Back in November of 2007, I owed a whopping $75,286 in debt. And as of today, I owe $30,094.

If my math is correct, that means I’ve paid off $45,192 — 60% of my total outstanding debt — in 18 months.

Depending on what happens the rest of this year, I suppose it’s possible we could be completely out of debt by the beginning of 2010.

At least, that’s the goal.

Here are my latest numbers showing my debt reduction progress during the last month.

Debt Reduction Progress May 2009

The biggest change from last month to this month is that I paid off our Prosper loan, which frees up $287 a month in cash flow.

That’s what I love about paying off debt… each balance you pay off reduces your monthly obligations… which just makes life easier.

Anyway, that’s all for now.

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It’s been nearly a decade since I shopped for furniture. And in this post, I’ll be sharing my current perspective and asking you for feedback.

Here’s the story…

On May 2, I moved into a new house. We’re renting it, just like we rented the last one, although this one is a little nicer and more expensive.

In the last house, I used the landlord’s office furniture. I don’t have any of my own. Plus, before we moved, we sold our bedroom furniture (to save the hassle of moving it, and because after 10 years we would like something new/different).

Bottom line: We need bedroom and office furniture, and we’ve been exploring our options.

After researching Craig’s LIst and visiting a few furniture stores, it’s clear there are three different approaches we can take.

Approach #1

• Buy cheap used furniture even if we don’t like it. (Most of the stuff on Craig’s List is ugly, in my humble opinion. Good stuff is hard to find.)

Approach #2

• Buy cheap new furniture. (Poor quality furniture at an attractive price.)

Approach #3

• Buy expensive new furniture. (Built to last with a price to match.)

I suppose each approach has its merits. My natural inclination is to buy something that’s going to last for a long time and hold its value better… something I could give my kids if/when I’m gone.

The only trouble with this approach is the cost. Of course, if you amortize it over the lifetime of the furniture, it’s probably not worth worrying about. But if we go this route, we have to pay for the furniture now — or finance it.

And financing furniture doesn’t really fit in with the goal of becoming debt free.

If there is zero-percent financing (as there often is with furniture purchases), then I might consider partial financing just to spread the cost over 3-6 months.

Unfortunately, with my business, I need furniture now, not later. Same thing with the bedroom. My wife will only tolerate our clothes being piled on the floor for so many weeks.

Ideally, all large purchases would be paid for with cash. And if we didn’t have the cash, we would simply save until we did.

But given the urgency of needing furniture, it’s hard to make a case for waiting. Which then brings us back to the question: Do we go cheap/used, cheap/new, or expensive/new?

What are your thoughts? Leave a comment and let me know…

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I’ve been super-busy with moving into a new house, writing copy, and managing clients, but I wanted to write this quick post to let you know I paid off my Prosper loan.

In fact, paid it off just a few days after my last debt update.

After reviewing my payment history, I discovered I had the loan for just one year and one month. I got the loan in March 2008 and paid it off in April 2009.

With this balance paid off, I’ll have only two outstanding loans left: the USAA credit card and our Honda minivan loan.

I’ll post another update in 10 days or so. Stay tuned!

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Here are a few debt-related posts to check out if you have a few minutes…

Carnival of Debt Reduction at Simply Forties – This week, my April debt update was featured in the carnival. I’ve now paid off 55% of my debt… and still going strong.

Discovering Your Financial Priorities – This was chosen as an Editor’s Pick in the carnival. The main point is that you must discover your financial priorities and find balance between debt reduction, living frugally, and actually enjoying life. Worth a read.

How to Get Out of Debt – Five Cent Nickel has put together a nice summary of how to get out of debt. He wrote it because he heard an ad touting a “silver bullet” debt reduction system on the radio — for a price of course. So he published his methods for free.

A Sneaky Credit Card Trick – LuluGal writes about how a recent change at her credit card company almost caused her some late fees. Worse, the credit card company didn’t bother telling her of the change. (Important to know if you use online bill pay services that mail checks on your behalf.)

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Whenever somebody tells you that you have to have something… or you personally feel that you have to have something… ask yourself this powerful question:

“What did they do 100 years ago?”

The reason this question is so powerful is because it forces you to think outside of modern conveniences and modern “necessities.”

It also forces you to challenge your assumptions about how life is lived — and how it should be lived.

Let me offer you a few examples.

