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!