It’s that time of year again where I celebrate being 100% debt free. March 5, 2015 is a date that will be etched in my mind forever as the day I received my financial freedom from creditors. You can read about my financial freedom story in my first three blog posts – My Financial Hangover, The Turning Point and The Journey to Freedom.
One year ago, I wrote about what life was like the first year being debt free – check out the post Debt Free Year One: How Life Has Changed. It was fun this week to read the post now being two years’ debt free. And while these changes are still true, I have found that the second year has brought about changes that I wasn’t expecting – and the feelings that I didn’t expect to have. So, here’s what has changed for me in the second year of being debt free.
Spending money has become a huge issue for me. Although I have a very healthy savings account, invest for my future and retirement, and have a savings account set up to replace things as they wear out, I still have trouble spending money. This is totally opposite from my freewheeling days when I wouldn’t think twice about dropping a few hundred dollars on shoes.
Just recently I had planned to buy some brand new bedroom furniture. I have never had brand new furniture in my entire life. What started out as a plan to buy a full set of bedroom furniture turned into visiting several furniture stores to select a bed and two night stands to finally deciding to either buy secondhand or just purchase a headboard and two night stands from an online retailer. I just couldn’t bring myself to purchase the brand new furniture set because it didn’t hold as much value for me as it had in the past. Also, the idea of laying out a few thousand dollars all at once made my stomach turn. Making larger purchases is now a more deliberate and thoughtful process vs the impulsive way I used to shop.
The temptation to finance things is still alive and well. As a natural spender, there is still the temptation to finance so that I won’t have to take the “big hit” all up front aka purchasing items outright. I start justifying that the low monthly payment allows me to have all these things without the financial pain of saving up and paying for it with cash. However, part of my journey over the past year is to become more minimalistic and reduce the amount of material items that I have. When I use the filter “does this thing add to my life or cause more clutter/chaos?”, it helps to silence the little voice inside me tempting me to buy on credit.
Another decision I made during my debt free journey also curbs financing – the decision to not use credit cards. I know that there are people who use credit cards “responsibly” but there is a lot of scientific evidence to support that you spend more money using credit cards. I have deemed credit cards to be my financial heroin – I can’t stop with one purchase. So rather than trying to use credit cards in a controlled way, I just decided to never use them again. Sure, it has limited my ability to use certain car rental companies (See my post Read the Fine Print), but outside of that minor inconvenience, I have had no problem using debit cards for purchases or travel – including international travel.
People still don’t take your “no credit” policy seriously. When I first got out of debt, I think people thought it was a novel idea that I become debt free and decided to stop using debt. I don’t think people though I was serious when I decided to commit to this way of life. I get questions all the time about credit scores and what if I have to buy a car or what if I have a major medical emergency. And of course, I have to educate those people on what my plan is to address all of these scenarios. Like the fact that you can get a mortgage with no credit score and 20% down (although my big hairy audacious goal is to buy a house with cash). Sure, it means a lot more paperwork going through the manual underwriting process but it forces me to make a slower, more deliberate home buying decision – unlike my last home purchase. Being debt free means being able to save cash at a much faster rate so that I can purchase a car for cash or have the cash available for my deductible and other out-of-pocket expenses for a major medical event. Deciding to not use consumer credit (and limit the amount of mortgage debt you take on) forces you to live life more deliberately and intentional and use creative problem solving rather than using financing as a simple fix.
Being debt free doesn’t feel as big of a deal anymore. This is the biggest thing that has surprised me. That euphoric feeling of being debt free and not a care in the world – I naively thought this feeling would last forever. Maybe this is what it’s like for married couples after the first year of marriage (I wouldn’t know – I have never been married). But as I settled into Year Two and the honeymoon period wore off, being debt free didn’t seem like that big of an accomplishment – until I would mention to someone in passing that I was debt free. The person would get all excited and ask questions about how much debt I had paid off and how long it took me and what a great accomplishment it was to pay off all that debt. I guess this new way of life had become a new normal for me so the best way to stay fired up about being debt free was to continue sharing my story and have the excitement of others hearing my story fire me up. It also helped me realize how far I had come when I went through old files to shred. I found my foreclosure notice. I found my payoff notice from my credit cards and student loans. I found a statement for a treadmill that I had financed – and then never used. I decided to keep these files to be my reminder about how far I have come and what life I left behind – and how much better my life is for being debt free.
So this is what Year Two of debt freedom has taught me. It hasn’t been anything I would have expected. It’s also been a lot more than I expected. Becoming debt free doesn’t mean your life gets easier. It just allows you to have more options when life throws you a curveball. Committing to staying debt free means deciding to walk through life the way most in the Western world don’t. And that’s OK with me. I don’t mind being a little weird if it means having peace of mind. I’ll take that to the bank any day of the week.