Life Lessons I Learned from Debt Freedom

by Sandy L on February 26, 2013

This post is dedicated to Mutant Supermodel, who reached out to me and  told me my posts were missed.  Thank you for the inspiration to put pen to paper again.

So a lot has happened since my last post a few months ago. Babci was in the hospital a couple of times (she is fine now, but it was scary), and my family bought and 2 family house so that we can all live together by the end of 2013.  The house was built in 1825 and it needs everything, from roof to foundation, but we’ll get to that in another post.  The hospitalizations and Babci approaching 80 did play a major role in our decision to buy this home when we did.  I wasn’t in a super rush before now, but it seemed more urgent to have a home where we could all live if things took a turn for the worse.

Our House with Basement Wall and Porch Missing

Our House with Basement Wall and Porch Missing

Today I wanted to talk to you about my ups and downs with trying to get out of debt completely and what I learned from the whole process.  Back in 2008, I was pregnant with my 2nd child, I had 2 mortgages, soon to have 2 daycare bills, 2 houses torn apart and layoffs were looming. My family was lucky. We were not impacted, but I swore that every paycheck after that would be used wisely.  I became addicted to PF blogs. I started all kinds of spreadsheets. I kept track of my craigslist earnings. I made all kinds of draconian efforts to maximize my extra payments towards my mortgages. I thought debt freedom was the answer to my happiness and I thrived on watching my balances go down. I was making progress, real progress and it was energizing. We had a good head start already. We didn’t have any non-mortgage debt and from the time I bought our home, I wanted to pay it off early, so many of my windfalls would go to extra payments.  Paying off our mortgage was within reach and we did pay finish paying it off about 2 years later (11 years after we bought our house).   I expected to feel happier, but I didn’t. I thought it was because I still had a second mortgage to pay off, so those efforts were diverted to that for a while.  Then almost suddenly, my family was 100% debt free.

What did I do first?  Well, I put off buying clothes and utilitarian household stuff for so long that I seemed to need everything. I shopped for a lot of things. I remember my measuring cup’s handle broke off and was using the broken one for like 2 years. When I finally went to buy another one and found out it was $3, I was like..why the hell did I not do this sooner?  I bought clothes. I replaced my long overstretched out underthings.  I bought new dress clothes for work.  Then I kicked myself for not spending sooner. All the things I needed equated to under $1000 and I had been going without them for 2 + years.   In the grand scheme of things, I really should have replaced some of those small ticket items sooner. If it were up to me, I wouldn’t have replaced our TV when it broke but it was football season and there are some compromises one must make for the sake of marriage.

The Funk

After the honeymoon phase wore off, I got into a funk. Monitoring debt reduction is very fulfilling. It’s easy to track and every month you’ve accomplished something.  It’s not like investments where one month you’re up and another you’re down even though you’re contributing from every paycheck.  I became lost and I didn’t get the same thrill from investing as I got from tracking debt. Investing was too complicated with too many variables that were outside of my control.  I suddenly lacked purpose in this aspect of my life.  I didn’t know what to do, so I did nothing. My spending habits did not change much, so cash started accumulating without any plan for it. I was lost, but I didn’t care. I allowed myself a break from personal finances for a while.  After such an intense go at debt reduction, I was burnt out. I really was.

Implementing the F-You test

Then something interesting happened. I realized that with debt freedom, I didn’t have to work the job I had anymore.  Working became a choice, not a necessity.  This single realization changed my whole perception of working and life.   When having a particularly hard day or week at work, I’d often ask myself, “are things so bad, that it’s worth quitting over and losing my salary and benefits?”  You know what, the answer was always, “no, things aren’t that bad, this is just a blip that will pass”.   When I was in debt and had a bad day or week,  I felt enslaved by my job and even though it is an excellent job, I was kind of blinded by the fact that I “needed” to work and therefore I was trapped.  It affected my outlook and attitude. Now I count my blessings a lot more than I used to and I think I’m generally more content with my job even though the job itself hasn’t changed.

