Posted by: LakeIris | August 6, 2011

In which I consider ways to become debt-free

Earn more.

Or spend less.

These are my options.

I have made steady progress in paying off my debt in the three and a half years that I’ve been working as a teacher. My car loan (which included expenses related to moving overseas) has been reduced from $10800 to $4000.

On the other hand, I’ve barely made a dent in my student loans. I didn’t even make payments for a year, since my income (when converted to USD) qualified me to defer due to ‘economic hardship’ back when the Australian dollar collapsed in late 2008. The loans were still accruing interest and only about 4% of my payments since then has been applied to the principal.

If I continue to pay off the loans at this rate, I’ll be debt-free by 2063. And 84 years old.

If I can manage to contribute an additional $450/month ($5500/year) to my debt repayments, I’d cut the repayment time down from 52 years to 5 1/2. And save myself approximately $113,000 in interest.

Earn more.

Or spend less.

I earn a very good income as a teacher. I also work long hours. While there are a few options for additional part-time work (such as tutoring) most of them aren’t particularly appealing when I consider the extra time they’d take.

It’s a simple decision, at the heart. Obvious what I must do. But how to spend less? Ah, now we’re getting to the tough part. Here are some of my thoughts and ideas from the past few months.

  • Reduce my rent. Moving back in with my parents (again) isn’t an option while I’m working in Melbourne. But perhaps there’s a cheaper place to live. Perhaps I could provide childcare/cooking/cleaning to a family in exchange for cheap/free rent. Perhaps.
  • Sell my car. When I add up fuel, insurance, service and other car-related expenses – it costs me a little over $5000/year. Even if I had to pay for public transport every single day, this would still save me over $3000/year. This is a complicated decision, the ramifications of which I won’t go into now, but suffice it to say that while I’m considering this option, it wouldn’t happen until the end of the year at the earliest.
  • Eat on a ‘food stamps budget’ – Kristen at Food Renegade and the Leakes at 100 Days of Real Food have me thinking about how much I currently spend on groceries, particularly since I’ve been eating much more real, organic foods. I’d have to cut my groceries spending down by about 67% to eat on a food stamps budget ($200/month for a household of 1) – but this would provide me with an additional $4880/year.
  • I’ve already made cuts to other discretionary areas of my budget – things like clothing, recreation and ‘personal care’ (skincare products, haircuts, facials, pedicures and the like) though I’m sure there’s still significant room for me to save with additional lifestyle changes.
I were able to implement one or more of these solutions, I would not only be able to more aggressively attack my debt, I’d also have the freedom to be more generous with tithing and giving…and save more for future purchase to break the cycle. No matter what I choose to do, I think having accountability and support will be essential, which is why I’m taking the plunge, swallowing my pride and sharing this journey with you.
Perhaps you’ve made similar changes to your spending – whether to pay off debt or for another reason – and you’ve got some helpful hints. Perhaps you are more creative than I am and have other ideas about how I can spend less. I’d love to hear your thoughts.
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Responses

  1. Cory and I have had to make similar decisions in the last five years after the collapse of the construction industry. We have calculated that our gross annual income has decreased by approximately $20,000.00 over all. This year will see the beginning of a rebound but at the same time, we must begin to prepare to send our first born to university! 🙂
    How have we survived?
    We buy all of our textiles–clothing, furnishings, accessories at second-hand stores or deeply discounted, on clearance, with a coupon.
    We eat clean and whole–EVERYTHING from scratch. We make our own bread, yogurt, laundry soap…It’s the same as the food stamp philosophy.
    We sold our second car–if I don’t have the wheels and need to go somewhere, I walk or bike. Same for the rest of us.
    We still vacation but we stay in family-owned motels and don’t eat in restaurants, rather eating a lot of cheese and crackers and other traveling food.
    Our bills are as low as they can go without mutiny. We have basic cable for $21.00/mo. No frills phone–no caller id, no call waiting. We turn the heat down to 62 degrees in the winter and wear a lot of layers.
    You can do it, Diana~God bless you on your journey!
    JoAnne


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