Climbing Out One Family’s Adventure in Becoming Debt-free

I should start by stating something obvious; no one wants us to be out of debt more than us. In fact I NEVER WANT TO SEE A CREDIT CARD AGAIN.

I believe our perceptions of money, debt and even contentment (i.e.: happiness) have become so healthy as The Wife and I sear the lessons of becoming debt-free into our psyches.

All of our family and friends support our goal and some have even dug in and are applying the same principles that bring us such peace. But a recent offer from very kind, loving family members highlights one of the red flags we have come to watch for.

I’m not sure I ever mentioned interest rates when I first tallied up our debts for you, but they are high. The cards run from 14% – 32%. I suppose I should write “ran” as all but the last big one are paid off.

Why I Don’t Care About Credit Card Interest Rates

There was a time when I really cared about those big interest rates, but I haven’t in a long time. When you crush your lifestyle and pay debt down interest rates just don’t matter.

Here’s a real example. One of our cards had a balance of almost $7,000 and an APR of 32%. We could have spent a lot of time worrying about such a malicious interest rate, yelling at people, surfing balances all over the place, but you know what we did instead? We paid the freaking thing off! And we did that in 12 months in our debt snowball.

32% of $7k is $2,240/year if we left the whole balance there. But we snowballed it aggressively so realistically we’re talking about 32% on an average of 50% of $7k for a total of about $1,120 in interest paid on our highest APR.

Why Borrowing Money from Family is Stupid

Now back to the well-meaning offer from family. With kind hearts we were offered a loan to pay off all our remaining debt at an interest rate of 7%. At first glance this is wonderful, right? 32% vs. 7% ? C’mon, no brainer, right?!

Wrong.

Here are the reasons we would never accept this loan (I mean, beside the fact that we will never borrow money again):

• we have learned that debt changes the relationship to the creditor
• if an income-crisis were to occur, the debt gets paid last after the necessities
• 32% is a lot more motivating that 7%
• 7% of $7k is $490. Since we paid $1,120 in interest we are only talking about $630 and that’s hardly worth our relationship with anyone let alone a dear family member

Loaning Money to Family Could Have One Benefit

I would also never consider loaning money to anyone again (that includes co-signing on a loan).

Can you imagine putting a loved-one in the position of having to choose buying food and paying their water bill over paying you? No, thank you.

What about sitting down to a holiday dinner at your debtor’s and noticing the new drapes, computer, or silverware? How would that make you feel about your loan?

The only real benefit to loaning money to anyone is to drive them away completely. I guess if there were someone I never wanted to see again I would loan them $50. That might be a cheap price to pay in some cases!

How to Get Zero Interest On All Credit Cards

The real way to no interest is to get out. Get out of debt! Run like a crazy person from those sharks.

• Decide you are done and never borrow money again.
• Live on a budget beneath your means for the rest of your life.
• Keep an emergency fund.
• Work like crazy, sell all you can, and pay everything off.

Boom. Zero interest. Every time.

We are So Grateful for the Love of our Family

It is with huge gratitude that we declined the loan. We know it came from a position of love and a desire to help, but when you break down what can happen the risk far out weighs any minor APR benefit.

Don’t ever borrow from family, guys. It just isn’t worth it. Really. And I recommend you never loan anyone you care about money either…

Unless, you know… you never want to see them again.

the Dad