The biggest gift I received from this whole exercise was getting back that feeling of having choices in life.  The world is my oyster again, even though it was there all along.  The multiple expenses clouded my vision.   The reality is that even with debt, I still have choices and lots of them.  Everyone has options. I just felt like I didn’t have as many when I was in debt.

Debt Tolerance Factors

So, here I am today and I saddled myself with double the debt that I had at the start of all this. It’s the most debt I’ve ever had.  Luckily, it’s temporary and once we sell our other two homes, we will have a healthy buffer between income and expenses again.  The other thing I learned is that my debt tolerance increases as my job security and job satisfaction increases. If I’m feeling fulfilled at work and I don’t feel like I’ll be laid off anytime soon, I don’t mind the debt as much.

Where Does Happiness Come From?

The most surprising learning of all, was that Happiness is Independent of Debt Freedom. I always thought there would be a linear relationship between debt reduction and happiness, and there was not.  Yes, there is a level of unhappiness that can and will occur if you’re drowning in debt and can’t afford the lifestyle you’re leading. But if you’re living within your means, happiness is mostly dictated by your attitude and outlook on life which is controlled almost 100% by you and you alone.

Happiness comes from hope.  Hope that if you are in a tough situation financially or personally, you have the knowledge that things will get better over time.   Happiness comes from knowing you have other options when life deals you a blow.  Debt freedom does indeed give you more choices.

Advice for those on the same journey

Now, you may think I’m a crappy role model because I went crazy to get out of debt just to get back into it again a year later. However, I’m actually pretty psyched that we could make this move for our family. Debt freedom allowed us time to build up a hefty down payment and comfortably afford a place in a good school district with a nice sized apartment for my mom and big yard for the garden and chickens.  I couldn’t afford this option 7 years ago when my mom first moved to the area to be closer us..it was the peak of the market, but I can afford it now and that’s 100% because we had equity to make the move.  Would my mom’s house be underwater if I paid the minimums on it and not paid it off?  Yes. But since it’s paid, we can take a loss on it and not be trapped there indefinitely. That freedom feels darn good and even with taking a loss, it’s still cheaper than renting an apartment for 7.5 years.

Anyway, I digress.  Here is the advice I have to offer for what it’s worth:

  1. Don’t put your life on hold while waiting to reach certain milestones.
  2. Do understand your spending
  3. GO ALL IN at the outset.  Sometimes just knowing it’s possible to get down to a certain spending level helps motivate us to believe that debt reduction is possible, even if the actions aren’t sustainable long term.  Do a few spending challenges..they’re fun.
  4. Do plan on setbacks.  (I had my TV, Washer, Dryer and Video Camera all die during my debt reduction blitzkrieg)
  5. Don’t think it’s hopeless.
  6. Don’t limit the categories you’re willing to cut.  The smaller the gap between income and expenses, the wider the net you should cast on categories to save.
  7. Do embrace craigslist and ebay for both buying and selling stuff.
  8. Don’t think you’re somehow depriving your children or yourself.

I go back and forth on the money/happiness thing. On the one hand I just told you that more money doesn’t automatically buy more happiness. But on the other hand, I absolutely see money as a key to happiness. When it gets right down to it, it’s not the absolute amount of money you have that’s important, but that gap between income and expenses. As long as there is a healthy buffer, it doesn’t matter if you make $20K a year or $200K, that feeling of security will always be with you.  Having that slush fund there for when your car breaks down takes away so much stress and heartache. I highly recommend it.  Good Luck and feel free to ask questions if you have them. I promise I’ll respond.

{ 22 comments… read them below or add one }

Kevin @ Invest It Wisely February 26, 2013 at 9:39 AM

Good to see you back, Sandy! To me, having that feeling of choice is so important. If I know I can opt out anytime without severe repercussions, then everything becomes more tolerable

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Sandy L February 27, 2013 at 5:09 PM

Kevin, I didn’t realize you were still around. I thought you sold your site and checked out of the internet world. Great to hear from you.

