topic Re: DEBT FREE in Personal Finance

DEBT FREE

JTC-137 — Sun, 07 Jul 2019 17:00:43 GMT

Cut a $25k check to pay off our last debt, and as of July 5, 2019 our household is officially DEBT FREE. We owe no payments to anybody. We owe NOTHING. I don’t think it’s sunk in fully just yet. I haven’t tallied everything up to the penny yet. Over the last 13 months we paid off roughly $55k in debt and cash flowed about another $20k in other (mostly) unexpected expenses.

It was a simple path to get there, nothing new or groundbreaking. We made a budget and stuck to it religiously, and also worked like a crazy person soaking up every minute of overtime available. It can be done.

Re: DEBT FREE

simplynoir — Sun, 07 Jul 2019 17:08:51 GMT

Congratulations!

Re: DEBT FREE

Streetervillelady — Sun, 07 Jul 2019 17:59:49 GMT

@JTC-137 wrote:
Cut a $25k check to pay off our last debt, and as of July 5, 2019 our household is officially DEBT FREE. We owe no payments to anybody. We owe NOTHING. I don’t think it’s sunk in fully just yet. I haven’t tallied everything up to the penny yet. Over the last 13 months we paid off roughly $55k in debt and cash flowed about another $20k in other (mostly) unexpected expenses.

It was a simple path to get there, nothing new or groundbreaking. We made a budget and stuck to it religiously, and also worked like a crazy person soaking up every minute of overtime available. It can be done.

Congratulations!

Re: DEBT FREE

Save-n-Invest — Sun, 07 Jul 2019 18:40:04 GMT

Congrats!

Re: DEBT FREE

M_Smart007 — Sun, 07 Jul 2019 18:42:21 GMT

"DEBT FREE" True Freedom, Congratulations!

Re: DEBT FREE

JTC-137 — Sun, 07 Jul 2019 18:57:31 GMT

Thank yall! I’d be lying if i said cutting that check didn’t hurt a little bit lol. My FICOs will most assuredly plummet, but I’ve played the credit game my entire adult life and have failed miserably. I proved to be undisciplined and frankly irresponsible at times. So far the cash-only diet has served us well, and I believe that strategy will lead to us being better positioned for the future.

Re: DEBT FREE

Anonymous — Sun, 07 Jul 2019 19:21:42 GMT

When I became debt free my scores went down about 100 points - 40 points when I paid off the car loan and 60 more when I paid off the mortgage the following month. YMMV but the hit for being financially responsible and solvent can be tough. I would think that the FICO scores would take into account the fact that a person has paid off all debt as a good thing, but since FICO is based on the premise of how likely are you to NOT make a payment in the future, it looks at being debt free as a NEGATIVE - that you won't be making any payments in the future, and the fact that no payments are due in the future just doesn't figure into the equasion. If you aren't paying somebody something, then FICO assumes you just shouldn't be trusted with money.

Re: DEBT FREE

JTC-137 — Sun, 07 Jul 2019 20:05:49 GMT

You make a good point and it’s something that’s always irked me about our current system. Maybe placing more emphasis on the ability to repay and weighing overall DTI is the answer. Neither of those necessarily predict future chance of default, but there’s nothing stopping someone with a 780 FICO from missing a payment or filing bk at any given time.

Re: DEBT FREE

Anonymous — Sun, 07 Jul 2019 20:17:10 GMT

@JTC-137 wrote:
You make a good point and it’s something that’s always irked me about our current system. Maybe placing more emphasis on the ability to repay and weighing overall DTI is the answer. Neither of those necessarily predict future chance of default, but there’s nothing stopping someone with a 780 FICO from missing a payment or filing bk at any given time.

My point exactly - why was I a worse credit risk when I had no car payment or mortgage payment than when I had a car payment and a mortgage payment? Between the two payments I had committed $1500 a month. All of a sudden I had $1500 a month more in disposable income, and my credit scores took a 100 point hit because of it (nothing else changed). I have since gotten those 100 points back plus by taking out some credit cards (which I didn't need and had lived 7 years credit card free without) just so I could do the AZEO method to boost my scores. The only thing FICO hates more than NO DEBT is NO CREDIT CARD DEBT. So, as long as the credit card companies are reporting SOME debt (even if it is for nothing more than a tank of gas) then FICO thinks I am a good risk. Who would have thought that owing money for a tank of gas would boost your credit score by 100 points or more? Installment loans do very little to boost your score but miss a payment on one and your score will sink faster than the HMS Hood. Owe $25 on a credit card for a tank of gas with $35,000 in available credit lines and you can have an 800 score. Pay off that $25 without charging it on some other card and you will lose about 30 of those points (I have seen it happen in my MyFico pages. My Util never goes above 3%.)

Re: DEBT FREE

calyx — Sun, 07 Jul 2019 20:52:56 GMT

Congrats on being debt free! What a great accomplishment - Enjoy it!

