My Life After Paying Off $53,392 in Debt in 3 Years

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It’s been about two years since I became debt free. Living a debt-free life is awesome, but the journey to get here was not a walk in the park. After hitting rock bottom and admitting that I was in a big financial mess, I decided to tackle all debt and took control of my finances, but with an understanding that being in control was no longer about making minimum payments on time every month. It meant that I needed to stop the debt-financed way of life that I had become accustomed to!

It’s hard for me to believe that I once owed so much debt. Carrying debt seems to be the norm for most Americans as long as it’s “manageable”. It’s not the lifestyle that my parents taught me since they dealt mostly in cash. Their motto is: if you don’t have the money to pay for something, you just don’t buy it, period.

Debt is a chain that, while it might be invisible to others, can keep us tied up to a life of stress and worries. This stuff is no joke, it can keep you up at night and bring you to tears.

For many years debt was part of my daily life. I was about 21 years old when I opened my first credit card account. Back then, they’d offer you a free t-shirt or any other cheap promotional item to get you to open an account. After the finance charges I ended up racking up, let me just say, those were some expensive t-shirts.

My first big mistake was financing a trip with that credit card. What was I thinking?  There was no way that I was going to pay off $900 within a month after coming back. My mindset was already easing into the monthly payments mentality with finance charges attached to it. Ever since then, I always carried some form of debt.

I would pay off a credit card balance, feel good about it, and then recharge it to find myself carrying a balance a few months later. I lacked the discipline needed to handle credit cards. I continued living that lifestyle until 2010, when I woke the hell up! This time was different, I realized that the life I was living was no longer acceptable in my eyes. It was time to make drastic changes, no matter what sacrifices or measures needed to be in place.

The debt chain needed to be cut once and for all. Aside from my first trip charge, most of my expenses weren’t extravagant. I didn’t buy luxury items or had expensive nights out. That’s probably the worst part of all, the debt creeped into my life in a way that looks acceptable under the eyes of most people:

  • It was for an emergency. Well, since emergencies do happen, I should have saved enough money for those rainy days. Just because it’s an emergency, doesn’t mean that we don’t have to be prepared for it.
  • It was to take advantage of an investment opportunity. I’ve now learned that a home is a lifestyle choice, not an investment. I shouldn’t have bought more house than I needed, especially if the new home and living expenses were going to eat most of my paycheck. The rule of thumb is that your home expenses should be no more than 30-40% of your after-tax income. But to retire super early, that should be enough to cover your total expense budget!
  • But I didn’t have to pay interest for 1-3 years. This is a big one. I didn’t know what life would’ve been like a couple of years from that time, so why that hell should I be borrowing from my future? Simply because the interest is delayed doesn’t mean that I should compromise my future income with current liabilities.
  • I needed it. If I would’ve searched hard enough, I would’ve found other ways to get it done: buy a cheaper car, hold off on getting more house junk, etc.
  • It was okay to borrow as long as I made more from another investment. No, no, no, just because I have money invested, bringing in profits, doesn’t mean that I can borrow the same amount at a lower interest and call it a deal. Debt is debt no matter what. Aside from that, the net worth takes a hit every time you dig yourself more into debt.
  • It’s only an X amount monthly payment. But what I didn’t realized is how much that item would’ve cost after the finance charges. There’s also an opportunity cost that I didn’t consider at the time: the loss of potential gain from other alternatives. If instead of buying furniture, how much would my money have grown if I’d have invested it in equities?
  • Buy now, homes will go up in price again. Luck is when opportunity comes and you’re prepared for it. So what if houses go up? You take advantage of deals when you can afford them and that’s the way I now do things, when I can truly afford them, in cash, and not because a bank or an industry says so.
  • Buy big now to compensate for future needs. Buying more housing than needed is a terrible idea, but even worse, is to buy what you think you might need years from now. I didn’t need to buy a four-bedroom home for children I didn’t even have yet. It’s smarter to outgrow the space first. Better yet, rent for as long as it makes sense and invest the rest. Luckily, I was able to find a creative way “to sell” the big house and reduce my housing expenses.

No excuse is good enough to add consumer debt to your life. That stuff is like taking a lethal injection. And if you get them, dispose of them as if your life depended on it.

debt free forever new

I’ll get rid of all of it tomorrow, were thoughts, full of anxiety, that crossed my mind. I kept on putting it off and then tomorrow never comes, unless you make it arrive. I stopped making excuses and looking for other circumstances to blame. I was the problem. I tallied it up my liabilities, and realized that by living my “American Dream”, I had accumulated $53,392 in debt, as follows:

  • Auto loan: $10,279
  • Student loans: $12,800
  • Personal Loans: $13,704
  • Credit Cards: $16,609.

