I’ve never really had a problem with credit cards, or spending beyond my means. Sure, I’ve definitely swiped my credit card without a concrete plan of how I was going to pay for the purchase. I’ve even maxed out my credit card back when I was a student, but I always found a way to pay them off. I’m not the kind of person who slips easily into the habit of overspending.
But, sometimes life hits you with a few things at once, and you have no choice but to shell out the cash. For smaller things, this is where an emergency fund comes in handy. My emergency fund has saved my butt so many times in the last year, I’d probably be eating nothing but KD without it.
Becoming Debt Free Was Hard
I recently paid off my car, and became debt free. With that achievement, I felt like I’d finally finished struggling to climb my way out of a hole, and now I’m sitting on the edge, looking down, and thinking:
I’m never going to fall into that hole again. No way, not ever.
I feel like this is an achievable goal, for the most part. I feel like if I’m really diligent with my money, if I don’t spend too much or live beyond my means, I can stay debt free forever. I can start to take steps away from that hole, to put some distance between it and myself. There’s only one thing that I think could drag me back into that hole, and that’s a big, unavoidable expenditure.
I’m talking about having to replace my car. My current car is a 2007 VW Golf with about 100,000km (62,000 miles) on it. I’d like it to last another four years, at least. When it comes time to replace it, I’ll probably go the same route I went with this car: Get a lightly used lease return with few kms on it and a good maintenance record. I’ll probably spend somewhere between $10,000 – $15,000 on it, with the idea being that the car will last me a good long time.
Staying Debt Free is Harder
To stay free from debt, I’ll want to buy this car in cash. So, if I wanted to save up enough cash to buy a replacement car in four years for $12,500, I need to save $260 per month for the next four years. That’s more than the car payment I just got rid of.
On top that, I also need to save for retirement, bulk up my emergency fund, and start a house down payment fund. Let’s also not forget travel (which I really want to do) or lifestyle inflation (I’m not going to live in the 400 sq. foot cottage forever).
And just like that, *poof* all of my money is accounted for (not that there was a lot to go around in the first place).
All of that lovely excess income I fantasized about having once I’m debt free, it’s spoken for. Not by debt, but by saving, saving so that I can stay debt free.
So I got rid of my debt (woo) but my money is already being claimed by savings if I hope to stay out of debt.
Guess I’m going to have to keep hustlin’.
Do you have a long term plan to stay out of debt? I want to know!