It was not all that long ago that our ‘Debt Free’ Adventure was more like a ‘who cares how much debt we have’ adventure.  I suppose we were semi-responsible in that we never made ourselves house poor, nor did we ever go hog wild on gadgets or toys.  In fact, the reason we accumulated debt at all is simple… up until January of 2009 we never understood how powerful a prison of debt can be.

Now that we do understand the power of debt slavery, we avoid it like the plague.

Mindset of the chronically indebted

Before I get into specifics, it is important to touch on a few “thinking problems” we had that are commonly shared by those in deb, you have to change your mindset:

1. We just didn’t care – By far the biggest personal finance problem for us was simply our lack of responsible money management.  If we would have taken control of our financial reigns from day one we would be in a much better position.  Oh well, since we can’t change the past we focus on doing the right thing going forward.
2. Influenced by culture – One of the biggest reasons we slowly let ourselves get into debt was because we did not purpose to think for ourselves.  Rather than responsibly determining our purchases based on actual savings and income, we bought according to cultural norms.
3. We make decent money – We figured because we were both college educated, working professionals that we should be able to have certain things.  Rather than responsibly determining our purchases based on actual savings and income, we presumed our income would always be there and leveraged against future income.
4. We deserve nice things – Because we sacrificed and worked hard all the way through school, we felt as if we deserved to buy nice things the day we began earning rather than the day we had actually accumulated the savings.  Rather than responsibly determining our purchases based on actual savings and income, we felt as though we deserved nice things before we actually earned those nice things.

Ways our debt accumulated

Here are a few specific ways our debt built up over the years:

1. We ate out constantly – Before analyzing food costs we rarely planned or prepared meals in advance, instead we would just eat out whenever we felt like it.  Now we set a strict budget for groceries and dining out and are careful to stick to it every month.  Not only do we save thousands of dollars each year, but we have also lost around 60 combined pounds.
2. We never used a budget – Rather than telling our money where to go, our money would just seem to vanish into thin air.  This always happened, regardless of how much money we made.  Now we give every dollar a job rather than wondering where it all goes… and boy does it feel great!
3. Credit cards as an emergency fund – Rather than save money for emergencies, we chose to go into high interest debt each time we had an emergency.  Saving for emergencies was a personal finance fundamental we lacked in times past but have since adopted… and we feel much more secure because of it.
4. I fell for the HDTV craze – I take full responsibility for all our financial irresponsibility… but this particular purchase deserves a special mention.  Against her better judgment, my wife gracefully went along with my decision to purchase a $2,000 television – bless her heart.  This was obviously a terribly unnecessary purchase decision on my part.  We had a 27″ television that worked perfectly fine, but for whatever reason I just had to have a fancy new boob tube.  I would sell it in a heartbeat if I weren’t sure to lose my tail on it… so we just keep it and plan on having it for a loooooooong time.  🙂
5. Bank fees – Oh my word… I hate talking about this because it makes me feel like such a D-bag.  Before we started our debt free adventure it was not super uncommon for me to be hit with bank fees.  Both over-the-limit fees and late fees were things that ate up a good amount of our money over the years.  Never again I say… never again!  Next to responsible management of our money the best move we made to avoid bank fees was switching to Capital One 360 Bank – they treat us so much better than any bank in the past.
6. Just swipe it – We used to just swipe our debit cards for everything with the only requirement being a positive balance in our checking account – and even that was ignored sometimes.  Now-a-days we use cash envelopes for our five most easily abused budget categories:  groceries, miscellaneous, dining out, entertainment, and clothing are all kept under tight reigns by limited amounts of cash each month.
7. Alcoholic beverages – Rather than waiting until we were home to enjoy a beer or glass of wine for much cheaper, we would order drinks with dinner.  A lot of people talk about the latte factor, but I wonder if the less popular alcohol factor eats up just as much or more of the average American family budget.  Now-a-days if we want an occasional beer or glass of wine we just wait until we get home.

Of course there are other factors that contributed to the debt we battle so fervently today… but this list gives you a good idea of what not to do if you want to win with money.

Ways you got into debt

What are some specific things you have changed or need to change in order to avoid future debt and help dig your way out of existing debt?

photo by Joe Shlabotnik