Getting out of debt is hard. It forces you to face a past that has probably caused you some pain. As if that isn’t bad enough, you have to own your part in causing that pain. On top of all that you have to change the habits that got you there in the first place and never go back to them! It’s no wonder that so many people that start the debt free journey fail to complete it.
This is why finding your “why” is so important. At some point, you have to get so disgusted with your situation that you’ve got the emotional fuel to change who you are. If you feel your fuel running low I’m hoping I can help. Stick with it! I promise you it’s worth it.
If you’re in the process of getting out of debt I want to give you an idea of what life looks like on the other side. Before I do that though I want to explain a concept that is so simple yet so hard to do.
Living Below Your Means
If you’ve ever read or heard anything about personal finance you’ve heard this. It’s practically the golden rule. If you can’t live below your means you can’t win with finances. What does it actually mean though?
All this means is that there needs to be a gap between how much you earn versus how much you spend. That gap is where you build wealth. This is referred to by some people as the wealth gap. I know this is really simple but sometimes we tend to complicate this financial thing.
Sometimes we try to get so analytical when really we just need to KISS (Keep It Simple Stupid).
Do me a quick favor. Think about how much money you bring in per month. Now think about how much of your money is going out in debt payments (including your mortgage or rent). Think about how much of your money is going out in waste because you aren’t being efficient with your income (i.e. you aren’t doing a budget). That represents what your wealth gap could be!
Now let’s get to the fun stuff!
The Power of The Gap
I was looking back at some budgets from 2012 and realized we make roughly the same amount of money now that we did back then. We had just gotten married in July of that year and moved into a decent but cheap apartment in the area we wanted to buy a home in. Our big goal was to pay off some debt and to save up for a down payment for a home within a year. At that time we were able to save about 33% of our take-home pay. This was our wealth gap!
Here is what we were able to accomplish with our wealth gap and with the power of budgeting over the past 6 years:
- Paid off Kim’s car and paid off her student loans.
- Saved up an emergency fund (about $12k) and a down payment for our home (about $12k).
- Saved up for our official honeymoon to Aruba (about $4K – I HIGHLY recommend Aruba by the way).
We ended up closing on our house in late June of 2013 then flying to Aruba six days later. Talk about being on cloud nine!
Since moving into our home in 2013 we’ve been able to do the following:
- Install hardwood floors on the main floor and top floor.
- Update the upstairs bathroom.
- Bought a new (used) SUV with cash.
- Update our Kitchen.
- Overhaul our Deck.
- Get the interior of our home painted.
- Put new flooring and paint in our Laundry room.
- Install a new HVAC for the main floor.
- Install a new HVAC for our upper floor.
We’ve been able to do the above and continue to visit Destin, FL for vacations because Kim has to go to the beach every year (Lol). On top of that, we’ve continued to invest a nice chunk per month in our 401Ks and IRAs as well.
We planned to update our master bathroom and had saved up the money twice but found better uses for the money both times. The first time was covering Kim’s maternity leave and insurance deductible. The second time we felt it was better to increase our emergency fund again.
- read: Don’t Call It A Comeback
Please keep in mind that we have not borrowed money to do these things. When you have control of your wealth gap you can focus it on whatever you want to accomplish and knock it out insanely fast.
Over this 6-7 year span, we’ve also had two children (one of which was born this past summer). I was able to increase my income through new employment over the years which allowed Kim to go from working full-time in 2012, to part-time in winter 2015 when she returned from maternity leave the first time, to PRN in late summer 2015. Now that Kim is PRN she’s only required to sign up for 3 shifts in a 6 week period. This has allowed us to spend more time with our two sons as they grow up. Not to mention avoiding a hefty daycare bill. Most of all, it’s been an increase in the quality of our life.
OK. I’m going to wrap this up because I actually feel a little dirty because I don’t want this to come off as a humble brag. There isn’t anything special about Kim and I. We don’t make huge sums of money. We’ve just mastered our wealth gap and use it to accomplish our goals. Once you eliminate your debt and free up your gap you can do the same. So stay the course. The grass is really greener on this side!
Kim’s Thoughts: I just want to reiterate that while there’s a list of things that we’ve accomplished over this time, the first list was using our wealth gap to essentially get out of debt and assure that we stay out of debt. The second list was using our wealth gap to do some things we wanted to do and needed to do. Neither of these lists was completed in a short amount of time. As you can see, it took us YEARS. And that’s OK. We had to run our race as fast as our income would allow. And you have to do the same – Run your own race.