Learn how to pay off debt and how to invest in index funds
My Debt Journey
Year 1
You're wondering why the total doesn't equal $260K.
I paid off $24K by closing my 401k just a few months prior to this.
(Not my finest moment)
Seeing this $16K in annual interest expense was a significant turning point. I would never get wealthy if I continued paying this interest.
Actions I took:
- Wrote out all my debts and their interest rates
- Calculated the annual interest expense
- Updated this tracker every paycheck
5 Months into Year 1
I hadn't made any progress on the debt, but my annual interest expense was down to $13K.
Actions I took to lower the interest expense:
- Refinanced my house to lower interest rate
- Refinanced my car to lower interest rate
- Consolidated high-interest credit cards into lower-interest debt
Year 2
I sold a duplex for $8K less than I had paid for it 4 years earlier.
Even though I sold it for a loss:
- it relieved so much stress
- my total debt reduced significantly
- my annual interest was cut in half
I also started using 0% credit card deals this year.
Year 3
I was getting good at living lean.
I reduced my expenses and put every extra dollar toward the debt:
- cut down on groceries
- lowered my utilities
- stopped clothes shopping
- reduced eating out
Paid off $30K in one year.
Year 4
I continued doing what worked:
- Lived lean
- Prioritized expenses
- Took advantage of 0% credit card deals
- Got a raise at work
Paid off $50K in this year.
9 Months into Year 4
I was getting so close to paying off my debt at this point.
There was only $10K of regressive debt (bad debt) remaining
and $53K of progressive debt (debt on appreciating assets) remaining.
Year 5
Finally paid off all debt with the help of selling my fixer upper home!