As of March 21, 2011… I am debt free!
My parents are great. They raised me with common sense and and financial responsibility. But I think there comes a point in every young adult’s life when you need someone or something to come along and smack you upside the head. In my case, I heard about Dave Ramsey and the Financial Peace University course that was being offered at my church.
When I graduated from a private college in 2009, I was well-equipped with a degree in music education, and ill-equipped with $11,000 in student loans and an $8,000 car loan that I owed my parents. I thought I was doing just fine, namely because I had secured a job despite the difficult economy, and because most of my friends had several tens of thousands of dollars more in debt.
I got a jump start over the summer paying off some of the loans, instead of wasting the “grace period” before making payments in the fall. I took $5,000 from my Roth IRA contributions to pay off one of my school loans entirely. I was able to withdraw from my IRA contributions without penalty, but looking back on the situation, I’m not sure if I would have taken money against the Roth, as that is a full year of contributions (and thus, a significant amount of compound interest) that I will never be able to secure as part of my retirement.
As my first year of teaching started, I began making monthly payments of $167 to my parents for my car, and $67 for school loans. As my friends started making monthly payments of a few hundred dollars, I thought I had it pretty good. But I started to consider that my school loans were set to be paid off in ten years. How goofy was it that I was making minimum payments to finish my school loans at age 32, when I could easily pay them off within the year?
These thoughts happened to coincide with my interest in Financial Peace University. I signed up for the class more or less to be part of a community of adults. With my family and girlfriend 240 miles away, and working in a middle school with 11-14 year olds every day, I wanted to have normal, adult conversations.
For me, the information presented in FPU was exactly what I needed to hear. Debt makes you slave to the lender, and I was enslaved to the bank and my parents. Of course, my parents were wonderful to help me out with purchasing a car, and never made a big deal of the fact that I owed them money; but I never wanted money and all of its complications to ruin my relationships with friends or family.
First I paid off my remaining school debt since my car loan was interest-free. Once my school loans were finished, I focused on the throwing every extra dollar I had in order to pay off the car. As soon as this last $2,000 check was cashed by my dad, it became official: I AM DEBT FREE!
{ 4 comments… read them below or add one }
Awesome! I’m sure that feels good. I entirely agree that debt is the new form of slavery. And once that last payment is paid, you become truly free.
LaTisha @FSYAonline recently posted..The Power of Compound Interest
Debt is a type of slavery. Eversince man knew what is debt. Early times have included one’s self to slavery. Debt must be paid.
Ray P. recently posted..The Top 8 Tips
That a good news Dan and a great strategy. Surely your Mom and Dad is very proud of raising a son like you. Maybe some find this hard to handle but if you focused on what is important you can really be debt free.
maxhine07 recently posted..Win lottery
Awesome! I’m sure that feels good. I entirely agree that debt is the new form of slavery. And once that last payment is paid, you become truly free.
LaTisha @FSYAonline recently posted..The Power of Compound Interest
+1