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Kevin @ Invest It Wisely February 27, 2013 at 6:49 PM

I did indeed, but I still stop by from time to time and I still have some favourite blogs in the reader. ;)

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Cesar Alcantar February 26, 2013 at 10:18 AM

Again! Very well said. I too have gone through this. I was on a path to pay my home early then I was let go from my job. Alot of my money went to buy my home and when things got tight, I started to fear losing it. I then got a new job and I changed my way of spending. I refinanced with a low interest rate and did not do the 15 year mortgage. I now have more of a buffer to weather any storm of uncertainty.

Good to see you back! Best wishes to you and your family and it is great to hear that Babci is doing well.

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Sandy L February 27, 2013 at 5:10 PM

Cesar – yes, perspective is everything. Buffer is a good thing.

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eemusings February 26, 2013 at 6:05 PM

I adore this post. And so glad to see you writing again. Welcome back.

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Sandy L February 27, 2013 at 5:13 PM

Thanks for stopping by. I need to stop in down under and see what you’ve been up to lately. I’m so out of touch.

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Jacq February 26, 2013 at 8:04 PM

Since making the switch to “buying dividends” instead of just plopping money into an account, for whatever reason, saving has become even more fun for me – and it was fun before. I suspect because it’s easy to see very clear expense coverage when I buy a dividend stream. And the target is very clear now. Got all the needs and some of the wants covered, now just trying to cover some awesome extras. Mostly because I don’t want to have a life in retirement (or whatever) that doesn’t have everything I really want – and then some.

The Stoics said that we should always go without (voluntarily) once in awhile to truly appreciate what we have and not having to go without. That’s where spending challenges can come into play and be helpful (besides the obvious saving money aspect). Of course, some go too far and become Cynics / ascetics. But I don’t believe that’s necessary. Great if it makes you happy, but it just makes me neurotic. My head sounds like the house whispering in the story The Rocking Horse Winner when I get like that.

Anyway, glad you’re back writing, glad to hear Babci is well, glad you bought the house that you wanted. Glad that you went back into debt to get it! :-P

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Sandy L February 27, 2013 at 5:20 PM

That makes so much sense…the dividend thing, because you can track cash flow and not stock value (which goes up down and all around). I can totally see looking forward to hitting different milestones with dividends..pay for your electric bill…pay housing, pay for food, etc. You must do a post on it. I’m hungry to learn more.

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Jacq March 5, 2013 at 9:39 PM

I don’t like talking about investing much – people act like you’re attacking their religion or something, when really I’m quite agnostic. :-)
That’s exactly how I looked at it though – the milestone approach of getting the expenses nailed down over the last 3 years and just getting income that covered them in stages. I also realized some time in the last couple of years that I would have a hard time spending / selling investments – no matter how much I had. The balance going down would bother me too much. I could see myself bargaining myself down from a 4% safe withdrawal rate down to 3% (because what if??) – and then 2% and so on until I was looking at 0% returns and working until I was 80. LOL Getting actual cash in my account changes the whole ballgame somehow. Or at least I think so – have to finish up this job at the end of April and put it to the test. :-P

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Linda February 27, 2013 at 10:54 AM

It’s great to have you post again and to hear that your family is all well! And this is a really awesome post that is very timely for me. :-)

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Sandy L February 27, 2013 at 5:21 PM

Linda, are the chooks all better too? We’re getting 5-7 eggs a day now. I need to find me a good omelet recipe.

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Linda February 27, 2013 at 7:18 PM

Well, the chickens are over the respiratory disease, but now they seem to have a fungal infection! Ugh! Do yourself a favor and keep your flock closed. Don’t introduce new birds unless they came directly from a hatchery or a source that you thoroughly trust. Even that is no guarantee they won’t get an illness from a wild bird, but those are pretty rare.

