I was fortunate enough to grow up in a middle-income family, living a middle-income lifestyle, learning the same financial mistakes that most other middle-class kids learn growing up. There was very little discussion of personal finances except for the one piece of advice that if I put away $100/month starting when I was 18, I would be a millionaire when I retired. Although it sounded like an astronomical sum of money at the time, I never took that advice and it turns out the numbers don’t quite work out anyway.
I spent the first 35 years of my life learning two things: no matter how much space you have in your house/apartment, you will fill it with stuff and no matter how much money you make, you will spend all of it (and sometimes a little more).
I never had much money in my teenage years but whatever I made I spent on stuff. I spent my college years living off the money I earned working part-time during the school year and full time in the summer (I didn’t receive much financial education when I was young but I did learn the value of hard work). I got some help from my parents as well and the balance was made up with a few student loans. I finished school with only about $15,000 in loans so I had some money sense back then.
And Then There Were Two
When I got married, my wife and I spent the first 5 years living under the burden of servicing a $10,000 credit line that we used to pay for the wedding. My wife had (and still has) a good paying job in a profession that is very stable so she was the breadwinner and since our expenses were low we got by just fine. We accepted the debt we were carrying to be a normal part of life and just continued on spending a little more than we made.
Fast forward a few years… As our incomes grew and I got a better job, we continued spending more and more. We bought a house and I renovated most of it myself. We took vacations to Hawaii and Napa Valley. We were making about $140,000 combined and slowly falling deeper and deeper into debt. None of it was credit card debt, I could never stomach the interest rates; our debt drug of choice was the credit line and when we finally came to our senses in September of 2009, we were almost $28,000 in debt.
It wasn’t like I didn’t know we were in that much debt. I have always been interested in personal finance, budgeting and investing so I always knew the status of our finances but I never cared. We were young and we had plenty of time to pay our debts. We had managed to save a small nest egg in RRSP’s (very similar to a 401K in the US), and the equity in our house was over $100,000 (the real estate market on the west coast of Canada was virtually unaffected by the economic downturn of 2008/2009). We felt pretty good about our situation and our growing debt was considered a necessary evil to continue to buy the things we wanted.
Time To Change
In July of 2009, I started listening to the Dave Ramsey show podcast and it changed my view of our personal finances and the role that debt plays in our lives. Our growing debt was no longer ok, it was unacceptable, and on September 1st, 2009 my wife and I pledged we would get rid of our debt. We reeled in our spending and paid off $28,000 by May 21st of 2010. In nine months, we paid off all our debt and it felt great; it felt like a weight was lifted off our shoulders.
And Then There Were Three (Four Counting Murphy)
Since then we’ve had a baby and my wife has resumed her career working part-time. We had an emergency fund built up but a bigger vehicle (older and used of course) to accommodate our growing family, some sloppy spending, and an emergency roof replacement on our home has eaten up the emergency fund plus a little more. We are once again in a small amount of debt (something I swore would never happen again) but we are confident we will have things under control again by Christmas.