How I Erased $70,000 of Debt and Became an Eventual Millionaire

by Jaime Tardy on 24 February 2014 1 comment

Money can give you freedom or make you stuck. You have the power to change your future, and it all begins with your money. You want your money to work for you; you don't want to work for your money. I know, because I learned the hard way. (See also: Money Lessons From Millionaires)

In my early- and mid-twenties, my husband and I always felt broke even though we both had good jobs and were doing the best we could. And to top it all off, I wasn't happy with my job at all because I wasn't in control. I worked really long hours for a video-on-demand company as a project manager, but I realized I was spending too much time and energy on something that I wasn't passionate about. I really longed to do something that I cared about. But I felt stuck because of the choices I had made, and I owed too much to be able to quit my job.

Then I had the realization that only I could take control to change my situation. It was up to me and no one else. I could be the hero of my own story. (See also: Become Your Own Hero to Make Your Fortune)

Be Honest With Yourself

Ignoring your finances is so easy. It's normal to only pay attention when the next bill is due, or when you realize your bank account slipped below $100. We ignore our finances because we feel that it's too complicated to figure out, or we're afraid of what we might find when we actually do peek into Pandora's box. (See also: Ways You're Lying About Your Money)

But you need to be honest with yourself. And that means uncovering things you don't want to uncover and admitting things you don't want to admit. Being honest is accepting where you are now, exactly as you are.

You need to put it all down on paper; it can't just be a number in your head. It may be a hard thing to do but you need to find out how much you actually owe. This is a first step in controlling your money — you will figure out where the money you do have is going and then you can figure out different ways to bring more in.

I did this by adding up all of my debt. I had no idea I owed more than $70,000. In fact, I thought I was pretty good with my money. It wasn't just credit cards either. It was a home equity loan, a new car, and student loans.

Action Item: Look Hard at Your Numbers

Take a hard look at all of your numbers. They are the facts, so take some time tonight to lay it all out on the table. Pull together every number you can, your debt, your income, your assets, and retirement. In the immortal words of GI Joe, "Knowing is half the battle." (See also: Ways to Track Debt)

Be Value Conscious

Many millionaires know the value of a dollar. They know because many of them have been broke. Here's a question: What do you value? It's very important to figure out what you want in life and what's most important to you. Most of the time, it's not material items that you value. It's so much more than that. So after you figure out what you truly value, then your spending should reinforce that. You should start spending money in ways that make you happy. Here are a few key principles to make you happy. (See also: Scientifically Proven Ways to Be Happier)

Buy Experiences Instead of Things

Researchers have found that the happiness derived from experiences instead of things wears off slower. So when we think about that memory, we get to relive that experience all over again. It's like we get more bang for our buck over that "thing" we could have bought instead that loses its importance over time.

Help Others Instead of Yourself

Research also shows that whenever we improve our connections with others, we are happier. So when we get to spend money on others or help someone out, it brings us a sense of fulfillment. I have found a very common theme when asking people why they want to become a millionaire — it's usually something like, "to help others and give more." (See also: Easy Ways to Make Someone Happy)

Buy Many Small Pleasures Instead of a Few Big Ones

Does eating one 12-ounce cookie give us twice the pleasure as eating a 6-ounce cookie? Studies show the answer is no. In fact, eating two 6-ounce cookies gives you more satisfaction. So the lesson here is to learn to break up your spending into smaller pleasures.

Acting on My Values

I realized that I was acting so out of control with my money. I would go to the store and not remember what I bought a day later (though I remembered spending over $100 on the trip!). I started to cut out all of those pieces that didn't really matter.

I found that I really cared for experiences, so it was the act of going to the coffee shop that I liked. So instead of an expensive sugar-laden latte, I just bought the cheapest tea on the menu. We put in place a budget for extras (when we were getting out of debt it was $25 per month each!), and I learned how to stretch that $25 for the whole month.

