Today we have a guest post from Emma over at Money Can Buy Me Happiness. Enjoy!
I feel like the luckiest girl in the world. I’ve spent over 14 months travelling through Mexico and Europe with my husband and son. Yet not so long ago I had accumulated approximately $30,000 in consumer debt and absolutely no idea how I would ever be able to afford to make my travel dreams come true.
It started off relatively small. I needed to take out a $10,000 loan to pay overdue taxes. Like all the debt that had come before it I effectively ignored it, just making the minimum repayment each month. Then my husband and I saw the opportunity to buy an investment property. Our now, now, now mentality meant that we borrowed just over $20,000 for the deposit and renovation costs to purchase the property.
My husband and I were very aggressive in paying back the $20,000 personal loan for our investment property as we knew borrowing over 100% of the property value to buy was a risky strategy. Plus my husband was not comfortable being in debt, he wanted to be free of it ASAP.
In order to pay back the investment property loan we joined our finances together (something we still do to this day) and paid that back within one year. After I’d seen what we could do when we put our minds to it I got serious about paying back my personal debt.
Here’s what I did to get out of debt:
Using a Credit Card Balance Transfer
I used a low rate balance transfer for some of my debt, moving it from a 13% interest rate to around 2%. When the bank sent the card out to me I cut it up right away. There was no way I was going to spend a cent on that card. I’m proud to say I never made a single transaction on the card.
Take on Extra Jobs
In addition to my regular nine to five office job I took on hospitality jobs for big events and worked at a music store on the weekends. I would often work seven days per week and allocate all the extra income to my debt. In the Christmas peak retail season I would work in my day job until 5pm and then work at the music store from 7pm until midnight. It was physically exhausting but it also felt like I was serving my sentence for the crime of being terrible with money.
Budgeting 101
As you can probably imagine, I was not a master budgeter at the time. If I was, I probably wouldn’t have had such a hefty debt balance. Earning money from extra jobs was an easy way of managing my money. Every cent I earned from my extra jobs went to debt repayment. All I had to remember was that my main monthly salary was for rent, food and essentials and my weekly paychecks from my casual jobs were to be transferred straight to the credit card account. You’ll be pleased to hear that I now consider myself a master budgeter.
Get Educated on Personal Finance
Ironically, after I had cleared the credit card balance I started to get interested in personal finance. I read every book I could find about the topic and I realised that being in debt is not normal and requires drastic action. Getting educated about personal finance is the number one thing I recommend people do.
That feeling of achievement once I made the final repayment was indescribable. Calling up the bank to cancel the balance transfer card was a highlight – the conversation went something like this:
Operator: ‘So ma’am, you want to cancel the card but you’ve never actually made a purchase on the card’
Me: ‘Yes that’s right’
Operator: ‘Can I ask why?’
Me: ‘Sure, I used your balance transfer offer to free myself from consumer debt and now it’s paid off I don’t need a credit card anymore’
Operator: ‘Are you sure you won’t use it again? It might be handy to have as a backup card?’
Me: ‘Nope’
Operator: ‘I can offer you two years fee-free’
Me – beginning to get cranky: ‘No, no,no, I don’t want the card. Please just cancel it or let me speak to your manager’.
After a couple of years of saving one income and living off the other – a concept that was simply unfathomable in the height of my debt-junkie days – my husband and I quit our jobs and travelled around South America, the US and New Zealand for five months.
We then returned to work for another year of saving money, had a baby boy and took off overseas to Ireland and Mexico when he was four months old. We’ve been travelling in some form ever since. None of this would be possible if I was still carrying high interest consumer debt.
The sense of freedom is exhilarating – I have no debt repayments to worry about so we just need enough to pay for our living expenses which are quite low. We rent out our house in New Zealand, and I do some freelance work but the majority of our travel funds come from savings.
Becoming debt-free has taught me so much. I’ve learned how to manage money and also how little I really need to live on. More importantly, being debt-free allows me to spend time with my two most favourite people in the world. Because the best things in life really are free.
Emma Healey suffers from chronic wanderlust and is currently trying to find a balance between a life of travel and the pursuit of wealth. She writes about her goal of achieving financial freedom so she can chase the summer around the world – between her home in New Zealand and her husband’s family home in Ireland on her blog Money Can Buy Me Happiness. You can also follow her on Twitter.
