I’ve had a long history with personal debt. I’m not talking about the high-octane variety, such as juggling multiple high-interest credit card balances or loans to survive until the next payday. No… I’m talking about the small, and seemingly insignificant, traditional borrowing choices that very much characterise lifestyle creep. What many might describe as ‘affordable debt’.
Well, today marks a small victory on the path to eventual FIRE as these debts are finally no more.
For as far back as I can recall in my post-university, adult life, I’ve always had some form of personal borrowing, over and above the ‘big one’ – i.e. the mortgage. When I look back at my younger self, I was certainly the type of chap who did some or all of the following things:
- Upgraded their phone every year or so, unwittingly spending hundreds of pounds for those (at best) incremental improvements. Up until a few years ago, I think every phone I’ve owned was bought on contract – i.e. a form of borrowing.
- Purchased several brand new cars over the years, financed through PCP, never ultimately paying the final balloon payment – instead recycling myself into the ‘next deal’ (effectively a very expensive, long-winded rental)
- On a number of occasions took out small, albeit, low-interest, personal loans to either consolidate other debts or secure funds for an unforeseen cash calls (i.e. tax bill).
While the amount (and combination) of such borrowings has fluctuated up and down over the years it’s been an ever-present fixture in my life, justified because I ‘could afford the payments’. Indeed, despite carrying this debt, my personal net worth continued its upward trajectory so, to some degree, it was manageable, but in another sense, I wanted to eradicate it once and for all.
Breaking the Cycle
This moderate, but constant, use of unsecured debt began to change just a few years ago when I started to really discover FIRE as both a concept and as a practical tool-kit. While I was perhaps passively following some aspects for years prior, the momentum shift really kicked in when I became active in my financial decisions. The new me does not:
- Upgrade his phone every few years – my current one is a little over 4 years old and running like clockwork
- Use finance to buy cars. The days of crippling car loans are behind us. We still run two cars in the family (soon to be one) but these were a few years second hand at purchase and paid for in cash.
The final kink to iron out concerned a personal loan. Unlike other borrowings over the years, this one was more tactical in nature, secured at a very low rate over multiple years but one I always fully anticipated paying off early.
We have a remortgage coming up later this year and a lot has changed since we bought our current home five years ago. A third child has been born and my wife has taken a career break to look after the children before returning to work once our youngest starts school in another year or so. With just one salary, and not wanting to jeopardise our remortgage process in any way, it was time to wipe that last bit of debt. I wanted a clean slate for 2020.
A few days ago, I cleared the personal loan, some 5 years ahead of schedule and saved almost £2,000 of future interest charges – always the plan. I did this through a combination of regular overpayments – money generated largely from my side-hustles and then using some of my annual bonus to wipe it.
So, mortgage aside, we are officially debt-free! I think the last time I had zero borrowings or debt outside the mortgage was probably back in 2005 (15 years ago).
“I now solemnly swear that I never go back, no matter how small or inconsequential a rate of borrowing may appear”
My current tracking process only stretches back to the start of 2015 so this is only a partial picture, but here is the debt journey that ends today.
A Win is a Win
It’s important to celebrate the little wins in life along the journey. While I feel less proud that I had any debt to start with, eliminating unsecured debt, which peaked at £65k in April 2017 to zero today, feels like an important step and something to celebrate 🙂
As the chart above depicts – prior to this change in behavior, the cycle appeared to be on a downward trajectory, with every new borrowing drawing me down further overall.
It may well be a coincidence, but it was early 2017 when I truly embraced FIRE. What followed was a greater awareness of my finances, a commitment to fix the leaks, optimise and enhance my financial structure and pursue side hustles, such as each-way betting and tennis trading, to bring in extra funds.
While a relatively small outlay each month – it certainly added up. Now, those funds are being redirected towards an increased monthly pension and investment contributions to hopefully accelerate the path towards FIRE even more.
What is your relationship with debt? Have you also successfully tackled a change in behaviour? I’d love to hear any comments below.
Thanks for reading