Debt-free by the end of 2014

So this is a pretty big, audacious goal. But I’ve done a lot of reading that suggests big goals are better because we are more likely to really make the effort to strive for them than little, seemingly easy goals. And I’ve had success with this kind of goal setting, particularly financial goal setting, before.

I have only two debts: A credit card that has a couple of hundred dollars on it and a HECS-HELP student loan that is somewhere around the $13,000 mark…ish. Not exactly sure, will ring the ATO sometime this month to double check that.

The credit card is easy. Like I said, there’s very little on it and I plan to have it paid off in full when I next get paid. Then the plan is to just pay it off in full every month. I was doing this very well last year but then the extended school holidays happened over Christmas, and as I was temporarily unemployed (teaching contract ended before the end of term last year, then my permanent job didn’t begin until January) I allowed myself to carry a small balance on it. I did end up receiving some vacation pay (although I wasn’t sure when or how much this would be), and I have some savings that I could have dipped into to had I felt the need to avoid this small credit card debt. I chose not to because I simply felt more secure leaving my savings alone and continuing to use my credit card even if I didn’t pay off the entire balance at the end of each month. I felt that using the credit card was actually more of a disincentive to spend than dipping into my savings. With the credit card I knew there would be interest charges, so it made me think a lot more before using it for purchases. Dipping into my savings would not provide the same disincentive and therefore I believe I would have ended up spending more. So this debt is not a problem at all because it was planned for and the balance will be back to $0 within the month.

The HECS loan, on the other hand, is sort of looming over my head a bit. In Australia we are very lucky that we have the option to defer our student loans and that if you aren’t earning enough, you don’t have to pay it back. It is common to hear people say that it is the best debt a person can ever have. Payments are taken automatically out of my pay and there are no hefty interest charges. There isn’t actually any interest charged on the debt but it gets ‘indexed’ each year. I also don’t have that much debt, compared to some people. I could ignore it completely and it would be eventually paid off simply through automatic deductions from my pay.

For these reasons, whenever I’ve mentioned that I want to pay it off, a large proportion of people think I’m being foolish. People have told me not to worry because, as just mentioned, it will basically take care of itself. People have also told me to invest my money instead because it will earn me more money that I would save by paying off my HECS. People also say that if I just save money and leave it in a low-interest savings account I will still be better off. Some people have also told me not to even bother paying it off at all! Generally these are people who were beneficiaries of the free university education offered in Australia in the 70s and they still believe it should be free. I see where they are coming from…but the reality is times have changed and it isn’t free.

In the end it comes down to my sense of integrity. The HECS-HELP loan is in my name and I want to pay it off. I’m no Lannister, but I do pay my debts. Actually, I try to pay my debts as quickly as possible because I believe debt is akin to slavery. While any of us have debt, we have to keep working so that we can pay it off. If we didn’t have so much debt as a society, it is possible we wouldn’t have to work so hard. There is a whole industry geared towards making us think we need fancy, expensive new things to ‘keep up’, and these shiny new toys are easier and easier to finance. Then just as we’ve paid them off, we need to ‘upgrade’ or ‘update’ and the cycle begins again. However, there is a movement that rejects this in favour of having fewer things and avoiding debt. I am very much in favour of this movement. I believe it is healthier in every way. As such, I want to eliminate my HECS debt as soon as possible. Fortunately my partner feels similarly about his HECS debt, so we are on the same page as far as debt freedom goes.

I know it’s possible to do it this year because in 2012 I acquired a car loan of approximately the same amount as my current HECS debt and I paid it off in 13 months. I was very proud of myself! However, I did probably go a bit overboard and left myself a bit short in other ways in order to do this. I don’t want to repeat that with the HECS debt. But I am going to pay it off this year and here’s why:

When it’s paid off I will be 100% debt free. That means every cent I earn after tax is mine to do with as I choose. I will be under no financial obligations at all and that will be immensely freeing.   My monthly expenses will have dropped and that means my savings can increase. Hopefully I will be able to begin investing seriously. Every step I take to pay off this debt increases my net worth. That in itself is worth-while to me.

Paying it off might also mean I am more able to take advantage of opportunities for travel and other opportunities than I otherwise might have been. Furthermore, when I drop back to a part-time teaching load sometime in the future (it’s going to happen, it’s just a question of whether it will be later rather than sooner) that will be much easier to adjust to given that my expenses will be lower. Reducing fixed expenses lowers stress and less stress is good for my health. All of these things to me are far better reasons for paying off my HECS than the ‘it’s the best debt you’ll ever have’ line of reasoning is for not paying it off.

Debt freedom here I come 🙂 Will you join me?

The agenda so far

It’s the start of March and I’ve now been doing this for nearly 2 months. This is my agenda so far:

1. Be grateful. This is the pillar of a happy life. I am striving to be grateful every day.

2. Self-care, self-love and occasional self-indulgence. This is essential. Nobody else is as committed to looking after me as I am and if I don’t look after me, then I can’t look after anyone else either.

3. Personal Finance. So far the focus has been on spending less than I earn but this is a huge topic that I have much to learn about and discuss.

4. Food. This past fortnight I have focused heavily on gluten but I am on a journey to nourish my body with good nutrition so I imagine this will be an ever expanding category.

And that’s what we are up to so far. I have spent the weekend in definite self-care mode and it’s been much needed. After a busy week at work I needed to take a break before the marking and assessment race of the school term begins in earnest next week. I also have a school camp coming up, some other work deadlines and several doctors appointments booked. I have spent the majority of this weekend resting, reading and enjoying some much-needed solitude. I have spent time with my partner and had a lovely long phone conversation with a dear friend. But most of the rest of the time it’s just been me and my cat, Crinkle, chilling out and taking stock. I have been eating good food and planning my finances for the next few months.

One thing I haven’t done is any school work. I usually work on Sunday afternoons but I am making a conscious decision not to do that today. In the coming week I have a lot of after-school commitments that will prevent me from getting home until quite late. So this afternoon I am choosing to get my flat in order, my washing done and some meals organised for the week. This is important because all of these things will make me more effective during the week. Plus, I just think it’s important to take two full days off work where possible.

On Friday I sat down to afternoon tea with two ladies who are on similar paths to me regarding wellness. While we all have our own journeys and areas needing attention, we also all have strengths and expertise in certain areas. We have decided to meet up every now and then to have a chat, share information and help support each other on our journey to wellness. This week we each identified an area that we are going to focus on for the next few weeks. The area I identified was food.

So food will continue to be a fairly big focus on the blog for a while, I’d say. I have many other agenda items, including exercise, hormone balance, decluttering, mindset, spiritual exploration, relationships, organisation, career goals, work-life balance….the list could go on and on. But one of the things I feel is important right now is to take one step at a time and to be gentle and gradual about changes. I want a sustainable, wellbeing-oriented lifestyle, not a quick-fix scheme. Therefore, I am going to take one step (or, actually, four!) at a time and be kind and patient with myself as I make these changes. I hope you will be kind and patient too.

I feel comfortable working on the first three items on the agenda while I also overhaul my diet because I’ve already been working on them for several years so they are more at the maintenance stage at the moment. I will gradually incorporate more agenda items as the months progress. Perhaps 1 – 2 new items per month would be a useful way to approach this. I am reminding myself that this is a marathon, not a sprint. In fact, it’s not even really a race (I’m not a big fan of competition). It’s more like a pilgrimage without an ever-evolving route to destination harmony. How it progresses from mere we shall all have to wait and see!