Your Debt Reduction Story

[rebeccae55]

My husband used to make a really good income...about $200,000. Still, we were SO stupid about money, spending everything he made and then some, with nothing set aside for a rainy day. Well, rain it did so we used credit cards to stay afloat. Once DH was back at work, at a much lower income, we had about $50,000 in CC debt plus a mortgage. We gradually reduced the CC debt to about $35,000. That stayed pretty level for a number of years. Then about 3 years ago we finally set some goals to get out of debt and save for our futures.

We are now 57 and 52, with one child finished with college and one to start in Fall 2008. We still have a mortgage of about $120,000. We occasionally pay a little extra on it but our primary goals right now are the second child's college expenses and our retirement. We expect our son will use the HOPE scholarship here in GA and pay most of his other expenses. However, we want to help some. We have a lot of catch-up to do for retirement. We only have about $100,000 in combined retirement savings as of today.

At this point, I can't imagine EVER taking on debt again. We just can't afford it, because if we had additional payments, we wouldn't be able to save for our future.

This forum really inspires me to stay on track!

[anonymous_saver]

My husband used to make a really good income...about $200,000. Still, we were SO stupid about money, spending everything he made and then some, with nothing set aside for a rainy day. Well, rain it did so we used credit cards to stay afloat. Once DH was back at work, at a much lower income, we had about $50,000 in CC debt plus a mortgage. We gradually reduced the CC debt to about $35,000. That stayed pretty level for a number of years. Then about 3 years ago we finally set some goals to get out of debt and save for our futures.

We are now 57 and 52, with one child finished with college and one to start in Fall 2008. We still have a mortgage of about $120,000. We occasionally pay a little extra on it but our primary goals right now are the second child's college expenses and our retirement. We expect our son will use the HOPE scholarship here in GA and pay most of his other expenses. However, we want to help some. We have a lot of catch-up to do for retirement. We only have about $100,000 in combined retirement savings as of today.

At this point, I can't imagine EVER taking on debt again. We just can't afford it, because if we had additional payments, we wouldn't be able to save for our future.

This forum really inspires me to stay on track!

I'm glad you have started making changes in your life. What is you and your husband's plan as far as saving for retirement, when will you both retire? I'm just interested because it scares me quite a bit hearing that you are both in your 50's and only have $100,000 towards retirement.

[rebeccae55]

I'm glad you have started making changes in your life. What is you and your husband's plan as far as saving for retirement, when will you both retire? I'm just interested because it scares me quite a bit hearing that you are both in your 50's and only have $100,000 towards retirement.

Well, quite honestly it scares me, too. My husband is not so concerned, why I don't really know.

Currently, for the past couple of years, we have both fully funded IRAs, including eligible catch-up contributions. Then I contribute 12% of my income to my 401K and receive a $ for $ match of up to 5%. My company also has year-end profit sharing that has been 3 to 3.5% of my income for the last 4 years.

The increase to 12% has been gradual as we have worked to get out of debt and build an emergency fund. Now that those are done, one thing this forum has inspired me to do is to save future raises. I am hoping to receive a raise of at least 4% in September so counting the match, profit-sharing, and my own contribution, I expect to have 24 to 25% of my income going into my 401K.

If I'm not mistaken, next year I can contribute $6,000 to my Roth, which is right at 10% of my income, bringing my total retirement savings to about 35% of income.

My husband's preference for his retirement savings beyond his IRA is to pay off our house. While I want a paid off house in retirement, I'm trying to encourage him to save more. Once we actually retire, we plan to move to a less expensive area, pay cash for a house, and put our equity to work.

I also am always open to changing jobs. There's a lot more to life than money...like working in a fulfilling career. I really enjoy my work now and feel like I am helping others through it. However, there are competing companies that might be willing to pay me more and I am open to going, if it's the right place for me. I will save more if I make more.

At the rate we are going, we will work for a number of years, God willing. A major goal is to leave our savings alone for as long as possible.

Sometimes I feel really discouraged and scared about the future, and all the things we should have done when the money was flowing in and all the stupid decisions we've made. I remind myself that we have made progress. I remind myself that slow and steady wins the race. I give thanks for our blessings and trust with all my heart that God will provide our necessities.

[Ima saver]

I didn't do a lot of major investing until I hit my late 40's. So, I am proof that it can be done. Ira's were not around when I was younger and we have never worked for anyone that offered a 401 plan. We will have to rely strickly on the money we have saved to live in retirement.

[disneysteve]

If I'm not mistaken, next year I can contribute $6,000 to my Roth, which is right at 10% of my income, bringing my total retirement savings to about 35% of income.

You're correct about the $6,000 amount.

Readiing your posts, I think you show how it is possible to overcome past errors or bad habits. Even though you are in your 50's, putting away 35% of income will give you a nice nest egg in 10-15 years. Maybe not as much as if you had started investing in your 20's, but still a respectable amount. It is never too late to start saving.

[minnie1928]

Dave Ramsey is one of the personal finance gurus. He's written a few books, does stuff on tv/radio and runs classes around the country. Most of his advice is good and sound though I don't totally agree with everything he says.

I agree with Steve. I took the things that worked best for us and left the rest. For example, I've made a killing in the past year racking up credit card rewards (rewards....not debt!). While Dave has a strict no CC policy, so I just ignored that part. He's also a big Cash kind of person. I found that I spend more if I have cash in hand. I budget money in Quicken and I know how much I have to spend, without carrying envelopes of cash every where with me. I make my purchase on a CC, pay it off when the statement arrives and earn rewards. I haven't paid CC interest in YEARS!

[anonymous_saver]

Well, quite honestly it scares me, too. My husband is not so concerned, why I don't really know.

