Ashley’s Getting-Out-of-Debt Story

Ashley's Getting-Out-of-Debt Story

When TJ and I met, I could tell right away we came from different financial backgrounds. He had worked hard every summer doing sales in California to pay for his tuition and living expenses, he had thrifty parents who had been able to help him along the way, and he may have had a reputation among his roommates as the one who would do anything for a free meal. I once gave TJ some leftover McDonald’s bucks coupons I got from a babysitting job, and to this day he insists it’s the greatest gift I’ve ever given him. (I’ll try to forget the $200 air compressor I got him a couple Christmases ago…)

On the other hand, I kind of flew by the seat of my pants when it came to money. I wasn’t a huge spender, but I didn’t like keeping track of things either, which meant going weeks and weeks without checking my bank account balance. I liked eating out, I liked hanging out with my friends, but I didn’t pay attention to how those things added up. I was mostly broke even during my undergraduate and graduate years. I also had about $12,000 in student loan debt lurking in the trenches, patiently waiting for me to graduate with my masters before it pounced.

TJ knew this but didn’t seem too troubled. He and I believed the debt wouldn’t be due for a while because I was still technically a student, even though I was also working full-time. I took a year leave of absence from my master’s program once we were married to move to San Francisco to be with TJ, which meant leaving my school counseling job and hoping I could somehow finish my graduate degree at a later date. Little did we know student loans don’t really care if you’ve taken a leave of absence and are “hoping” to come back soon. As soon as you’re not taking classes, they come a-knockin’. Quite rude of them, if you ask me.

Sure enough, six months after we tied the knot, a discreet little letter from my university showed up in our mailbox, politely asking for $12,000 or else I’d wake up in bed next to a severed horse’s head. (Not really, but it felt like that.) I remember feeling so guilty. Here I was, a financial burden on this really responsible guy. I felt like I needed to somehow come up with the total on my own. As I started typing “Which organs can humans live without?” in the Google search bar on our desktop, TJ gently stopped me. “Ash, we’re a team now! Let’s just pay it off and stay out of debt. And in return, just promise you’ll love me forever.” I gave him a big hug and agreed. (He still throws this in my face when I’m mad at him about leaving his socks on the floor or his electric razor on the counter: “Ash, you promised you’d love me forever, remember?!”)

Luckily, because we had had a pretty frugal honeymoon, no car payments, inexpensive housing (for the Bay Area), and two good jobs, we had saved up enough in just six months of marriage to pay the debt off in full as soon as the letter came in the mail. It took us down to not a lot left in our bank account, but it was definitely worth it to not have the burden of debt weighing on our shoulders. More than anything, though, paying off this debt together was such a bonding experience for us. I wasn’t in this alone anymore, and neither was TJ. We each had each other now, as partners, companions, and teammates.

I also learned the immense value of our budget. Yes, it was difficult and annoying to follow at first, but all that annoyance and difficulty had an end result — freedom, peace of mind, and security. It was totally worth any and all sacrifice to get there. Most getting out of debt stories are more comp

How has getting out of debt (or working to get out of debt) changed your partnership? Or, if you’re going solo, how has it changed you?

Does Your Budget Have a Bike Lane?

Does Your Budget Have a Bike Lane?

Budgets help direct our spending, but by nature they constrain us. While that doesn’t sound very fun, these restrictions are for a good cause. By voluntarily limiting short-term spending, we can stay out of financial trouble and work toward achieving longer-term financial goals. Though it sounds contradictory, we achieve financial freedom by choosing to limit ourselves.

In theory, if we could predict all of our expenses then we could live on the bleeding edge (paycheck to paycheck) of our income and not have to worry. In practice, it ain’t happening — at least not long-term. ‘Life’ happens to us and our budgets.

If you’ll bear with me, let’s set a scene: Picture driving along a winding, coastal road. Nice, isn’t it? You should probably picture yourself in a convertible if you aren’t already. Better. Are you smelling that salty, sea air? Mmmmm. Now, think about that road. It is made up of asphalt, lane lines, maybe a rumble strip or Bott’s dots, a bike lane, a guardrail, and sits atop a hillside or cliff leading to that beautiful beach below.

You get to safely enjoy this wonderful scenery while travelling rapidly because someone at some point decided to put some paint on the ground, and for some reason you decided to follow said paint while you drive. Would it be more scenic if the guardrail wasn’t there partially blocking your view? Probably. Would the driving be more fun or exhilarating if the lane went all the way out to the edge of that cliff? Fun for some, scary for others.