Example #1: Vaccinations

Everybody assumes that all children should be vaccinated. But what did they do 100 years ago? And what were child mortality rates? And how did vaccines impact those mortality rates?

Example #2: Cars

Everybody assumes that a car is a necessity. But is it really? Can you get by with a bicycle or simply walking? What would life look like if you couldn’t have a car?

Example #3: Health Insurance

Everybody assumes that health insurance is a necessity… that you’d be crazy to go without it. But what would your life look like without health insurance? How would you get health care, and how would you change your lifestyle?

My point is that we all make assumptions. Some of them are right and some are wrong.

And we have to be willing to challenge our assumptions if we ever hope to discover the wrong ones.

So next time you’re faced with a decision that involves purchasing something, just take a moment and reflect: What did they do 100 years ago?

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I just cut a check in the amount of $5,431 and dropped it in the mail yesterday. It’s my final payment to the IRS for 2008 income taxes.

With that burden off my back, I’ll be able to press forward with paying off my debt more aggressively. It seems I always make the most progress in late spring and summer because that’s when I feel I have no obligations to the IRS.

In fall, I’m holding back in preparation for paying taxes. In winter and early spring, I’m paying those taxes.

So with that in mind, here are my latest debt numbers…

Ryan's Debt Reduction Progress April 2009

Since November 2007, I’ve paid off $41,620, which represents 55% of the total amount of debt I owed.

I’m more than halfway there! Only 45% left to pay off and I’ll be debt free.

My plan is to pay off my Prosper loan in the next 30-60 days. That will leave me with only two loan balances left: my USAA credit card and my Honda minivan loan.

Part of me wonders which of these last two I should pay off first. The USAA card is a higher interest rate. But if I could knock out the van loan, that would free up nearly $600 a month in cash flow — about six times more cash flow ($100 a month vs. $600) for paying off twice as much ($10K vs. $20K).

Anyway, I’m still thinking about that. If you have any suggestions, please let me know.

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“Without consultation, plans are frustrated, but with many counselors they succeed.” -Proverbs 15:22

If you ever hope to be debt free, you will need the advice and guidance of many counselors.

As I’ve reflected on some of my biggest financial mistakes, I can trace them back to two things:

1. Impatience – Not being willing to wait for what I want.
2. Lack of Guidance – Not consulting my trusted friends and family members for their advice.

Often, these two go hand-in-hand. When you are impatient, you will not seek guidance. And, ultimately, your plans will be frustrated.

Let’s say your plan is to pay off all your debt.

But let’s say you also really want to replace your current vehicle with another one.

If you go car shopping just to look around… and you have no solid plan for HOW you will make a decision… chances are your impulsiveness will get the best of you.

You’ll trade your car in, buy a new one, and find yourself upside down on a fat, high-interest car loan. Your plan to be debt-free — poof!

Delayed by a year or two, at least.

That’s what happens when you don’t seek wise counsel from trusted advisors.

When you do take the time to get counsel, you will make much better decisions. Decisions that are in alignment with your plans.

Case in point: My wife and I are actively seeking to move out of our current rental and into a different rental.

Prices range from $1,500 to $2,500 a month.

Our families know us well, and they know our goal to be debt free. So they are giving us sound advice that will help establish our plan. They’re not telling us what we want to hear (”Sure, go ahead and get that McMansion that will make your friends drool!”).

Did you know my WORST financial decision ever can be traced to my impatience and not seeking guidance from many counselors?

Yep.

I lost $30,000 on that hasty decision.

And I learned not to make that mistake again.

Plus, I’ve seen my brother make similarly poor decisions with his car purchases. He’s bought and sold and bought his way into a boatload (or car-load) of consumer debt. All because he makes spur-of-the-moment decisions, without input from me or anybody else.

I’m not pointing fingers here. I’m just as susceptible as my brother to making fast, “feel-good-in-the-moment” decisions — that I wind up paying for for years.

But I share the example because debt reduction — and becoming debt-free — is a long-term plan. And if you want to see your plan established… if you want to see it come true… then you absolutely MUST seek guidance and advice from many counselors.

More often than not, they’ll save you from a costly decision.

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Those were the words of a disgruntled reader who recently unsubscribed from my email list. Coincidentally (or not), he unsubscribed right after I published my post about becoming “Instantly Debt Free.”

I wonder which part he didn’t like: the part about forgiveness of debts or the part about getting rid of the income tax?

Who wouldn’t want their debts to be forgiven?

