Debt Free Kiwi #6

How much debt have you paid off?: Took out $200,000 of debt in 1991.

What was it for?: House.

From deciding to become debt free to making the last payment, how long did it take you?: Interestingly enough, our story starts with the 1987 share market crash. We settled on our first house with a mortgage five days before the crash. Further along, we lost our jobs and moved to the provinces. We saved and paid off the existing mortgage and rented in the provinces. Eventually, we sold that house, it took ages, and we only just got our money back. We vowed never to have a mortgage again. We saw a property in our new area, and as cash buyers, we put in a cheeky tender down to our last dollar, never expecting to win. We did! On settlement day, we did literally go down to our last $$. So much so that it’s a family joke we had to borrow some grocery money from my Mum to get us to the monthly payday. We had little furniture, but our dream property was older but with potential. We found out our bid was successful because it was quite a bit lower but cash and a 7-day settlement. I’ve never been able to express how significant the feeling of not having a mortgage meant to us, our mindset for life, and the choices it gave us. We had more children and renovated. We invested back into the share market.

What age did you take on your first debt, and how old are you now?: 25. 60.

Did you do it alone or as a family?: With my husband.

Did you pay off debt from your regular income, take on extra work, or change jobs to speed it up?: Both of us had jobs that paid allowances, so there was sometimes extra for lump sum mortgage payments.

Did you sell anything or receive cash gifts to contribute towards your debt payoff?: No.

What people, books, websites, podcasts, budgeting tools, debt trackers and resources helped you?: We had a plan to be financially free and had different Sinking Accounts. Including a travel one.

Did you keep an emergency fund while you paid off debt? If so, how much?: Yes we had a sinking fund for emergencies of three months of monthly expenses.

Did you have any setbacks along the way, and how did you overcome them?: A setback of not being able to sell our first house meant that we couldn’t buy another one for 18 months, and while frustrating, it meant we got lucky because once it sold, the bad market played in our favour to get our new home. It also allowed us to save money to pay off that mortgage.

What tips/hacks could you share?: Personal money is important. Each of you needs a discretionary regular amount to use as you wish; it keeps you sane. Also, plan something fun/special/extra every three months and set up a sinking fund to pay for it. Actually, we didn’t use credit cards at all then, either. Only as emergency spending.

Was there a structure to your debt payoff? i.e. paying smallest to largest, or highest interest rate to lowest?: Yes, we hated paying interest. We first paid the highest interest off, then lump sums on the rest. We lived on one salary, the lowest one, and the other was used to pay the debt.

How did you stay motivated, and what was the most challenging part of paying off your debt?: The thought that we’d have to make mortgage payments for 30 years. We also are outdoor types, so spent lots of time tramping and climbing, which is cheaper once you have the gear. The worst bit was interest reviews; interest always went up!

How did you celebrate making your final payment?: On the day we took ownership of our debt-free house, we sat on beer crates and had fish, chips, and some wine. Our furniture was still in storage.

Was getting out of debt worth it, and what have you learned about yourself?: We are thankful that we met each other with similar values and glad that we did save hard in our early days. Yes, knowing the roof over your head is yours gives great security.

Will you ever go back into debt again?: Not now. No need.

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