There’s a sink-hole in front of you. It is bigger than you… in fact, it’s bigger than the house you live in.
This hole is roughly the size of:
- your house
- + your university
- + your car
- + anything unrelated those above items that you walked by and thought “I have to have that… now”
You know that you need to fill this hole up as fast as you can.
And, you also know that it’s still sinking.
You may think it has stopped, but it hasn’t. It may have stopped widening, but it’s still sinking.
To fill up this wide and gaping hole in front of you, you have a shovel. Now.
But, for years you’ve had only your hands and feet. You tried to kick and throw in as much dirt as you could to try and fill this hole, but it was widening and sinking faster than you could throw a handful of rocks in.
Now, though, since you’ve found that shovel, you can see that you’re making progress. There’s this bit at the bottom that appears to be filling. Finally.
What is that sink-hole? Debt.
Debt to the tune of: a mortgage, student loans, car loan, and unpaid credit card balances.
What causes it to continue sinking?
Interest on all of those loans.
What caused it to widen?
Your own spending…spending more on credit, or taking out another loan (car, school, etc.).
Nearly everyone has one of these sink-holes.
Jonathan and I do too.
And here’s the good news: We’re paying it off.
Two years ago, Jonathan and I canceled all our credit cards, choosing instead to live a cash-only lifestyle.
This means that if we don’t have the cash to buy something, we have to wait until we do.
We do this by asking ourselves “How can we afford this?”
Then we build businesses and income streams to afford whatever “this” is.
Two years ago, Jonathan and I had the following debt:
- $205,000 Home Mortgage
- $18,000 Car loan
- $40,000 Student loans (darn grad school)
- $22,000 Credit Card balances (from our Kilimanjaro 2006 trip, our wedding, and some from our honeymoon)
That gave us a total of $284,000 that we owed to other people…PLUS interest.
We were paying it, every month, but never felt like we were getting ahead.
So, our first order of business was to cancel our credit cards.
At least that way, we couldn’t spend anything more on them.
Then, we signed up for a program that would work with creditors on our credit card balances.
With their help, our interest rate dropped from an average of 22% to 6%. That’s a huge difference! (Contact us if you’d like to know more about this.)
Next, we took every spare penny we had, and put it towards paying off debt: credit cards first.
I’m proud to say, that after only 2 years, we have less than $6,000 left on our credit card balances.
And we sold the car that had the car payment.
That means that in 2 years, we’ve paid off over $47,000.
We have also had renters in our house for the last year, so for a year, our mortgage payment has been (mostly) paid for by someone else. (We still have some that we pay every month towards it (renters don’t cover the whole mortgage), but what we pay monthly is 1/14th (7% or so) of what we paid when we lived there.)
Still, today, we are putting every spare penny we have towards paying down debt.
In fact, all loans and everything else included we are currently putting 49% of our income towards debt repayment. Hard to believe, right? (I couldn’t believe it myself until yesterday.)
When we started, about 25% of our income was going to debt repayment, and we weren’t getting ahead of it.
The good news is that in 10 months or less, we will be completely free of consumer debt / credit card balances, which will leave us with student loans and our mortgage.
Then, our sink-hole will start to fill up even faster, because for us, being debt-free (filling that sink-hole) is the most important way to spend our money right now.
So how can we afford to travel?
Hard work. Really. Most people think we’re on vacation just because we’re traveling. But the answer to how we afford to travel is that we work really hard.
We’re not working hard in the sense that “working hard” means to many people (being out digging ditches or doing manual labor), but figuring out all the moving pieces and the mental work required takes:
- Willingness to be flexible
- Willingness to learn
Just to reiterate: we’re still working while we’re on our world travel.
That’s why being settled somewhere for a longer amount of time (here in New Zealand) has been so important to us. It allows us more time to work, and get set up to work a bit less for three months… then we’ll settle somewhere again and work really hard.
You may remember that we have about $1,830 / month to spend differently now that we’re traveling than we did when we lived in our home in Colorado. (We save that money on: transportation, phones, and housing.)
That amount is actually less now that we’re living in New Zealand and things here are more expensive than in Central / South America.
As much of that $1,830/month as possibly can is going to paying back our debts.
(Some times it feels like too much is going towards debt repayment. Because we do have to make choices and limit the tourist activities we do, because paying down our debt is more important to us right now.)
And now you know… the rest of the story.Jonathan’s note: Looking at a mountain of debt is really hard. What’s even harder is to gauge the size of a mountain when you have no idea how big it is. If you are in debt on credit cards, a good place to start is by writing down everything you owe, and to whom. I am also of the opinion that everyone should spend at least 1 month tracking everything they spend, and everything they earn. Most people want to improve their money situation, but aren’t willing to do something as simple as tracking spending and earning. For whatever reason, it’s actually quite difficult to be disciplined enough to track it in-between 10-25 days. After 30 days, it becomes easier. But people freak out about money, without really knowing what their money picture is. You can’t improve what you don’t measure, and you can’t measure what you don’t track. (It’s not really possible to improve something if you don’t what it’s basic measurement is. It’s not really possible to measure something if you’re not tracking it’s actual size.) If you want to know who we went through to help get our interest rates down, or want to know more about this process (a 4-year process for us so far), please post a comment below. Books that helped us in this process: