Today’s Debt Free Story comes to us from Linda, who has a unique debt story. Her family resides in the most expensive city in the U.S. – New York City – and, despite the high cost of living, have become debt free! Linda blogs over at Brooklyn Bread, where she shares her thought provoking and engaging articles on work, money, kids and life in the city. Take it away, Linda!
Tell us about yourself.
I am a working mother. I live in Brooklyn with my husband and two sons, 8 and 4, and my little miniature greyhound. I work as a publicist in Manhattan and my husband works for a humanitarian organization. He’s from Rhode Island, and I grew up in Staten Island.
Like most people living with kids in an unimaginably expensive place, we have considered leaving, but it never felt right. We kept asking ourselves, what do we really want? We have generally always been very happy. Would it really make sense to give up all the things that we love, just for a bigger house? And then spend so much more time commuting and less time with our children?
But we knew that we had to be creative to make it work. My neighborhood is like an airplane – everyone on my street pays a different fare to live here! I’ve been here for over a decade, so my rent is as low as can be in this area. There are a lot of regular people like me, with multi-millionaires sprouting up all around us, which is a stressful bummer. Really good friends of ours lived next door. Until their landlord died. And their friends slash next-door neighbors bought their building and kicked them out. They’re leaving Brooklyn – this story is common.
All of the costs of living in New York, regardless of where you live, are intense – rent, food, entertainment, taxes and the big one…childcare.
I started my blog hoping to offer motivation, a fresh perspective and inspiration to other regular families who are trying to make ends meet in expensive and difficult places. People who love their lives and love their towns, but get discouraged on those hard days. Sometimes you need a reassuring voice that says “don’t give up your home if you love it. You can make it work.” I would love to be that voice.
What type of debt did you have?
We rent – owning is just out of the question for us here. We both paid off our student loans in our 30’s. So it was all credit card debt. It was just that creep… a little here, a little there. Vacation, Christmas, another vacation, a new TV… who doesn’t know this story?
What was the defining moment that made you decide to tackle your debt?
Getting older just naturally causes you to re-evaluate. Turning 40 was like this magical – not in a good way – moment. We both started to think about our parents when they were 40. My parents were not college educated, but they owned a home. My husband’s parents were very well off at that age. His dad owned his own business. We felt like we were barely a step above college kids, financially. But we were getting old – the worst of both worlds!
When you don’t own a home, you feel a little like a child when your family members and acquaintances talk about things like renovations, water heaters – even barbeques! We just felt like our financial situation should be better at our age. As we learned, that doesn’t just happen.
Saving for a house then, as now, seemed impossible if we wanted to stay where we have lived for the past 15 years. But getting out of debt was the next best thing. We were by no means at the most extreme end of the debt spectrum – I can’t say we paid off $40,000 in loans in one year or anything like that. We were probably just under $13K or $14k at our absolute worst. But we didn’t even realize how much that $14K affected us every month until it was gone. It was 100% responsible for our paycheck to paycheck living.
What was your plan for paying off the debt?
We have always had some savings. Not a lot, but definitely enough for an emergency or temporary job loss. Our plan revolved around understanding where our money was going, cutting our spending and expenses, and doing something rather painful that made a big impact on our overall frame of mind, which I’ll get to.
Where did you find the extra money to put toward the debt?
Life is so different from my parent’s time – one checking account for two people… what is that? My husband and I have always had separate accounts – separate lives really – when it came to money. I had no idea how much he was spending and vice versa. And to be honest, same for debt. Not on purpose really, I just never changed my “focus on myself” habits. We split the rent, we split tuition, we split babysitting and that was as far as our financial camaraderie went.
My husband suggested we start budgeting with YNAB (You Need a Budget). This really got the ball rolling and we still do it religiously. We finally started to see where it was all going. Wow. It was enlightening. Discussions ensued. Things like, how was it possible we were spending $1500 to $1600 on groceries between the two of us every month? We slashed that number with changes to our shopping habits, finally dipping our toes into wholesale retailers and actually budgeting for food and everything else. No more buying toilet paper at the deli!
There were no official spending freezes, but I, as the spender and shopper of our family, did have many stretches of abstinence. Because, as we all know, you buy one little thing and suddenly the floodgates are open! So I had lots of stretches where I really bought nothing non-essential.
