A new day of victory is dawning for Nancy and her husband. I was so happy recently to receive an e-mail message from Nancy. “I follow your blog and really like it,” she said, “such good insight into why we do what we do. I did make a comment back in the summer regarding our $97,000 debt. We made our last payment at the end of August after six years of intense focus while in our retirement. We are now learning how to live without debt – a strange mindset indeed.”
A couple fighting debt in retirement and gaining victory? I had to know more. The personal finance bloggosphere tends to focus upon youth, but a majority of retirees live in debt, and this story should be shared with each one of them. Let’s hear it for Nancy and her husband for proving it’s never too late to turn finances around!
Please give an introduction to yourself and your husband.
My name is Nancy (age 67) and my husband is Joe (age 69). We have been married for 32 years. We both came from a background of divorce with neither of us having children. We were also both broke when we met. Joe was always self-employed, first selling and teaching a well- known public speaking course back in the late 70’s. He then started his own business as a management consultant in leadership training, and in later years provided family counselling and life coaching. I was employed in clerical jobs and eventually went to college at age 32 to become a medical transcriptionist. I was employed at one of our local hospitals for 24 years doing this job.
Joe had a heart attack and subsequent quadruple bypass at age 58 and that is when he retired, as he had lost one-third of his heart due to waiting too long to go to the emergency department, and he also suffers from fibromyalgia. I had a pulmonary embolism at age 58 and discovered that I had a genetic clotting disorder, so I therefore wished to retire at age 60 while there was still some life left in me – lol! The only problem was our $97,000 debt.
What type of debt was the $97,000 debt you had when you retired?
Neither Joe nor I made big money in our careers, but we had enough. We took the plunge and bought our first house back in 1980 with a $2000 deposit and had to take out a second mortgage – a bad mistake. We lived with my mother for two years while I went to school, Joe travelled with his sales job and we rented out our house. This was the period where interest rates went through the roof and we had a mortgage renewal come up and were happy to get it for 11% interest. After I got the hospital job with its benefits, decent salary and pension plan we moved into our house. In retrospect we should have stayed in that house and paid off the $30,000 mortgage, but bigger sounded better and we bought another house that we still live in today.
About a year before Joe’s heart attack our financial advisor suggested that if we got a secured line of credit on our home it could serve as our emergency fund. We followed his advice, rolling our now $60,000 mortgage into it. Then we did a stupid thing and bought not one, but two used cars and put them on our line of credit, counting on an inheritance to come through which didn’t materialize for another two years. Then Joe had his heart attack and things went from bad to worse and we ended up owing $97,000.
As you approached retirement, was this debt a cause for stress? Or were you comfortable with it?
We had learned to live with our debt over the years, paying it down to $30,000 and then putting it all back on again. Our thought was that eventually we would sell our house and pay off our debt. The year that our tax accountant stated that we had paid over $4000 in interest on this debt was a reality check. I started envisioning just how large our debt was and how long it would take to pay it off and my stomach was in knots. It did seem hopeless at the time. We had been fortunate in that the interest rates were low for so long, but I worried that they might start to rise and then we would be in real financial trouble.
You use the words “intense focus” to describe the effort you put towards eliminating that debt following your retirement. What made you decide to get focused? What sorts of strategies did you use to achieve your goal?
Due to my health issues I knew that I was going to leave my hospital job at age 60 and start collecting my work pension and Canada Pension. So for the last year before I left work we concentrated on putting at least $1000 a month on our debt, sometimes more if we could. Our plan was that after retirement I would get a part time job with another hospital which would allow me to work from home. So for five years I worked part time from home and also collected my pensions – I was making the most money I had ever made! We could afford to put $2000-$2500 on our debt each month and it was so satisfying to see the numbers come down on each statement. It became an exciting game to keep the downward motion going.
When I turned 65 our plan was stalled as the hospital got new technology for performing my job. After going to the training sessions I realized that I didn’t want to learn another new thing, so after much prayer I handed in my notice. We really needed about another two years of employment for our debt repayment to be done, but we found another way. Our financial advisor suggested that we start drawing on our RRSP each month and we could use that money plus our regular payment to finish off the loan. We did this and had a final boost in the form of a 10 year old class action lawsuit settlement for a drug that Joe had been taking which was found to cause heart attacks. So this money was applied to our loan and cut six months off our final year of payment. We also stopped using our Visa; we stopped eating out; we stopped frivolous spending; and we went on no vacations. We have never had cable TV, no technological devices, and we have no data plan on our ancient cell phone. We use the library to borrow books, movies, and music. Last Christmas we did not buy each other gifts but gave free “experiences” that we would do over the coming year – we liked this so much we are doing it again this Christmas.
