I’d like to apologize to you all to begin this week. You may have noticed that this post is going up on a Tuesday night rather than the typical Sunday. I’ll freely admit that part of the reason for that is poor planning on my part, as I knew I would be gone this weekend on a bucket list type trip. On Sunday I went to watch a Green Bay Packers game at Lambeau Field against the Carolina Panthers. As a lifelong Packers fan, this was an amazing experience that I won’t soon forget. The temperature at kickoff was a balmy 33°F and only got colder throughout the game. By halftime there was solid snowfall and at the end of the game the field had been covered by a layer of fluffy snow. The environment combined with a last second stand by the Packers to come away with victory made for a once in a lifetime experience, and I am so grateful to my parents for getting us tickets and planning a trip like this for the family.
Honestly a pretty soft lead in for what I’d like to write about this week. Debt. If you’re a typical American, you’ve got about $38,000 in debt outside of a mortgage, which is a staggering number. If you like scary reads, take a look at the Northwestern Mutual report which details the average debt numbers as well as other terrifying debt statistics for the average American.
While I would not, by any definition, classify this blog as personal finance, every now and then over here at Branchbarks we touch on subjects personal finance adjacent. Things like, “is your hobby a money pit?”, “the true cost of commuting”, “bank-life balance”, and “the Branchbark money philosophy”. I really hope that this place can become one that highlights a different, and in my eyes better, approach to financial freedom and happiness than the one so often pushed here in the United States. As you continue reading (hopefully), remember that this all comes from a place of love and encouragement. For most people in debt there are opportunities to start to turn around your situation, and for those not in debt reading, great! Please avoid it like the plague.
For the sake of this post, when I talk about debt I am only talking about non-mortgage debt. While I don’t always think buying a home is a great decision, it can be a positive for many people, including Allyson and I (so far). Like many my age, I went to college and took out student loans to do so. I was lucky to have parents that helped me with college costs, I worked through high school and college to save money for school, and I searched for scholarships and opportunities to reduce the cost of school wherever possible. Because of this, I was able to graduate college with a “small” amount of student loans compared to many of my closest friends, about $30,000 worth. By treating this debt with the proper attitude, I was able to pay it all off about 2 years after starting my full time engineering job. I am not naive, I was lucky enough that after one year interning at a Georgia Tech campus organization I was able to find a job that paid very well for someone my age. But I also know an alarming number of well paid coworkers and friends that find themselves barely getting by with credit card debt, car payments, student loans, etc. Part of the reason they are still struggling, I believe, is because they approach debt with a vastly different viewpoint than I did when I was paying off my student loans.
From day one, I viewed my student loan debt in the only reasonable way I believed one could view debt, which is as a HOLY SHIT EMERGENCY.
Is this extreme?
I owed someone else money that I didn’t have! Do you know how many people have had their legs broken for the same thing? While you may not have your legs broken by unsavory characters, debt can bring your life crashing down and hold you back just as easily.
Step one in my HOLY SHIT DEBT EMERGENCY was to not spend money I didn’t have. If you are in debt at this moment, and even if you aren’t, you should be doing everything in your power to NOT SPEND MONEY YOU DO NOT HAVE. You cannot get out of debt if you keep spending money you do not have. It is as simple as that. And this doesn’t mean you can put something on a credit card because you’ll get paid in a week and you will have the money then. This means that if you do not have cash or money in an account at the moment you are paying for something, then you don’t get to buy it.
Step two in my HOLY SHIT DEBT EMERGENCY was to cut back my spending to an absolute minimum, because if you have forgotten, it is an emergency to owe other people money. Every single day that you have debt costs you more and more through interest and fees. The quicker you can pay it off, the sooner you can start saving your excess money and getting ahead. Make a budget and cut out every item not related to the bare minimum for living. This means no eating out because that costs way more than a nice meal at home. This means no cable tv in your house, no Netflix, HULU, or whatever the hell Disney has subscription services. When my friends went to movies, I took a rain check and then hung out with them afterwards around a fire pit or at a house party. I had a POS phone on the cheapest cell phone plan possible at the time (Republic Wireless). The only trips I took were roadtrips to see Allyson because we were working in different states at the time. And those trips were done in a 2001 Honda CrV that was bought used for $6,000. I had a roommate and then after a year I lived in the smallest studio apartment available to rent near work. I didn’t get a pet and I did my best to not have a child (GASP!). Again, I was a guy living alone and had some privileges in what I could easily give up since I had less responsibilities than others. The point isn’t for you to live my life, it is to examine your own and begin looking at your debt as the emergency that it is.
Step three in my HOLY SHIT DEBT EMERGENCY was to put my excess savings to work. My personal preference was to establish an “emergency fund” of about $500 in case an unexpected expense came up. This would allow me to avoid needing to use a credit card for most surprise expenses. But, remember, I was already in an emergency, so as soon as I had $500 in savings I took all of my extra money each month and paid down debt logically. By logically, I mean I paid off my highest interest debt first. I get the idea of a “debt snowball” pushed by Mr. Ramsey where you pay the smallest debt off first and then move on to the next smallest to build forward momentum. That is stupid. If you want to feel accomplished, split your highest interest debt into sections and focus on paying off the first $1,000 and then the next $2,500, etc. Focusing on the highest interest debt first will save you time and money, which is the whole freaking point of treating debt like the HOLY SHIT EMERGENCY it is.
The final step of my HOLY SHIT DEBT EMERGENCY was to take advantage of the good habits I developed while paying off my debt. I didn’t go out and get a new car loan the second I paid off my student loans. I continued to spend less than I earned, focusing on building up an “emergency fund” of ~3 months of my spending, so that I would never be faced with going into debt again. And then I continued to spend less than I earned, saving for an eventual house payment and investing the rest for the future. I’ll admit, I started to eat out occasionally and I even got myself a cat (which I question sometimes). But I had spent 2 years developing great habits for saving money and living a fulfilling life while doing it, and I didn’t see any reason to change.
So if you’re in debt, take a moment to reflect on what you are doing to get out of it. Are you taking every step possible because you’re in the middle of an emergency, or are you treating it more like a nuisance that you’ll fix as soon as you can get a better paying job? And if you’re not in debt, but you are one tire blowout away from needing to use that credit card, the same ideas apply. Even if you are comfortable, consider taking a second look at your spending. Is there anything there that can be reduced so that you will have more freedom and security in the future?
Thanks as always for reading. Let me know what you agree or disagree with in the comments below.
P.S. Since I am kind of in a rant mood, I just want to mention the complete shit I hear in a podcast that I listen to regularly. It’s a company called Bespoke Post and they offer something called a “Box of Awesome”. It’s basically a subscription service where you pay monthly for them to ship you a box full of junk that you do not need and wouldn’t typically buy. As the podcast says “It’s like a Christmas give every single month with a box of things you would never get yourself”. WHY THE FU*K ARE YOU PAYING FOR THAT? If you happen to be doing this, please let me know so that we can have a heart to heart conversation, and if you are in debt and getting this crap, I may need to shake you before we talk.