Melanie: They're like, “What?”
Hahna: They're like, “Why not?” I'm like, “Well, I'm trying to pay off my student loans, and so I'm only reducing it to those 2 days.” It was just mind-boggling to them. That was one of the challenges that I had to deal with, of doing something that wasn't a part of the social norm with my group of friends.
Melanie: Yeah.
Hahna: Even cutting back on going to the happy hours or rather than getting that appetizer, entrée, dessert, plus alcohol, that's a lot of money. That's going to be a large bill, so maybe I'm just going to do an appetizer and an entrée or some sort of combination and just seeing that slight tweak, that slight change in the money that I was saving from that, I was able to then contribute towards my debt and pay it off much faster.
Melanie: Yes. Yeah, I mean, it can be socially isolating at times to get out of debt, but it's something that you have to do. You'll get the last laugh with your money once you're debt-free.
Hahna: Oh, absolutely. When I saw the zero balance on my account, I felt like it was a personal victory and that the social sacrifice that I had made was totally worth it.
Melanie: Same. Totally agree.
Hahna: How has your life changed since becoming debt-free?
Melanie: Yeah, so it's only been about a month and a half since I paid off my debt, so it's still very new to me. In a way, I feel much richer because all of the money that I have is mine. I'm padding my emergency fund, I'm going to start aggressively investing, save for my goals. I have less guilt around purchases. You know, before, whether it was a necessary purchase, whether it was just a splurge purchase, whatever it was, I felt guilty about it regardless. I just hated spending money all the time.
Now, it's like, “No, I need this, and I can afford it.” Or, “No, I want this, and I can afford it because I have cash.” Having that freedom of choice and having that ability to pay for things and not feel like, “Ugh, this could have gone to debt,” is just huge. I think a lot of it felt like a huge weight on my shoulders for years and years and years. To be debt-free for the first time in my adult life and to be able to save that cash, invest that cash, use it for things that I've been putting off for years, feels really amazing.
Hahna: It's very empowering.
Melanie: Yeah.
Hahna: Just as you were describing some of the life-changing experiences that you're having now, you could see me … I'm like beaming because I'm like, “Oh, just wait until a year goes by.”
Melanie: Oh, I can't wait.
Hahna: Because I became debt-free, and when I say “debt-free,” I paid off my student loans, I paid off my credit card debt, and I paid off my auto loan.
Melanie: Dang!
Hahna: That was a total of like $50,000 in debt.
Melanie: Nice.
Hahna: I made my last payment August 21 on 2014. It was my mom's birthday.
Melanie: Oh.
Hahna: I called her up. We had a moment. Being debt-free for over a year now, it's amazing, just the, as you stated, the freedom of choice and how I can utilize my money to make it work for me and to live a better life, a more meaningful and abundant life. It's just very powerful.
Melanie: Yeah.
Hahna: Given the benefits that come with being debt-free, what are the consequences? Can you describe the consequences of being in debt?
Melanie: Yeah, the consequences of being in debt. You know, as I mentioned earlier, your money is never truly yours. Especially if you're in student loans and you're just waiting for loan forgiveness, you might have a tax bill later on with current tax law. You're paying interest every single day. You know, the consequences of being in debt is like so much money just going to interest. It can hinder your savings and investment goals.
If you don't pay off your debt, it can ruin your credit score, you can have debt collectors on your back. It can just lead to so much unnecessary stress that it could really cloud your judgment in every aspect of your life. I think it's really hard to rebuild wealth or just build wealth in general and start over if you're constantly just on this merry-go-round of paying people every single month. That's what it felt like for me for the past couple of years. I was just on this merry-go-round making payments, making payments, making payments. A good portion of it would go to interest, and it just feels like it's never going to end.
You know, you kind of feel stuck, right? Once you choose to get out of debt and once you really put all of your energy towards getting there, you can start to get rid of some of those consequences that can affect your self-esteem, that can affect your relationships, your stress, your mental health, your physical health, and your financial health.