Was there a particular “guru” whose advice you followed? What sorts of support and encouragement did you have? Did you engage in any regular reading, pod-cast listening, or discussion to keep you on track?
I read a couple of Gail Vaz-Oxlade’s books, and we used her jar system for awhile. I still follow her blog and we now use the envelope system, paying cash for our monthly budgeted expenses. Our church offered a six week course from Dave Ramsey and so I got his book The Total Money Makeover from the library and studied it. That was when we decided to use “gazelle intensity” to get rid of the debt and started making the big payments consistently, never adding any money back on our credit line and not using our Visa card except when absolutely necessary. I started looking for financial bloggers and came across Prudence Debtfree, The Frugal Farmer, Luke1428 and a few others whose writing encouraged me and spurred us on to victory.
Most people have a reduced income through their retirement years. Was yours significantly reduced? Did this present a challenge to your efforts to pay off your debt?
My income actually increased for five years once I retired from my job – because I took on a part-time job and added it to my pension income. Now that I have finally stopped working, our combined income is around 80% of what we made when we both worked – we did not have a big combined income so we are used to living on what we make presently and we have more than enough now we have no debt.
As you look back, do you see areas where you could have improved your management of your finances? What pieces of financial advice would you give your younger selves if you could?
Looking back I see we had a tendency to jump into things before we were financially ready, such as buying a house and used cars. We should have saved a down payment before taking the plunge. We should have had a written budget and then to stuck to it. Definitely never take a second mortgage! But I have to say that we have always operated by faith and prayed about our finances before taking that leap and we have never been let down. Plus there have been lessons that needed to be learned.
Describe the moment when you and your husband made your last payment in August, after six years of debt-elimination. Did you mark the occasion in any way?
We had been anticipating THE DAY for many months and had a plan. We both went to the bank and Joe signed the final cheque because I had always made the payments and I wanted him to feel a part of the celebration. Fortunately we had a “mature” teller, and when we told her it was our final payment to debt-freedom, she was ecstatic for us, congratulating us and shaking our hands. She praised our efforts and said in her line of work she sees people drowning in debt who don’t seem to care anymore. She made our day, to say the least. Then we went to Starbucks for a celebratory specialty coffee. All that day we kept reminding each other of the fact that we were debt free. Later that month we went out for a special celebration dinner at a wonderful restaurant.
You said to me, “We are now learning how to live without debt – a strange mindset indeed.” What sorts of differences do you notice now that you are debt-free?
We still have to keep pinching ourselves to realize that we are debt free and that all the money that comes in each month is ours. We need to be mindful of our budget and not repeat the mistakes we made in the past. We are working on our emergency fund and in the New Year will be starting on saving with gazelle intensity. For the moment we are allowing ourselves a few luxuries after the last two years of austerity. We save for purchases now. We have a $2000 float in our chequing account so we aren’t caught short with something unexpected and don’t have to use our Visa card.
How have your friends responded to your debt repayment?
Our friends have been watching with interest. Some have really encouraged us, while others who are in debt have the “You only live once” mindset and think we were crazy to deny ourselves travel and other indulgences.
There is such an emphasis on “starting young” in the world of personal finance. Some people feel it’s too late, once they hit middle age, to make a significant difference in their financial situation. What would you say to a person feeling that way?
We have to start from where we’re at. At times life hands us some difficult circumstances that can change the course of our lives for better or worse. We have to truly want to get out of debt, make a plan and stick to it and debt freedom will happen and it is the best feeling in the world!
Is there anything else you’d like to add?
I must add that since the day we were married we’ve known “the secret” and have always tithed 10% of our income and given to others when we saw a need. Now that we are debt free, we have put a “giving” category into our monthly budget so that we will have a greater amount to give when we see a need.
Photo courtesy of Andre Karwath aka Aka
Share this post with those who thinks they’re too old to get victory over debt! Your comments are welcome.