Whoa, by the end of 2010, I was over $50,000 in debt! My investment portfolio balance was around $45,000. Up to that point, I felt great about the fact that I was investing, not realizing that my net worth was negative with all the debt. I was worth less on paper than when I was born!

I didn’t know how to proceed at that moment. I could have crumbled and surrendered to bankruptcy, but, to me, that wasn’t an option. All I thought was: “I’ll get myself out of this mess, one debt at a time.”

I made drastic life changes and took the right steps to eliminate all debt once and for all,

  • I cut my living expenses as much as possible,
  • Moved to a small one-bedroom studio,
  • Stopped using credit cards and got on a cash/debit card only system,
  • Started sending as much money as possible to the account with the highest interest and then moved on to the next one.

Having the right partner makes a big difference

It took me three years to pay it all off, but that came with sacrifices. Along my journey, I was fortunate enough to have my girlfriend (now, Mrs. Enchumbao) to provide me with the moral support that I needed to make it through. In my darkest days, I knew better days would come, if I could just continue to be optimistic and do my best in that moment. It would have taken me much longer to reach my destination without her.

Her debt-free life was also an inspiration, a constant reminder that it’s possible to live a life with purpose, instead of worrying about accumulating material possessions. And that you’ll not be just alive, you’ll be living. She taught me so many lessons by just living a life based on true happiness! Mrs. Enchumbao simply made me a much better man. Not having the right partner is also not an excuse to stay in debt. They can get on board or get out!

The right mindset and personal responsibility

If you’re in debt and want to set yourself free, you can get out of it just like I did. But you need to have the right mindset and take personal responsibility for it. We can only blame others or external circumstances for so long. I got there due to poor financial decisions I made along the way, and because, at times, I was looking for instant gratification. It was not because of a government in power or because the rich are being “unfair”. I lacked the proper financial literacy, but I was willing to learn and never make those mistakes again.

debt free baby

It’s a new chapter

My life is so fulfilling after I closed the debt chapter. This is one of the reasons I can barely recognize the man I was five years ago. Can you believe that I am the same guy who is close to becoming financially independent and retiring early with his wife? We live in a great country that allows us to fail, get back on our feet, and redefine success according to our happiness.

If you’re willing to admit that you have debt issues, take responsibility and make the right sacrifices, I believe you can leave the debt path behind and live a more fulfilling life. Visualize it, plan it, act on it and you’ll get there. The day that you decide to stop the debt-financed lifestyle and start living the Enchumbao way, everything changes. Debt doesn’t have to be a permanent issue in your life. Anyone can become debt free and financially independent, it’s really up to the individual to make the necessary changes. You have the power to get up, clean up the mess and keep moving forward, just like I did.

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Mr. Enchumbao

I work for a large investment management company helping people save for traditional retirement. During my spare time, I help others save for financial independence and early retirement by writing for Enchumbao. My journey to FI began in 2012. I was in a lot of debt back then, but I turned things around and became debt free a few years later. My wife and I reached financial independence in 2017 and are preparing to retire by 2020.

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6 Responses

  1. LM says:

    Preach it brother, this is how it happens — debt by a thousand cuts. So happy for you to make such an amazing turnaround. You are an inspiration to others!

    • Thank you bro. It’s been an unbelievable journey. This is something that I couldn’t even express to Mrs. Enchumbao as I was going through it and here I am, telling the world with the hopes to inspire others as well. I’m glad it’s working!

  2. No man’s credit is as good as his money. Better to be debt free than to have an excellent payment history on maxed out credit cards. Excellent decision!

    • I couldn’t agree any more, cash always win. I haven’t paid a finance charge over $3 in two years and it’s such a feeling that is hard to explain. We use credit cards to get rewards but it doesn’t influence how much we buy and…. The most important thing is that I made an initial agreement: Mrs. Enchumbao makes sure that the payment for the balance goes out every month. If one doesn’t have the discipline, one needs to let the other partner handle that part of the equation. But now I feel good about controlling my expenses. The biggest luxury item that i’m after is MY TIME. We can’t wait to pay full price for that commodity, to become financially independent. Thanks for the comment and support, my friend.

  3. I just can say congrats for open eyes and end with that debt. For me no debt = freedom, and people, including my close friends sell their freedom to easily

    • Hi Young Investor, so good to have you here! Thanks for your thoughts. I hear you, it’s hard to convince close people to us on how important and liberating it is to live a debt-free life. Thanks for dropping in! And the Spanish goes: Gracias por visitarnos, sigue inspirando a tus amigos a seguir tus pasos como inversor, y si no, sigue tu liderazgo y consigue otros amigos que compartan tus metas y alimenten tu ansiedad y sabiduria. Esperamos visitar a Espana pronto, cuidate.

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