card). This freed up another $250 monthly. This left us with $4000 in credit card debt.
We had paid off $6000 in seven months!
More from GFC, Below
Managing Sudden Drains on the Budget
However, January '08 bogged us down. We had freed up $400 a month by paying off these cards, but my wife's student loans became due. We went from $250 monthly to service my student loans, to $1,100 a month to service our loans. We consolidated hers and got the total down to $750 monthly (the same amount as our mortgage payment), but we were back to living check to check. We couldn't make any progress on the last card, but it's $200 a month payment was killing us. We got the principle down to $2,000, but some emergencies happened that pushed it back up to $5000. It was like this for most of '08. Then in October I got a promotion which came with a raise to $43,000 a year, and my wife got a new job teaching college which took her pay from $20,000 a year to $32,000. Our income increased by 50% that month. We we able to live a little more comfortably after that, but we still did not make any more headway on the credit card. In August '09 we made our final payment on our last credit card (from the evil insert big bank name here).
This was momentous for us after 2 years trying to get this monkey off our backs.
Truly Living Within Your Means
We lived within our means for the rest of '09, but only barely. We did not rack up any more credit card debt, but we were not saving either. In December of '09 I looked at our budget and realized we had be hemorrhaging $2000-$3000 monthly in uncontrolled spending (not including bills)! Worst yet, I could not determine how we had spent all this money. I crunched some numbers, and determined that we could afford to spend $380 per week on Groceries and incidental expenses. Up to that point we had been charging groceries and incidentals to our debit cards, which contributed to our overspending, so we resolved to withdrawal $380 each week, and pay cash for everything. We saw a 23% reduction in spending in Dec '09 and another 13% reduction in Jan '10. This lower level of spending has persisted through the present.
In '10 we have managed to save $500 dollars monthly (sometimes an additional $500). When our washer died we were able to buy a new one with cash from our savings. This was very empowering. We have begun contributing 6% of our incomes to retirement, with plans to increase this incrementally over the next few years. We expect to pay off our car this year (a year early), and possibly renovate our bathroom.
We no longer spend money from a position of fear, rather from a position of power.
Note: The process we have used to get out of debt is based loosely on advice we took from listening the Dave Ramsey on the radio. There is no trick to getting out of debt, but his process is a road map to doing things the right way.
Do you have a success story to share about how you took control of your finances? If so, please contact me. I'd love to hear your story, too!