I found savings wherever I could. For example, our electric bill. You wouldn’t believe how much I have saved by unplugging the energy hogging cable boxes. Or buying a case of seltzer at Costco instead of buying a drink with lunch at work every day. Or taking the dog to the vet in Rhode Island, instead of Brooklyn! I started thinking like this all the time. So many opportunities to save.
The kids remain our biggest weakness. Stone cold self control is the only answer. We are not always successful.
We did, however, need to get a new babysitter during this time. We found the most wonderful, amazing student from our neighborhood to take care of our kids who was a fair amount less expensive than our previous career nanny. This helped take quite a bit of the pressure off because after rent and food, babysitting is our biggest expense. Childcare is always the elephant in the room, the albatross of every working family.
How long did it take you to pay off the debt?
It took under two years. Because we did one kind of dramatic and painful thing that any money expert will tell you is a terrible, awful idea. I’m just going to blurt it out: We cashed out some of my husband’s 401K. I don’t recommend this.
But I don’t regret it. Because we both knew what a big deal that was and how it is not the kind of thing you do twice. It was actually a traumatizing thing to do and the stress of paying such a dear price for our foolishness will forever be branded on our brains. It is an overwhelming incentive never to let debt happen again.
How did you stay motivated to continue on your path to debt freedom?
I still pinch myself every day that I am not sending money to credit cards. The more money we save, the more excited I get at the possibility of what else we could accomplish financially with intention and sheer will. Once the debt was gone, I have found it easy to stay motivated. I don’t ever want to go back to that place.
When you have credit card debt, you live check to check because you always send as much as you can to pay it down. We had many moments being stressed and down about money. We still have bills and expenses and concerns, but we don’t have that particular kind of stress any more. The worst thing that happens now in a given month is that we are not putting as much as we’d like into savings. But we are always putting something. And on months when we’re firing on all cylinders, we put significantly more than we ever used to. We are probably saving about 20% of our income on average now. But we can do better and I plan to. Baby steps.
The first time I read Mr. Money Mustache, my mind was pretty blown. I had never really read any personal finance bloggers before. I randomly stumbled upon the article about him in the New Yorker. And that opened the door to this whole world of interesting people with interesting, useful and really inspiring perspectives. Who knew how many people were living in RV’s, homeschooling their kids and making their own laundry detergent?!
My husband and I got in the habit of trading notes, sharing books, talking about how grateful we are and giving each other tips to stay stress-free and happy, which, for me, is what all of this is about.
Did you make any mistakes or hit obstacles that slowed or stopped your progress?
We’ve had better months and worse months, but so far we have not been derailed. We are planning a trip in October and that all came out of our savings account. First time I have ever done that! It hurt a little, but I think it’s supposed to.
My big fear is Christmas. That is always financial Armageddon for me. Floodgates! From the tree to the cards to the cooking to the booze… and I can’t even contemplate the presents. I have six nieces and nephews! And several awfully timed birthdays smack in the middle. I am really thinking a lot right now about how I am going to approach this.
How is your life different now that you are debt free?
Everything is totally different. Not having that stress every month where I’m like $50, or $100 short is life affirming. My husband and I would get so down when money was really tight. We’d give each other pep talks and remind ourselves that our children were healthy and our life was happy, and that we can’t let money get us down. And we were. And we didn’t.
We still remind ourselves to be grateful every day, but boy it’s nice to do that not in the context of money depression.
What advice or actionable tips can you give people who want to pay off their debt?
I think that the most important thing that someone else can give you is inspiration and motivation. That’s what really helped me to make changes. I have had to find my own way with the details.
But this is what worked for me: It began with sharing the goal with my husband and motivating each other. Then we started budgeting with YNAB and setting limits. We cut out the easy stuff first – the absurd, ludicrous, asinine purchases. Then we worked on trimming expenses – groceries are such a big one. It’s no wonder there is so much advice out there on this one issue alone. I definitely found some good tips on this topic.
And we kept going – down to the little things. Because as we know, the little things do add up.
Linda lives in Brooklyn, NY with her husband, two sons and Italian Greyhound and writes about the mental and financial struggles working families face in expensive urban areas. Surrounded by extreme wealth and juggling a precarious work-life balance can lead ordinary parents to feel they have no choice but to leave. Brooklyn Bread hopes to show city-loving families that it is possible to make it work by being smarter about money, while focusing on the things that truly matter and make us happy.
Have a Debt Free Story of your own you would like to share? Contact me!