Do you think about your debt at least once a day? Do you worry about how you’ll ever get out of debt? Do these questions sound like the beginning of an infomercial for a credit counselor?
I think I have a problem, but you probably don’t know our little secret…We’re not hurting to pay any bills. You’ve heard me complaining about our credit card debt, auto loans and student loans, but we’ve never missed any payments, never went without food, and never had to sell any possessions to pay a creditor. So why do I obsess about our debt so much?
Another PF blogger and I were chatting about this issue last week, and also about our dreams of moving closer to our families back in Pennsylvania. However, I seem to be seeing our path to those dreams in tunnel vision. After reflecting, I realized we don’t have any well-defined goals. Goals such as freedom from debt, birthing or adopting our first child, or even moving back to PA. Sure, I’ve talked a great deal about our debt, and paying off that debt. I’ve also talked about our research into and feelings about adoption. However, we don’t actually have a clear plan for any of these big events.
How can you work towards a goal if you haven’t defined that goal or the goal’s end-date? I have an Excel budget where I track our bills and income (duh). But I also track where I’m sending our extra money for the next 5 years. Sure, I have to make some estimates, but currently we have a debt payoff date of May 15, 2009. That’s when you’ll see that original $112,890 in total debt down to a big, fat goose egg.
But wait, didn’t I just give a date for our goal? Well, yeah, but that’s only half of the equation. You see, I have the goal, and I have the date, but our debt is just part of a bigger picture.
The Big Picture
Debt isn’t everything. It REALLY feels like it when you have debt, and my fellow blogger doesn’t have any non-mortgage debt. Until you have $112,890 (or more) in total non-mortgage debt, then you really just don’t know how bad it feels. Obviously, I don’t plan things well, and that’s mostly how I got into this mess (I’m not blaming Stacie for this one). I decided to put all my debt down on paper to see the damage. We had 2 new cars (both with thousands in negative equity added in), 2 student loans and a big mass of credit card debt. Where do we even start?
So I began the Excel budget to track our expenses. It took years to fine tune, and I can still make many improvements, but it works for now. However, the debt is my past. I also need to plan for my future. I mean the future during and beyond the debt “prison”. For years I was withholding savings in the hope of paying down debt faster. I didn’t contribute to my 401k, or our savings account, or to any Roth IRA. We had the money, but I was so absorbed by the debt that I didn’t consider the importance of saving and planning!
The Next Phase
So what have we been doing?
- I’ve been contributing to my 401k and Roth IRA. As much as it hurts to “lose” that spending power, I know it will help us in the future.
- I’ve been slowly funding our savings account. This is where I’d like to focus some more effort.
- I’ve been paying down debt at a considerable speed. I still don’t think we can manage paying off all the debt (without some drastic steps) on the current timeline, but I’ll get to that next.
And what WILL we be doing soon?
- We’re going to sit down and plan out the next 1 year of our lives. We’ll be specific and map out dates where we expect to be in our debt recovery, savings goals (once we make them), and with our adoption/pregnancy status. That last item is a little tricky because we have such little control over the process (if any).
- We’re going to sit down and plan out the next 3 years of our lives. Why 3 years and not 5? Because in just over 2 years, we’ll need to determine whether we’ll want to refinance our 5/1 arm mortgage, let the rate reset, or just sell the house. If we want to sell, we’ll need a plan NOW, rather than at the moment.
- We’re going to sit down and plan out the next 10 years of our lives. This is where things get fuzzy. Personally, I’d like to just win the lottery and not have to work, but that’s not a realistic goal. Instead, we need to consider where we’ll be in our careers, as well as our location and family status. Will we be in PA or still in the DC region?
We determined that there are only 2 places we’d be satisfied living right now. One is right where were are (in our current home) and the other is State College, PA (a college town close to our families and with an actual job market).
However, we’re both frightened and overwhelmed by the prospects of these big decisions, but we both recognize that the only way we’ll understand what is required of both of us is to set goals and a path to achieving those goals. We know that goals are moving targets, but that you need to start somewhere. Because ultimately, if you don’t know your goals, then you’re probably working towards the wrong ones.