I'll start this post off by saying that I am no expert. I really have no fool proof method, but I'm going to throw some tips out there that worked for us, so maybe they can help you. I'm approaching my 25th birthday (20 days!) and cannot explain how great this past year has been without any debt.
Here are my tips on how we became debt free by age 23:
- Keep a list of all debts (credit cards, school loans, car loans, personal loans, etc.). I simply used the notebook app in my iPhone. Every time we would make a payment, I would go in and deduct that amount from the total. Make sure to update your interest rates when they change if you don't have a fixed rate. Although it is hard to spend money on something intangible like debt payments, is really satisfying to see your debts disappear before your eyes. Make sure to always tackle the highest interest rates first. It would be counterproductive to pay off debts with the lower rates before higher ones.
- Set goals. I don't know about you, but when I set a goal for myself, I become obsessed and determined to meet it. When we decided that we were going to completely pay off all of our debts before I turned 24, we started putting every extra penny away that we could until we met our goal. We were fortunate enough to have some opportunities to earn extra money during those months. Instead of spending more, we put it straight towards loans. Just pretend it isn't there and it won't hurt so bad when it disappears.
- If you can't pay cash, you don't need it. Luckily, we never got ourselves into credit card trouble. However, we do use our credit cards a lot. Why? Because for every dollar we spend, we earn points to get money back. We recently went to Disneyland and paid for our airplane tickets using a credit we earned with our credit card points. Key is to NEVER carry a balance on your credit card. We use it, then jump on our phones and transfer money to pay it off right away.
- Live below your means. Just because you have money doesn't mean you need to spend it. I know so many people who take on huge loans, whether house, car or credit card, just to put on a front. So you drive a Mercedes or live in a mansion? Can you afford it? If you can,
goodgreat for you, seriously. If you can't, then don't do it. Remember that for every dollar you owe a creditor, that's one less dollar that you actually have to your name.
- My personal tip when it comes to buying a house? Don't take on a higher house payment than you would be able to rent it for. Just because you can buy a house doesn't mean you should buy a house. What if something happened that caused you to move right now? In a bad market, selling isn't an option. What if your house payment was $3000, but market value for rent was only $2300? Could you afford to pay the difference every month along with all of the other bonuses that come with being a landlord? This is me being extra cautious. You never know what will happen tomorrow. Just be safe.
Most importantly, reward yourself. Whether you are setting a goal of saving $100, $1,000, $10,000 or $100,000, reward yourself once you get there. Don't go overboard by any means, but it is always easier to make sacrifices if you know that there is a light at the end of the tunnel.
And there you have it. Your final 2013 No Spendtember lessons from two kids who paid off tens of thousands in debt and bought two houses before the age of 25.
That's gotta give me at least some street cred, right?