We woke up a few years back and realized that we were in a ton of debt and working our fingers to the bone just to pay the bills and keep up with our growing mountain of stuff and the stress that accompanies it. We finally decided to do something about it and started a plan to simplify and work ourselves out of debt. What kind of debt you ask- well, lets just say that at some point, when you realize you have over a million dollars in debt you wake up, hard and fast. Who would loan us (a couple of kids) that kind of money, even it if wasn’t all at once?? See, we made a few investments (bought a couple rundown fixers to restore to their glory and hopefully cash in on the flip side) when the real estate market was buzzing, and like many we now find ourselves with properties that are decreasing in value and that we can’t sell.
Luckily (depending on your viewpoint) we didn’t take any bad loans, so there’s no balloon payment coming our way- but sadly…banks don’t seem to be willing to work with anyone who hasn’t missed payments. How did our society get to a place where those of us who pay our bills on time have to pay more and at a higher interest rates, while those defaulting get the gift of reduced interest and payments?? I digress.
The plan started small. Go out less and do with less. We simply pinched pennies. And lets be honest, for all the tough conversations and tough decisions- this really isn’t that hard people.
I doubt that most people we know would even say they knew we were/are saving, much less that we made several of the big decisions in our life to save more. First we pinched pennies, then dimes, then (okay, who am I kidding, its not the 20s), but we started small and watched our savings grow. We saved what we could and focused on bad debt first.
-Get rid of what small credit card debt that we had. Check.
-Then we worked toward jen’s vehicle payment, then her student loan. Check.
-Then onto my student loan (and how exciting was it to get rid of that beast!). Check.
As each bill got paid off, we suddenly had more money to save, and the savings for the next debt grew faster. We also focused on buying less, and starting to get rid of what we had. This is hard in the beginning, but becomes oh-so easy with practice!
We eventually decided to take more dramatic action and move out of our home. The same house that we thought we would live in, start a family in (if we ever decide that having kids sounds like a good idea less than 3 years out), and eventually die in. We poured our blood, sweat and tears -literally- into that house and couldn’t imagine ever leaving her. But…we used a transfer at Jen’s company as a chance to force ourselves out and look at things from a different perspective. Worst case scenario, we could decide we were right and move back in to complete the plan. We sold most of our belongings, stored the rest and downsized from a 5 bedroom house (with basement and garage packed to the gills) and moved into a 3 bedroom apartment in Ogden, Utah! We also got into a bit of an investment there that hasn’t exactly turned out the way we planned, but that also is another story for another time…
How quickly did this really big, really hard decision become clear and easy…
Having someone else pay the largest bill we have (in rent) every month made that seem like the best decision we ever made, and now looking back it’s hard to remember why we were so in love with living in that big empty house to begin with. When we came back to stumptown we stayed at the level and size we had been living for a year and moved into a house easily half the size of our previous one, and quickly realized we still had two rooms that sat empty. The purging continued! We finally paid off our car loan, and a small loan we had used as a down payment. Soon we had paid off a small piece of property we held a loan on and things were looking good. Sadly, during the same few years, the market went to crap and rent lowered, so despite all our efforts, we still lose money every month on our investments, but were working on that. We sold our vehicle -which we loved- and decided to buy a 1967 VW bus (plenty more on that in other posts) for a fraction of the price in cash. Another loan paid off, and the value of knowing that we drive a vehicle that has as much personality as we do, and that we could live out of we ever decide to downsize that far! =)
After a few months living in friends’ basement, we moved to Vancouver last year (this time to follow a dream job opportunity for Jen) and moved into a studio apartment. Its amazing how squeezing into tighter and tighter spaces make you really stop and question how valuable the “things” around you are. or aren’t. It also doesn’t hurt that with each smaller space comes a smaller mortgage or rent, and more savings to go toward the debt monster. We also made the tough choice of NOT buying a pass to snowboard last winter (even though whistler is oh-so close), and NOT taking the same large vacations we have taken every other winter. We still went and played, but downsized there as well. Not because our drive to travel or snowboard has gone away, but because we know how much more we will enjoy those things when we aren’t going deeper into debt to do so. We have been in VAN for almost a year and while we may want for many things (sunshine and cheap drinks being most common topics), we haven’t once wished for a bigger space. Next month we are downsizing yet again to a smaller and less luxurious bachelor apartment, and a slightly less attractive neighborhood all in the interest of saving and simplifying. And this time, cutting our rent almost in half! Its hard to believe that a year ago we were struggling with the tough choice between the current studio and a bigger, more expansive place closer to the beach.
We have now run out of the small bills to payoff. The easy work is done. We are now saving the big dollars for the big prize. We are looking forward to paying off an entire equity line and to doing so soon. That will put us almost back to a place of breaking even. A place where (assuming average vacancy in our rentals) we’ll be at least equalling our monthly payments with rents coming in… meaning that almost 15 years after graduating and over 10 years after buying a house we can almost…almost consider ourselves as having the same freedoms as we did when we graduated from college.
I can already feel that this one is going to be tough. Its hard to collect that size of savings and not let it start “burning a hole in your pocket”. We’ve already started joking about tropical vacations and how ripe the current market is for an investment… but we both know the right choice, and we both know how very good it will feel to write that check. Certainly, there were other options along the way, as there will be in coming decisions. Since choosing this path, we didn’t always take the hardest/cheapest route and we certainly didn’t take the easiest or most expensive. But we have made ourselves aware. Aware of the typical cycle of working to buy and then working harder to buy more/bigger/better. And now, we are aware of a different cycle entirely.
This path may not be for everyone, in fact we know it isn’t… but for us, this path of simplifying and purging has been truly wonderful. And we look forward to whatever possibilities it may bring us in the years to come.