Does our country’s debt scare you? At the time of writing this, the debt is over $13.5 trillion. Wow. Seriously—take a moment to let that sink in. I know that when I start to think about it, I get the willies. How are we supposed to get out from under this debt? What will we each have to do as citizens to pay off our portion of this burden?
I cannot account for our nation’s debt, but our household is on the right path. We have gotten to the other side of the curve. All of our debts are paid off (minus the mortgage), and so now we can save for every thing ahead of time instead of spending money first and then paying it off afterwards. Purchase now, pay now, and move on with our lives. If there is something large that we want, we have vowed to save up for it.
Since we have worked so hard to get to this other side of the curve (and I must say that the grass is greener over here), by the grace of God and our own personal vows we hope to never put ourselves or get on the other side again.
Our Vow Immediately Put to the Test
However, immediately after paying off our last debt on September 1st, our AC/Heater/Ductwork had to be replaced. Could we have continued living and sweating in 85+ degrees? Sure. But the summer had zapped our energy and morale quite a bit. You can read the background through the link above, but essentially the AC Company decided it was better to rebuild our 20+ year old AC unit instead of replacing it under our home warranty, and the rebuilt unit would not work after 19 visits (no exaggeration) to our home over the course of a hot and steamy Houston summer. Not only was the unit working intermittently, it was also too small for the area in the bottom of our home and so it churned all day and all night, sending our electric bills to $300+ each month. Aside from this, we were told by several repairmen that our 20+ year old heater was dangerous.
Because the original repair was not working, our home warranty offered to replace the unit with the same tonnage, or to cash us out. We knew that we would never get to the right temperatures in our home without upgrading the tonnage from a 2.5 to a 3.5 unit, so we decided to cash out.
It was a particularly tough decision on our part as to whether or not to finance it through our credit card and do a balance transfer for 0% interest for 12 months, or to pay it all off now in one fell swoop. The reason it was such a difficult choice was because of our vow to not go into debt again as well as our dwindling emergency savings. After paying off all of our non-mortgage debt, we had just enough left in the bank to pay off the new unit but it would leave us with close to nothing in savings.
In the end, we charged the unit to our credit card to reap the points, and we paid it off in the grace period with the rest of our savings. We are banking on the fact that we are both employed, that if one of us loses our job we can live on one income because we paid off all of our debts, and that we have a back up in our Roth IRAs should we absolutely, last resort, need some money (and I do mean last resort).
I knew we made the right decision because I felt great about being out of debt and not adding another debt even after seeing our account empty. However, our number one priority now is to build up our emergency fund to full status. We are going to pursue this with the same gazelle-like intensity we pursued our debt, and hope to achieve this goal within six months.