Who wouldn’t appreciate an increase in cash flow because of no longer paying the income tax?

Oh, well. Some people are weird. They just love getting screwed over by greedy credit card execs and power-hungry politicians.

And some people just like to rob certain classes of people through the tax code so they can give it away to others who they feel are more deserving — and, of course, take their cut as the middle man.

I’m not for any of it.

And if somebody is offended by the ideas of debt forgiveness or living in a country where there is no income tax… then this is definitely not the blog for them to be reading.

Offended? Vindicated? Leave a comment and make yourself heard.

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At breakfast this morning, my brother reminded me of my original goal that I’ve stated publicly here on this blog before: to pay off all my debt… and then buy a house.

(Public blogs are GREAT for accountability, by the way.)

After that, he made an interesting observation.

“Buying a house is kind of like paying for the privilege of debt,” my brother said. “It’s like, ‘Hey, you give us $30,000 and we’ll let you have $370,000 of debt.’”

When you think of a mortgage as “paying for the privilege of debt,” it turns the whole thing on its head… and it makes renting seem more logical.

Sometimes, we’re so locked into our normal way of thinking, we need a completely new paradigm to get us to see more clearly.

I think my brother’s observation is one of those mind-shifting insights.

Seems to me, buying a house made a lot more sense back when people saved up 20% to 50% as a down payment… and only got a 10-year mortgage. In 10 years or less, you would actually own something.

Nowadays, actually owning a house — and I mean really owning it, as in there’s no more mortgage — is very uncommon. I’d guess that less than 10% of Americans actually own their homes. The overwhelming majority are just renting their homes from the bank.

Anyway, what do you think? Are my brother and I just being too extreme? Or is buying a house the equivalent of paying for the privilege of debt?

Leave a comment and let me know your thoughts.

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Certainly, the discipline of paying off large accumulated debts teaches us some things about financial responsibility and how better to handle money. And for that, I’m grateful.

In the current economy, though, millions of people are struggling. And the idea of becoming instantly debt-free would be exhilarating (and life-changing) for just about everybody.

Not only would it impact people on a deep, personal level, it would also lift the heavy burden that’s dragging the economy down. Perhaps we could recover sooner rather than later.

Here are two things I think would be beneficial:

#1 Declare a Jubilee

In the Bible, a Jubilee happened every 49 years. Anybody who was an indentured servant was allowed to go free… and all debts were erased.

Essentially, in a Jubilee year, everybody got to start over at zero.

A friend recently asked me: But isn’t that being unfair to all those people who save money or charge interest on the money they’ve loaned?

My answer: Not really.

First: Savings retain their value when there’s an honest money system. The American system is dishonest; it creates money out of thin air. As the money supply increases, each individual dollar is worth less and less.

Inflation (also called devaluation of the currency) is the hidden tax, and it penalizes savers while rewarding debtors.

Second: God’s law prohibits charging interest on loans. If we were to honor and follow God’s law, then there wouldn’t be so much debt in the first place.

It is unhealthy to build an economy on debt-funded consumption. This can only happen when interest (especially exorbitant interest) encourages money lenders to lend.

But since God’s law prohibits interest, this would never happen.

#2 Get Rid of Most Taxes (Particularly the Income Tax)

Right now, chances are you pay from 15% to 25% of your income just to pay state and federal income taxes.

Then there are a whole raft of additional taxes you pay: sales tax, gas tax, real estate tax, car registration tax, etc etc etc.

Some organizations estimate that the average American pays 40% to 55% of his/her gross income in various forms of taxes.

God’s system is much better. Rather than demanding 20% or 30% or 40% or whatever, He asks for only 10%. And that “tax” is only due on the increase of the produce of the ground and on the increase of the herds.

Basically, God wants a return on His labor.

But God doesn’t get involved in double/triple/quadruple taxation like man’s government does. When you really study the Biblical law, you’ll discover that God is much more merciful than you might have imagined him to be.

If you’re interested, you can learn more about The Law of the Tithe here.

Now, whether you believe in the God of the Bible or not, imagine how radically the U.S. would change if all debts were forgiven and we eliminated most of the onerous taxes we pay.

Can you imagine what that would do for people — their lives, their feelings, their productivity? And can you imagine what it would do for the economy?

I’m not holding my breath waiting for this to happen… I don’t think “the powers that be” would ever willingly do such a thing.

But stranger things have happened. After all, Pharaoh did let the Israelites leave Egypt.

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