Ironically, the day after my last post where I mentioned my thoughts of turning them all into soup I got three eggs. That’s the most I’ve seen in about three months! Next time they slow down, I’m going to whisper “fricassee” into their little ears. ;-)

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Mutant Supermodel February 27, 2013 at 5:38 PM

Hooray! You posted! And you are so sweet for mentioning me. :)
I am really excited for you and this new project. I know it’s going to have its crazy stresses but the reward is going to be well worth it. Can’t wait to hear from you again.

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rented life March 2, 2013 at 12:55 PM

Thanks for the list and the commentary on happiness. Yesterday my future income plans were slashed. Husband’s job has been super stressful for him, prompting him to want to search for jobs–but we rely on his income the most, and his benefits. We’ve both been feeling hopeless: what can we cut from out budget, how can we cut some things and still enjoy life, do we put family on hold, etc. It’s nice to hear from someone who has been there that putting our lives on hold, etc isn’t something we should do. We both feel very trapped at the moment, in our jobs and living situation.

When you went all in, how did you sustain that? We could cut a few things–our bi-weekly date night (a movie, or a dinner, never both), eating less meat (though that doesn’t appeal to me, as eating more paleo/gluten free has been expensive, but kinder to my joints), our netflix account…but then I feel like geez, those are the few things we enjoy, literally everything else goes to living expenses, student loans and credit card debt. How do you stay positive in cutting out those few things?

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Sandy L March 2, 2013 at 1:12 PM

Rented Life – this requires a whole post on it’s own, but the amount of fun you can have for free highly depends on how much free time you have. I do a fair amount of volunteer work that lets me do things like go to $100/ticket art openings for free. My skier friends volunteer for ski patrol in the winter so they can ski for free and get their gear at cost. My artsy friends are ushers at performing arts centers so they can see live plays and concerts for free. Plus, there are usually free community events that you can substitute for the stuff that costs money. During this time, I had a newborn and a toddler. We spent every Saturday at the local lake instead of going to more expensive places like road trips to the zoo. My kids had just as much fun, if not more. I guess to sum up, I spent more time on thinking about free but thoughtful ways to use my time. Cooking a special meal, going for a hike, spending a sunny day outside were all pretty satisfying and I didn’t regret not having more movie time. (Although I did buy a 10 pack of movie tickets for a discount that I used for the year).

I also did get satisfaction from seeing my balances go down, so whenever I pulled out my check book to write a check for my mortgage, I updated my little amortization table with a little green box that I used to symbolize “Paid, done, finit.”

I will try to write a post soon on this. It’s an excellent question.

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Cynthia March 2, 2013 at 1:06 PM

So great to get an update on your life, and for me, to get a nice overview of your personal and financial history! Your story is inspiring and it is totally clear that the debt you are taking on now is the “responsible” kind of asset-based debt that will ultimately resolve itself. I also really like the “f-you” test — that’s always been such a tricky area for me. So now, in honor of this post, off I go to record January and February spending and learn what damage I have wrought ;-)

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retireby40 March 6, 2013 at 11:46 AM

You’ll be mortified by how much money we owe… http://retireby40.org/2013/03/pay-off-mortgage-or-not/
I don’t mind mortgage debts at all. I’m happy enough to have positive equity and the knowledge that we could pay it off if we choose.
Can you pay off the new mortgage once you sold your old house? Would you?

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101 Centavos March 7, 2013 at 6:40 AM

Very glad to see you back and posting, Sandy. We’ll of course want to see pictures of the new garden come spring.

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Gloria March 8, 2013 at 10:55 AM

It is so good to have you back posting. I must admit I would check in periodically and worry about Babci when I did not see a post. Glad to hear she is doing OK and that you are back!

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Will Van Hartog March 12, 2013 at 9:37 AM

As a new blogger, it’s great to have you back on board!!

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Laura March 24, 2013 at 10:10 AM

You’re back! Yay! How did I miss this?

I’m very glad to hear Babci is doing well.

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