Debt: Ramona’s debt story

I would like to start a new series of articles here on our personal finance blog, in which we all share our debt stories. You can still pay off your debt or be debt free, what matters is to have had the experience already.

The articles will be short interviews in which you can provide us details about how you got into debt, how you’re planning on paying it off etc. If you’d like to contribute to the series, please contact me and I’ll send you the questions.

If all goes well, we should have a weekly debt story from our readers.

1. Please provide few details about yourself

I’m the owner of this blog and also a passionate web designer. Am currently self-employed at my web design business, married to a wonderful man and expecting a child. My days are usually the same: I wake up in the morning, work on my clients’ sites, write in my blog(s), comment in various communities etc. We both love to travel and it’s something we find important for our sanity. I’m also a beginner photographer, trying to take some nice pictures with my camera.

When it comes to money, we both like to be try be more responsible and we’ve clearly made progress in the past years. Probably because we’re not that young anymore, so we’re not as tempted to spend money as we were 10-20 years ago 😉

You can get more details from my ‘about‘ page, here on DojoBlog.

2. What did you get into debt for?

I had 2 loans in my life: one for a computer I purchased back in 2003 and a car loan in 2008. My husband has a HUGE aversion towards anything similar, so he’s always been debt free.

3. How much debt did you have?

The computer was about $1.3k and the car was over $21K ($4K as down-payment and $17K to be paid in 4 years – fixed rates). I also had to pay about 20% in premium insurance (which was pretty steep, since the bank chose it and I couldn’t find something less expensive), so overall it was a pretty painful situation.

4. What’s your current debt status? How much of this debt have you paid off?

Right now I’m debt free. The computer was paid off in 3 years (fixed rates as well and a hefty ‘penalty’ if I’d have paid it sooner), even if it earned me enough money after few months to be able to pay it off earlier. The car payments were also fixed and pretty big for my income (especially after losing my job), so I don’t think I could have sped them to much.

Just as in the laptop’s loan, the bank would have me pay some penalties, if I wanted to get it paid off earlier, so I just went with the fixed rates. In March 2012 the car was finally mine and I became debt free, which is my current debt status (which I plan on keeping for the rest of my life).

5. If you’re still paying off debt, what is you plan to tackle this task?

I’m clearly not into this position anymore, but, if it was the case, I think making faster/bigger payments would be a really great idea, as long as you’re not getting penalized though. Being debt free is clearly a great achievement for me and it has made my life easier, so I think trying to pay the loans should be a priority.

6. What would your advice be for people who are still in debt?

Make lifestyle changes and try to free up more money each month. We’re not currently in debt, but we’re keeping a budget, we track our spending and optimize the cash flow so that we can save more money. If you are in debt, splurging on useless stuff won’t help you get out of troubles. Being more frugal doesn’t mean you can’t still enjoy a fulfilling life, you just need to get your priorities straight and make the changes.

Another VERY important thing is to save money. It’s pretty difficult to save while you’re also paying off debt, but not having an emergency fund can be devastating. I lost my job while still having my big car payments and was lucky enough to get my web design business running SO FAST that I recovered in few months (was also lucky to have a very supportive family and they really came through for me).

Do not rely on luck, make sure you have some money saved. If I didn’t have my folks pitch in with my living expenses and the chance to make my business work OK from the start, I can’t even imagine what would have happened. I’d probably have lost the car in few months and still owe the bank money (if they couldn’t re-sell it at a good price).

7. How do you feel about debt now? Would you loan money again?

For me the entire experience was an ordeal (especially with the second loan). I would never put myself through something like this again, it was a painful experience. If I compare my ‘debt years’ with what happened since 2012, it’s clear to me that taking loans is no longer the answer for me. We both want many things which are pretty expensive (a car for husband comes to mind, he’s using mine currently), but we are willing to save for it and work extra to make everything happen faster.