Currently, for the past couple of years, we have both fully funded IRAs, including eligible catch-up contributions. Then I contribute 12% of my income to my 401K and receive a $ for $ match of up to 5%. My company also has year-end profit sharing that has been 3 to 3.5% of my income for the last 4 years.

The increase to 12% has been gradual as we have worked to get out of debt and build an emergency fund. Now that those are done, one thing this forum has inspired me to do is to save future raises. I am hoping to receive a raise of at least 4% in September so counting the match, profit-sharing, and my own contribution, I expect to have 24 to 25% of my income going into my 401K.

If I'm not mistaken, next year I can contribute $6,000 to my Roth, which is right at 10% of my income, bringing my total retirement savings to about 35% of income.

My husband's preference for his retirement savings beyond his IRA is to pay off our house. While I want a paid off house in retirement, I'm trying to encourage him to save more. Once we actually retire, we plan to move to a less expensive area, pay cash for a house, and put our equity to work.

I also am always open to changing jobs. There's a lot more to life than money...like working in a fulfilling career. I really enjoy my work now and feel like I am helping others through it. However, there are competing companies that might be willing to pay me more and I am open to going, if it's the right place for me. I will save more if I make more.

At the rate we are going, we will work for a number of years, God willing. A major goal is to leave our savings alone for as long as possible.

Sometimes I feel really discouraged and scared about the future, and all the things we should have done when the money was flowing in and all the stupid decisions we've made. I remind myself that we have made progress. I remind myself that slow and steady wins the race. I give thanks for our blessings and trust with all my heart that God will provide our necessities.

It sounds like you have a good plan as far as your finances, I wish you well that you stay healthy for another 10-15 years or so, so that you are healthy enough to continue to work. I hope that you keep your husband on your great savings plan. Maybe you could also talk him into putting raises into a 401(k) as well? Or at least, 1% of his income into a 401(k) per pay increase, that would maybe be doable!

It also sounds good that you are planning on downsizing and using the equity in your home to pay for a smaller home when you retire. That's great to hear.

It sounds like you have a pretty awesome 401(k) plan and profit sharing plan. Once you receive the profit sharing, are you selling it into more diversified mutual funds though? I would advise keeping it all in company stock. In addition, since you sound like you enjoy your job, I would stay and not look around for other opportunities. I think it is too valuable to enjoy your work and where you work.

I guess my only other concern would be that you are putting money into appropriate mutual funds.

Finally, if you haven't already, get a high interest online savings account for your emergency fund. Emigrant Direct is my favorite, but there are many other decent companies.

[Reggie_Black]

I started with a credit line of $450 in college and charge things here and there but generally paid it off. Then, once I graduated, they increased my credit line to $2000 or something and I quickly charged a $900 bed onto the card so I wouldn't get made fun of by my roommate (I was sleeping a cot beforehand).

By the time I was 26 I had altogether about $18,000 in debt - I got another card, they kept raising my limit, I financed a used car (will never do that again). Luckily today, I am about 2 days and one paycheck away from paying off all my debt!

[myself]

It seems ours is a little cyclical.

2000-2005 we paid down $34,700 of debt
2005-2006 we bought 2 vehicles and did some enhancements to our house, and added $25,000 of debt

We're only putting away about 6% of my income (one income family with 4 kids). But, we're paying down debt by about $1300/month. At this rate everything will be paid off by the time our first 2 children go to college, and we'll be raising our retirement savings about 1%+/yr during that whole time. Our plan is to have more passive income (via brokerage accounts, savings, investment properties, etc.) than we need to live on.

[sakigt]

I got into a reasonable amount of debt for someone my age (Im 24 now). Then I decided to go back to school to get into the Pharmacy program at UF. To get through school, I realized I would need to pay off all my debt, excluding the house.

Things have slowed down because I had to cut back hours to take classes, but Im still doing well. Only about $3000 left to go!

[lillyb]

Ours mainly is just having a plan. Mostly we followed DR advice, but did a few things our own way, too.

Recently, we sold our home and will be using the leftover cash to buy a home outright. We're moving to a place we've said we would love to retire to someday, yet we're in our mid-30's. With not owing anyone for anything we'll really be able to start socking away retirement, and be able to enjoy ourselves until then, as well.

[Ralph]

At this point I'm looking at it like the US government, first I need to slow the rate of increase! As I see it, the only real area for cutbacks is food, but that will be a hard sell with my wife hooked on convenience/junk foods. We are a classic Financial Odd Couple - I try to spend NOTHING, and she refuses to accept reality. I <somewhat> like a challenge, but this is a tall order!

[Caoineag]

Hmm...well the short version, I graduated college with 20k in student loans and really good credit but no actual credit card debt. Moved cross country with my dh, got a poor paying but great resume building job, survived him being unemployed for a couple of months, both of us got better paying jobs and about two months into that I decided it was time to get a handle on the newly acquired debt and pay it off.

Discovered that dh had racked up debt in addition to mine, so the total was close to $40k instead of the $20k I had thought. That was two years ago and I have been baby stepping us away from the higher spending. He is debtfree and I am working on mine. I figure that it will take me another 1 1/2 years to pay mine off and we are right on schedule. We could pay it off faster, but we enjoy travelling and are saving for a house downpayment.

[Ima saver]

Thank goodness my dh is pretty much on the same page as I am, except for his love of cars! I had some credit card debt, but I just decided to no longer charge anything that I could not pay off the next month. That was my new year's resolution several years ago, and I have stuck to it.

[debtfreecb]

Hey Joel,

Thanks for starting this post! I have $62,000 in debt excluding my mortgage to pay off. In 6 months, my husband and I have paid close to $9000 off already. I figure that I have another 4 years to go but I am trying hard and when I hear stories like yours I am reminded that it is possible to dig oneself out of the financial hole I dug!

Thanks for sharing