Re: DEBT FREE

Kforce — Mon, 08 Jul 2019 03:55:32 GMT

Congrats !!

1) Being debt free is more important than fico scores.

2) Not everyone's profile suffers the same from becoming debt free.

I lost about 15 points and a year later only about 5 down.

For me the score loss was very small.

Re: DEBT FREE

JTC-137 — Mon, 08 Jul 2019 04:21:20 GMT

Thanks! And I completely agree finances > fico. That’s a surprisingly small drop you experienced; I’ll know in about a month what happens in my case. Over the course of this journey I’ve learned, in my case at least, that it only takes about $10k in the bank to mitigate almost all contingencies...from meeting max out of pocket for healthcare expenses to complete vehicle replacement.

Worst case would be losing my job, but we’re now building up to 6 full months of expenses to cover that. I’ve been there over a decade and we’ve never had a lay-off in our 100 year history, so there’s no reasonable expectation that scenario would come to fruition. Still want it covered though. Now with no debt, the income needed to run our household should be easy to replace. If my wife were to also get a job we’re talking a total non-issue. That’s a good feeling 😁

Re: DEBT FREE

Anonymous — Mon, 08 Jul 2019 12:13:04 GMT

Congrats

Re: DEBT FREE

Anonymous — Mon, 08 Jul 2019 16:58:49 GMT

Congratulations on paying off all that debt! That’s awesome.

Re: DEBT FREE

Anonymous — Tue, 09 Jul 2019 05:23:48 GMT

Congrats!

Re: DEBT FREE

Anonymous — Tue, 09 Jul 2019 14:14:16 GMT

@JTC-137 wrote:
Over the last 13 months we paid off roughly $55k in debt and cash flowed about another $20k in other (mostly) unexpected expenses.

It was a simple path to get there, nothing new or groundbreaking. We made a budget and stuck to it religiously, and also worked like a crazy person soaking up every minute of overtime available. It can be done.

That is insane! My fiance and I are in $55k debt accross her student loans and our car loan. Do you use a budgeting software or do you follow your own budget? We have been using YNAB to budget for the last 9 months and it has paid off quite a bit so far. I just received a raise and she will be due one soon so we're planning on using a good portion of that additional income for debt paydown. Your story gives me motivaiton to get become debt free as soon as possible!

Re: DEBT FREE

Anonymous — Tue, 09 Jul 2019 14:36:09 GMT

Excellent! Congratulations!

Re: DEBT FREE

JTC-137 — Tue, 09 Jul 2019 14:39:49 GMT

We tried using several different apps but it didn’t work in our case because we would forget to track expenses. So we opted for a written budget just because that’s what worked for us. First and foremost we said our goal is to have no debt. Once we were on the same page everything went so much more smoothly. We sit down a day or two before payday and have a budget meeting. If something came up between paydays we would meet again to discuss it. On payday I immediately paid all the bills and she pulled out cash for us to live off of until next payday. Groceries are tricky because we have a million kids lol so we shoot for +- 10%. A couple of times we ran out of cash and were literally digging for change in the couch. Our budget (stuff we pulled out the cash for) categories are:

1. Groceries
2. Fuel
3. “Pocket money” for each of us (most of the time these funds were reallocated to the random things that would pop up like school pictures, doctor visits, etc)
4. A VERY modest entertainment category

Everything else was listed out as a bill, even the kids’ activities. Then anything extra went to our debt. We haven’t taken any vacations or bought anything for ourselves that weren’t absolutely necessary. We only ate out a handful of times. I looked at it like this short term sacrifice would set us up for the rest of our life. Also we cut up all credit cards.

If yall can allocate 100% of your raises towards your debt that’ll go a long way in paying it down faster. You can do it!! Making the budget and sticking to it is the hardest part which you’ve already done. Now just keep chipping away at it! Please keep us posted of your progress

Re: DEBT FREE

Anonymous — Tue, 09 Jul 2019 15:17:01 GMT

@JTC-137 wrote:
I looked at it like this short term sacrifice would set us up for the rest of our life. Also we cut up all credit cards.

I really like your analogy here and I think that goal setting will go a long way convincing my fiance to jump on board. It's hard to keep her on the same page as far as finances go since she is a big spender and I was raised to be frugal and value money. We are planning on getting married within the next 1.5 years and and hoping to be able to buy a house in 3. I think she will be able to get behind the idea of short term sacrifices setting us up for success in the long term. We are both still very young and and have a long road ahead of us, I just want to make sure that road is a lot easier to travel!

Edit: I wanted to add that while I think cutting up your credit cards can be a good idea for some people who have a bad habit of over spending when using cards but when used responsibly can reap huge rewards. I look at credit card spending as cash out the door since I pay in full and responsibly budget all of my spending. I am pooling all of the cash back we earn to pay for vacations or to help justify a large purchase.

Re: DEBT FREE

Anonymous — Thu, 11 Jul 2019 01:22:51 GMT

Congratulations!