Action Item: Identify What You Really Care About

Write down the last 10 items you purchased. What really made a difference to you? Was it being able to go to your favorite coffee house, or do you not care about coffee at all?

Numbers in Your Head Don't Count

To understand one's finances means that you understand the meaning behind the numbers, not just the basic figures themselves. We all need to seek to understand our finances. That means knowing the basics like your income and expenses and having them written down. But it's also knowing what those numbers mean to your life and goals. (See also: Achieve All Your Goals in 6 Steps)

Know Your Net Worth

The first number to figure out is your Net Worth. Your net worth is all of your assets minus all of your liabilities. This is simple math, just addition and subtraction. It just takes some time to find all of the numbers. It might be disheartening to see it in black and white after you figure this out, but at least you know where you stand and are being honest with yourself.

Develop a Budget

The second number to figure out is your Income and Expenses — a Spending Plan. No matter how much money you have coming in and going out, I firmly believe that understanding your finances is vital to having a healthy relationship with money. In other words, create a budget. (See also: How to Have a Better Relationship With Money)

Know Your Current Spending

The third number is your Current Spending. You need to know how much your spending matches the budget you set out for yourself. Budgeting helps you become very clear on your spending habits so you can start to predict what the future will look like.

My Results

We ended up realizing that the new car was a huge piece of the debt ($19,200). We also looked to see how long it would take us to pay off all of our debt. If we took out big chunks like the car, the number of months it took would be a lot less.

So we first started to look at bigger chunks. We got rid of the new car and bought a cheaper $8,000 car. We also sold kayaks, a jeep CJ7, and just about everything we could.

Then we looked at the smaller things in the budget. We did the standard things like canceling cable and negotiating our rates. Plus we really tried to raise our income every single month. My husband took on odd jobs. Every time we did a little more the length of time we had to do it got smaller. That was a huge motivation for us. (See also: How to Stay Motivated When the Going Gets Tough)

Action Item: Establish the Finish Line

Figure out your three numbers (or update them if you haven't lately!). Figure out that magic date, the day you will pay off all of your debt, or be able to quit your job, etc. It will set the goal in stone, and help you realize there is an end in sight!

Control Your Money

Now that you have all of the numbers in place and a plan of attack with your budget, you'll need to figure out what to do with your excess money! The goal at first is to reduce your expenses and increase your income so that the excess amount gets bigger.

You need to take a hard look at everything and see what and where you can cut things. Be deliberate with your money and know where every penny is going. And remember, these cuts are a temporary way to creating the best setup for you to move forward on your goals.

Keep reading sites like this one and finding stories similar to yours. That's how I persevered in getting out of debt. And that's how I'm on my way to a million dollars right now. I am interviewing millionaires who can tell me their stories of how they have done it, which inspires me to keep moving forward toward my goals.

To me, an Eventual Millionaire is someone who has the goal to be a millionaire, eventually. But they want to do it on their own terms; they want an enjoyable business and an enjoyable life.

I am an Eventual Millionaire.

Which action step will you be committing to today?

Jaime Tardy is a Business Coach and a Speaker who helps entrepreneurs to achieve their goals. She's the Founder of EventualMillionaire.com, a website that features a new millionaire interview each week and focuses on personal finance and entrepreneurship. You can grab The Eventual Millionaire Book at TheEventualMillionaire.com and also download the Eventual Millionaire Starter Kit for free right on the site. You can also listen in to all 100+ interviews with millionaires free on EventualMillionaire.com.

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"Buy Experiences Instead of Things" - This is SO important. We all spend so much money on stuff, but we always just want more stuff. Its a never ending cycle of spending to maintain a certain level of "supposed" happiness when we get the shiny new thing.

Luckily for me, I realised a few years back that this was rubbish and have managed to prioritise experiences over stuff. In fact, we have two lines in our budget saying that. The "experience" line gets a lot of leeway. However, every penny spent on "stuff" in analysed and reduced where possible.