You can probably see where I’m going with this. Let’s think of this scene metaphorically in budgeting terms:

The road or asphalt is life. Hopefully nice and smooth, but likely winding with ups and downs; potholes and debris, though infrequent, are to be expected from time to time.

The lane lines, dots/markers, and rumble strips are our budgets. They guide us along the road, keep us headed in the right direction, and help us avoid danger. Sometimes if we drift beyond the line, only a small correction is needed. Sometimes when you hit that rumble strip, things get loud and uncomfortable. The same goes for our budgets.

The guardrail is your emergency fund. It’s effective at keeping you from going down a cliff, but it’s painful. If you hit it, not only will your car be damaged, but so will the guardrail; both will be in need of repair. Same with our finances. If we need to tap into our emergency funds, it probably means we’ve hit a painful point of life. Once we free ourselves from relying on it, we might have some scrapes and bruises (dinged credit score, perhaps?), and our emergency fund will be low, if not depleted (dipped into that retirement account?), and in need of replenishment. Early in your career you may be young, poor, and driving an econo-box; it won’t take much of a guardrail to keep you from going over. As you progress in a career and get older, maybe you get married and have kids; your guardrail will need to be bigger and beefier to stop that minivan fully-laden with increased financial obligations.

What is the bike lane? I would suggest that this is a buffer you should create by self-imposing constraints on your spending and generally living below your means. It augments the typical emergency fund and is used more for unexpected expenses that pop up here and there and less for the “I just lost my job” emergencies. It may include ‘savings’ you have earmarked for other goals: vacations, car fund, medical funds, etc. If it is narrow or non-existent, you are rightfully going to be white-knuckling that steering wheel and focusing on avoiding the guardrail above all else — not very fun. The wider it is, the safer you are, the less you’ll stress, and the more you can enjoy the beautiful scenery of life. If you have to swerve to avoid a pothole or boulder here and there, you’ve got extra space — no biggie!

Some might wonder where to draw the line between bike lane funds and guardrail/emergency funds or how distinct that line should be. J & J have previously given their take on answering “When is something an ’emergency’?” It is going to be different for everyone and their unique circumstances. Regardless, you won’t be able to build that buffer or widen your bike lane if you are spending every penny that comes in. Eventually, your lifestyle and budget need to blend to allow you to live on less than what you earn.

What’s so special about paint on the ground or reflective, plastic trapezoids? These simple, man-made items when appropriately placed and properly followed, allow us to safely do and see more. Similarly, we need to find man-made or artificial constraints for our budgets that will allow us the freedom to do more. Here are some I use to maintain or grow my financial “bike lane”:

  • 24 vs. 26 – I get paid every two weeks, and that means 26 pay periods in a year, yet I budget as if I get paid twice a month. That means twice a year I get a little extra. Maybe that money helps me catch up if I’ve overspent, replenishes my emergency fund, pays for a vacation, or whatever. I specifically don’t budget for it, so I can use funds where needed when it comes.
  • Frugal Months – tighten those screws every once in awhile and get back to basics. It’s sort of like hitting the reset button mid-year, and hopefully it helps you save a few hundred here or there.
  • Hidden Savings – $200 from every paycheck goes to a separate savings account that isn’t part of my regular budget. Though I know it is there, I’ll go months without thinking about it. It is always nice when I remember it, log in, and see that I’ve got a little extra I haven’t been planning on. Some are against this method, but it works for me.
  • Beef Up Your Tax Refund – Claiming fewer tax exemptions will cause you to take home less each pay period, but it will result in you learning to live off less and getting a bigger tax refund.

Alone each one might not result in huge savings, but altogether they result in a meaningful amount for our family.

Thanks for coming along for the ride.

What do you do to ensure you live on less than you earn? Do you have a bike lane in your finances?

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When TJ and I started our budget, I had a hard time accounting for every single purchased item. Coming home from a shopping trip started to feel like an interrogation, even though I’m sure TJ didn’t mean it that way. “What did you buy? How much was it? Did you…

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Maximizing My Tax Return

Back in May 2012, I quit my first ‘real’ job, and I started working at my current company on the last day of July. During those two summer months at home, we were blessed with the delivery of our first child. Once I returned to work, I was greeted with…

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