It has literally taken me 25 years to dig out of the hole I started digging when I was 18, and I'm not done yet. At its peak, our credit card debt was $24,904.68. We are down to $10,760.96, progress, sure, but not credit card debt free.
We have had periods in our life over the last 25 years where we were credit card debt free, but inevitably, we would rack the credit card debt back up. 20 months ago, we hit our all-time high in credit card debt and are finally seeing the light and making real changes. We are adequately funding our sinking funds, planning for upcoming expenses, and cash-flowing everything we can to avoid going backwards with our progress. We even have a baby emergency fund for real unexpected expenses. Our progress has been slower than we would like, but it's still progress.
We have both short- and long-term savings goals within our envelope system. Long term we are saving for: new (to us) cars, home repair/furniture, and appliances. More immediate savings goals are for: car repairs/tires, car registration, annual car insurance, home essentials, health essentials, clothing, school costs, and Christmas. Funding all these different sinking funds “slows down” our progress, but they are the reason we have progress. Without these sinking funds, we would have to charge every expense that pops up.
We also contribute to our retirement. As a teacher, nearly 11% of my income is taken out of my paycheck and put into CALSTRS, before I even see it. I also contribute an additional 15% to my 403b. My husband contributes 13% of his paycheck to his 401k and gets a 3% match from his employer. On top of that, on his first paycheck of every year, his company gives another 6% into his 401k they call profit sharing. All told, we contribute about 23% of our pre-tax income to retirement every year. (I know we could be out of debt faster without doing that. I know the math supports pausing retirement to pay off high income debt. But I also know that our peace of mind is worth the extra time/money in debt. We watch my husband’s parents struggle in their retirement because they didn’t plan well and never want to be in that situation.)
We are also trying to be strategic with any unexpected monies that fall into our lap. Right now we only have a baby emergency fund and want to grow that so we put a small amount (based on how much “extra” money we get) into savings, a very small amount of unexpected monies gets dedicated to the buffer in our checking account and the rest goes towards our credit card debt.
I wish it didn't take us 25 years to learn these lessons but at least we have learned them. Our kids have seen us struggle and hopefully won't make our mistakes. They both (by their own choices) use the envelope system. They both save 20% of their income. They both tithe 10% of their income. Our 20-year-old has started his Roth IRA and our 18-year-old has earmarked $1500 in her savings to start her Roth IRA.
Our kids are so far ahead of where we were at the same age and my only consolation is that I think part of the reason for that is the struggles we have had. Hopefully they will never struggle the same way and will live within their means, which was our biggest mistake.
All these choices and how we handle our money are a result of our credit card debt and how we have treated credit cards since we were 18. We don’t blame the credit cards and we don’t blame the credit card companies. We blame ourselves. I CANNOT wait for the day that we owe nothing to our credit card! The way we use and allocate our money will change drastically. Right now, we have to use our money in the present to pay for purchases from the past, and it will be so freeing to have more choices.
44-year-old self, you are growing up. You are handling your finances and credit cards more responsibly. And you are going to get out of debt. All the hard work has taught you so much and will help you in the second half of your life. The mistakes in your past don’t have to be the mistakes in your future. But, remember, it's okay to stumble. You don't, and won't, get everything right. The important thing is to persevere! Keep going!
44-year-old self, you are making progress, but it’s also okay to need a pity party once in a while.
Today, I’m pulling myself up by my bootstraps and getting back to it. I will get break the $10,000 threshold. I will stay the course, and I will get out of debt. I have to remember that this debt is 25 years in the making. It didn’t happen overnight so it’s not going to go away overnight… but it is going to go away!
January 22nd, 2024 at 07:19 pm 1705951171
That being said, sometimes you need to go through some rough spots to pull yourself out and get on the right track. That's great your kids are practicing the envelope system. I will tell you seeing my mom and dad being poor as church mice in retirement was a sobering discovery. My folks had a furniture store when I was a kid and then an antique store in addition to my dad working at a beverage company. But he didn't make a lot and together they scraped by, thinking that his small pension and their Social Security would be enough. It wasn't. He wound up taking a part time job after retiring and they kept trying to raise money by flea markets and all that until they simply couldn't. When he died, my mom got his Social Security since his was higher, but unbeknownst to me, she was selling things that had some value to make ends meet. Don't get me wrong, I'm not upset with her having to do that, it was her stuff, but after she died, I realized just how tight it was for her. I would take her out to eat and pick things up for her at the grocery store and for any holiday I would give her money for her to use however. But when I was still working and they were alive I felt like I was Scarlett in "Gone With the Wind" raising her fist to the heavens saying she would never be hungry again. That was me, but it was "I will never be poor again."
My last suggestion to your 44 year old self is this...the closer you get to retirement, get as much as you can paid off, whether it your house, your car, or whatever you owe on. And then continue making payments to yourself on those items so you have even more funds. Even know, I continue to make payments into a savings account for the house -- not big ones because our pensions are smaller than what our paychecks used to be, but saving the money has afforded us the luxury of paying cash for a new drive way and a new roof and a bathroom remodel.
January 22nd, 2024 at 08:22 pm 1705954962
You only have so much space available for retirement savings each year. You can never get space you ‘give up’ by not using it back. With a long time and growing income, people can correct for under funding but with ‘only’ 20 years or so, you don’t want to lose the space.
However, with debt, I would use tax free options to stretch money further now, and plan to use Roth options once the debt is gone.
January 24th, 2024 at 01:23 am 1706059433
January 24th, 2024 at 05:46 am 1706075201
Also like Rob I would 100% aim to have everything paid off when you retire. To pay off your home, a new/newer car, etc. Going into retirement with the lowest minimum monthly required spend i think is key.