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I Went From Being $15,000 In The Hole To Being Debt Free In Six Months, And You Can Too!
By Jonathan | June 7, 2008When I graduated from Broadcasting School I had fifteen thousand dollars in debt hanging over my head. The primary debt was student loans, a car loan and a sprinkling of credit card debt for good measure. I carried that debt for a few months out of necessity before making a conscious decision to eliminate it. Less than six months after making that decision I was debt free and had a positive net worth for the first time in my adult life.
If I had followed the recommended payment plan, that is, the plan my debtors wanted me to follow to provide them with the greatest profit, it would have taken me over ten years to pay off everything I owed, and I would have paid an additional five thousand six hundred dollars in interest! To put it another way it would have cost me more than twenty thousand dollars to pay off fifteen thousand dollars of debt. That’s not even counting the interest that has already been paid. Now if you’re like me, you just read that and said to yourself, "that’s insane!", and it is, but what really scary about it is that most people never stop to think about what their debt is costing them. The never see past the monthly statement, and figure as long as they are making the payments, that’s all they have to do, right?
Wrong!
Making the minimum monthly payments on any debt is the worst thing you can possibly do for your finances. Just look at my case. If I had made only the minimum payments on my debt I not only would have paid more than five thousand dollars in additional interest, but it would have cost me on average $130.00 in a month just to maintain those debts. That much money invested with a ten percent rate of return over ten years would amount to, and get ready for this:
$28,000.
That’s right, the savings, and the interest earned on a measly one hundred thirty dollars a month would have resulted in nearly thirty thousand extra dollars in my pocket after ten years. Therefore, not paying off my debt as quickly as possible could have cost me as much $33,600 over and above the actual amount of the debt. That means a fifteen thousand dollar debt could have cost me almost fifty thousand dollars! Staggering isn’t it? If you thought that credit card balance was costing you the amount you see on your bill every month, I hope you have changed your mind now.
Was paying of that much debt in a short amount of time difficult? Yes, it was. I had to sacrifice a lot, and sometimes I even felt deprived, but it was, as they say, short term pain for long term gain. Being debt free allows me the mental and practical freedom to explore new opportunities and take risks that I would otherwise not be able to take. And it affords me the opportunity to get rich, something that is never possible through debt.
In an upcoming article I will discuss practical ways to take control of your debt and earn your freedom.
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Topics: Finance, Self Improvement | 16 Comments » | Donate
I know it is crazy! We are trying to pay more each month on or mortgage so we can pay it off years sooner and save a ton of money in interest! NCLM
Very nice article, and I congratulate you on paying down your debt! I also spent several years in debt prison. I can tell you that there is no better feeling than being debt free.
So everyone who reads this, bite the bullet, make sacrifices and pay down your debt as soon s you can do it. You will never regret it!
I have large amount of debts to pay myself and I know how difficult it is to pay them. You have achieved quite something by becoming debt free in such a short time. I am going to use us as my inspiration to pay off my debts.
That is great! I wish all Americans would read this and follow your advice. Good debt like a mortgage or car loan is ok, assuming it is a reasonable loan for your income. But the credit card debt in this country is ridiculous.
Hi Dan,
Thanks for your comments.
I would argue that car loan debt is not any better than credit card debt. Just as with credit card debt, you are paying interest on something that has already depreciated.
That being said, a car is often a necessity, so a car loan is not automatically a bad thing, and for that matter neither are credit cards, so long as they are used properly.
Even a mortgage is not necessarily a good debt….
I don’t know if it’s realistic for some people to pay their debt off. The sad fact is they create so much debt with credit cards ect. that they can’t dig them self out.
If only people would take a step back and really look at the big picture, they would see banks and credit card companies, not as “friends”, but more as opportunists. There’s a reason they keep raising your credit card limit, and it certainly isn’t to help you out.
Steven
Great calculations. Sounds ironic but borrowing money costs you. :)
Hi Jon,
Your post is encouraging. I am motivated how you sacrificed a lot just to pay your debts in just 6 months — that’s totally awesome. I just wish I can do the same, but I think it will take me a year or two before I could settle my debts.
Your post is very inspiring. But, of course, not all people can do what you’ve done. I wish I could do the same for myself. I’ve been having a hard time with my mortgage. Thanks for sharing your experience. It’s consoling.
It can be difficult to pay off a mountain of debt, but paying a little over the minimum a month is better than not paying at all.
I am very solidary with your cause. I too found a way to fight myself and recover from -1500$ on the bank account and 4000$ on the credit card. I currently am renting a house to live with my girlfriend that wasn’t possible last year.
Surprise! Finance companies are in business to make money off you. Your mission is to thwart them. Ideally, credit should only be used to buy things that make money for _you_.