Ten years ago, in 2009, we had just started getting paying off our $38,000 in debt and had very little savings to speak of. We had a 30-year home mortgage on our house in Atlanta, and because we’d only put 5% down and the market tanked so bad, we had negative equity in it.
I thought we’d never get our debt paid off, but we finally did, in December of 2009. For awhile, we were only focused on building up an emergency fund, and didn’t think about our net worth at all.
But once we found the FIRE community and began to learn more about personal finance, we wanted to grow our net worth and become financially free.
Here’s what we did to stack our financial wins and grow our net worth to the level it is now.
February is a depressing month. It seems to be that way every year for me. It’s the middle of winter. Even though we now live in North Carolina, and we no longer have a snow-covered backyard, the days are gray and largely rain-filled. Though some shoot push up through pinestraw-filled beds, Spring feels far away.
Our daily routine, which I have a hard time with on good days, feels unbearably heavy. (And as I write these lines I roll my eyes at myself, because, geesh, my life is so so good in the giant cosmical scheme of things. But feelings! They’re there for the feeling, right?).
Hi there! It’s Wednesday and time for another installment of Your Three Year Experiment, featuring people who are sharing their own three year experiments–their plans, goals, and dreams for the next three years.
Today’s post is from Claudia from Two Cup House. Claudia is a personal finance blogger, SEO consultant, and trainer who moved into a tiny house with her husband Garrett in order to get closer to financial independence.
Claudia and her husband paid off six figures in debt in just a few years by downsizing to a tiny house and starting their own business. Now, they’re pursuing FI, but not RE (that’s financial independence, but not retiring early). Read on to find out:
how they were able to pay off $200,000 in a short time
how they’ll balance building their business with travel
the one place in their budget they’re not frugal
If you’d like to be featured in the series, send me a note! My contact info is on the Start Here page.
What’s your background? Early years, education, married, kids, jobs?
We grew up in different parts of Pennsylvania and have spent most of our lives here. Unsurprisingly, we’re Penn State grads.
My husband, Garrett, and I live in a 500 sq ft house in Lancaster County, PA. We don’t have kids (and don’t plan to have kids).
Today, we’re self-employed. We run our own marketing consulting and training business.
How did you come to the realization that something needed to change in your life?
At the end of 2014, we heard a radio program about personal finance. People were talking about getting out of debt, which was unusual to us. After hearing enough episodes, we sat down to take a look at our own debt and found we had more than $200,000 in debt (including a mortgage), which made us both feel quite uneasy.
What will that change look like?
Deciding to downsize and sell our home was the first big step. I found a full-time job. And, we started a side hustle. All of this happened within the first four months of 2015. Once we put a plan in place, we wanted to make all the big changes as fast as possible.
Now, we’re pursuing some level of financial independence. We seek to invest enough to have dividends to cover our basic expenses, so we invest half of our income toward the goal.
How are you employing a three-year experiment to make it happen (i.e., what’s your three-year plan)?
Since we’re doing well with our finances, we decided we don’t have to rush to the finish line. Balancing work and life is the focus this year.
The first year of our three-year plan will be 2019. We will begin traveling the US and invest half of our income. And, we’re launching a new project that will help us grow our business.
The second year of our three-year plan is to bring in a partner of sorts to help us grow your new project (and subsequently our business). Scaling this new project requires more help than we have today, a necessary step to maintaining work-life balance. We’re planning to travel more of the US and then also take a trip to Europe for a few months.
The third year of our three-year plan is to improve our second-year efforts by looking at the data, figuring out what works so we can continue doing more of that, and eliminating what doesn’t work to make us more efficient. We’ll be traveling around our favorite parts of the US and abroad to find a small plot of land we can call “home” in the future.
What have been some challenges you’ve run into?
With respect to our personal finances, we have a tendency to push the “easy” button when it comes to dinner, so we’re not always the most frugal.
What have you found easier than expected?
Living in a small house makes life a lot easier. We don’t spend as much time cleaning or maintaining a home as we used to. We find we’re happier than we were in the big house.
Do you think you’ll reach your goals in three years? Longer? Shorter?
I think it’s going to take us more time than we expect to grow our business, but since we’re on the slow road to financial independence, we’re not all that concerned if it takes another year to get there.
However, I think we’ll find our next patch of grass sooner rather than later. We’ve wanted to relocate for several years and have already identified a few places we like.
What are you looking forward to once you’ve reached your goal(s)?
Having the ability to take our business on the road with us is the goal, so I’m looking forward to the start of our travels 2019. Achieving financial independence will just be the icing on the cake.
What would your life look like with no more payments? No more car payments. No more credit card payments. No more student loan payments. How much extra money would that give you? Imagine the freedom to travel, to build your dream house, to finally retire. It’s a new year. And a chance to finally, once and for all, get out of debt. But what if you’ve tried before, and nothing’s worked? Or you’ve gotten out of debt only to get back into debt?
If you’re reading this, you may have an overwhelming amount of debt to tackle. Or you may be a personal finance guru, and need this advice like you need an extra helping of pasta with dinner.
Never fear! This guide is designed to help you get out of debt, but much of this advice will also work for other large, looming goals you’ve set for the year.
But why, you may be asking yourself, should I listen to this random voice on the internet? What does she know about how to get out of debt or how to accomplish my goals?
I have written every detail of how Mr. ThreeYear and I managed to get out of debt in this post and this follow up post, but in case you’re new, here’s a recap.
When Mr. ThreeYear and I got married, we were both debt free. This is something of a miracle when most college graduates finish college with debt. According to Tica, The Insitute for College Access and Success, 76% of graduates from New Hampshire, where we live, have college debt upon graduating as undergraduates, and the average debt burden is $33,410. That’s for undergraduate education!
I was fortunate to have scholarships to college and parents who paid the rest. Mr. ThreeYear was fortunate to live in a country where undergraduate education is more reasonably priced: Chile. When we met (in said country), neither of us had any debt. We spent a few years living like the DINKS we were, but Mr. ThreeYear’s way: we bought everything in cash. If we couldn’t afford to buy it with cash, we couldn’t afford it. I scoffed at Mr. ThreeYear as he saved up to buy a car, in cash. “Why don’t you just take out a car loan?” He looked at me like I was crazy. “I don’t want to take out a car loan! I’ll just wait and buy it when I have enough money.”
Two years later, we moved to the States. We moved to the fast and furious city of Atlanta, where Mr. ThreeYear, and then I, found jobs, and slowly, every-so-slowly, we began to adopt the Atlanta way of life. First, we bought a house. We had been renting a very nice, 1100-square-foot apartment that was 15 minutes away from Mr. ThreeYear’s job (it was literally two miles away from us, but you know, Atlanta traffic). It had tennis courts and a pool, and a low rent (we paid around $850 a month for a two-bedroom in the heart of the city), but we decided we should buy a house, instead. Continue reading “The Average Joe’s Ultimate Guide to Getting Out of Debt”