Our "Stupid Tax"

I've decided to continue on the financial theme since I've gotten a lot of feedback that people want to know more about our journey...so today I'll tell you how we totally blew a few things along the way (just in case you were considering elevating us to superhero status).

Today I put in a request to be able to do our debt free scream from the Financial Peace lobby (if you aren't familiar with Dave Ramsey, that won't make any sense). I haven't heard back yet, but part of the request process was to add up our total debt that we paid off. I actually hadn't done that yet. We had approached the process in steps (paying off the smallest ones first), and the only number I knew for sure is we had paid off 23K in the past 12-13 months. So I got out my paper where we listed our debts, added it all up and it was...

$85,700 in debt paid off in 8.5 years.

If we had looked at that number from the start it would have seemed insurmountable. If we hadn't had those debts, we could have literally bought our house plus made improvements with cash! That doesn't include the interest that we paid.

But we made some stupid choices, especially pre-2007, that made our debt a little higher.

Any good financial person that helps you get out of debt will tell you to first, "don't take on any more debt." Dave tells you that, but for a few key (and big ticket items) we just didn't listen. That's what Dave calls stupid tax...knowing better, yet taking on more debt and the price you pay is stupid tax. I'll give your our big three.

1. This is absolutely the MOST painful when we look back. It still takes our breath away to think that if we had made a better choice, we would have had more like $59,000 to pay off. When we first got married Andrew was going to school at Eastern Illinois...FOR FREE. Tuition +$1000 a month from his GI Bill and IL veterans grant. But we were young and in love and got this crazy idea to move to Iowa and Andrew transfer to Northwestern, which was not free. So that lovely wrong choice (at least financially) was about $27,000 in debt (plus what we paid out of pocket, I just refuse to add up that total cost). We loved our time and friends we met there but that was a huge cost.

2. Once Andrew was out of school and we were both working full time we bought a brand new Vibe. It was 0% interest (we reasoned), and we would keep it until our kids learned to drive and that would be their first car. Great idea, but it was severely flawed. Mainly because 2 years later when our family had grown and we didn't think that 600 mile trips in the Vibe with 2 kids sounded like fun, we had to trade it in for an older minivan, and took a huge depreciation for that 2 years of newness (which wears off pretty quick). We had actually paid off the car before that time (by then we just wanted to be out of debt), but we still paid the tax of losing about half the value of the car, which is typical with new cars. If we had paid cash for a slightly older Vibe, we wouldn't have lost as much in depreciation and would have paid off our debt sooner.

3. When we moved to IL, we had made a profit on our house. We should have used that to pay down a big chunk on stupid tax #1 and we would have been out of debt about 2 years sooner. Instead we rushed into buying a house. Don't get me wrong, we like our house, but we probably would not have chosen this house if we were taking a bit more time. We also would have been out of debt sooner and probably had an even big down payment on the house.

So those of you starting the journey...learn from our mistakes. From this point on, don't take on any more debt! We would have had about $33,000 (plus interest) less debt to pay on and have gotten out of debt 2 years earlier (okay, maybe several years earlier if we hadn't done #1...)