It was the milk that made me cry. I drove home from the grocery having purchased a gallon of milk, a six-pack of ramen noodles, and a loaf of bread. It was the first time I’d been able to buy groceries in two weeks, and the first time I’d bought milk in well over a month. I knew it had to last until my next paycheck, and I kept thinking I could have put that $3.75 toward a bill or bought a second pack of ramen instead of splurging on the craving I had for milk. It was the milk that made me cry, and it was the milk that propelled me down the road to living debt free.
I was twenty four years old, lived alone in a suburb of Chicago, and the load of debt and stack of bills I had amassed seemed completely insurmountable. I remembered what it felt like to be debt free and worry free. That was before the house.
I bought my first house, with my sister, when I was nineteen. I had been in a car accident and used my (small) settlement as a down payment on the house. Several years, a job transfer, and two unexpected surgeries later, I had rent on a condo that I didn’t own, mortgage on a house I couldn’t live in, student loans and credit card debt, plus a stack of medical bills and buying milk made me cry. I knew something had to change, so I called a friend that did financial planning. He told me to gather all of my bills and he’d help me come up with a plan to erase my debt.
When he came over, we sorted through ever one of my bills, from the mortgage to the water bill. He explained to me that to eliminate my debt, I had to stop acquiring new debt, establish an emergency fund, and use a snowball approach to pay off my existing debt. To use the snowball approach, we put my debts in order from lowest balance to highest balance. We calculated how much I could afford to spend on debt reduction each month, without having to cry over milk. We called my creditors and negotiated lower payments. Then he told me that all my debts should get the minimum payment each month plus a stamp, except for the one with the lowest balance. The bill with the lowest balance should get the rest of the debt budget. Once that one was paid, then I roll the debt budget toward the bill with the next-lowest balance. In doing this, I was able to see small victories along the way. It took over four years, and plenty of overtime, but I finally paid off my last debt in September of 2004. I met my husband the following month.
It’s been nearly ten years since I wrote that last check to debt, and aside from our mortgage, we continue to live debt free. Not because we’re rich — we are far from it — but because we are both committed to living below our means. We relish being in control of our finances, and not letting them be in control of us. We have a financial plan, and for the most part, we stick to it. We save for the things we want. We could have a nicer house, a newer car, or the latest gadgets. None of those are worth crying over milk, though. When you are confident about about your money, you can save for your goals and splurge knowingly on what matters most to you.