How Becoming Minimalists Helped Us Pay Off $95,000 of Debt
Have you ever thought about selling everything and starting over? It sounds like a crazy idea, but minimalist living helped my partner and I pay off nearly $100,000 of debt.
We love experiencing different neighbourhoods in our city in South Africa, so we tend to move a lot. In spite of this penchant for moving, we insisted on owning and carting around a household full of stuff.
While preparing to move yet again in July 2008, I realized I simply couldn’t face the stress of packing it all up.
We also had a mountain of debt we were doing our best to ignore: two car loans and a mortgage on a rental property, which amounted to about R800,000 ($84,000); a maxed-out credit card (R35,000, or $3,700); an overdraft at its limit (R25,000, or $2,600) and a bank loan from when we’d tried to consolidate our debt (R50,000, or $5,300).
Half jokingly, I suggested that we sell all our possessions to pay off our debt. Saskia was reticent at first, but the prospect of getting out of debt, saving money on moving costs and not having to pack won her over.
Here’s how selling all our stuff and becoming minimalists helped us get out -- and stay out -- of debt.
Make a Financial Plan
We’d been in and out of debt often enough to know we needed help, so we hired a financial advisor to create a road map for us outlining how to get out of debt. While his road map only addressed the symptom (the debt), not the cause (creating the debt), given the miserable state of our finances at that point, addressing the symptom was the first step toward getting things back on track.
He had us list our debt in details, then pay off the loan with the highest interest rate first, following the avalanche method. Any extra money -- like what we were planning to make from selling off all our stuff -- would go into this plan.
Then we made a budget, one that listed in detail our monthly income and all necessary expenses. And then we got to work.
Decide What to Sell
We sat down and made a list of what we could sell, from our rental property (who really needs to be a land baron?) and our second car down to smaller items like kitchen appliances and clothing.
Ridding yourself of the clutter in your life -- everything you no longer use -- isn’t easy, but be ruthless. Use the three-month rule to identify everything you haven’t used in the last three months. These are the things you can sell, clearing them out of your life, and bringing in extra cash.
If three months seems daunting, try the six-month rule. The important thing is to look critically at your possessions and identify what you can part with. As you sell each item, plug that money into your debt-repayment plan and tick each loan off your list.
Stop Buying Stuff
Don’t buy things just for the sake of buying them. When we tried this, we found the less we bought, the less we wanted. Delaying a purchase to really consider it helped us realize we were caught up in the desire for something we weren’t actually going to use.
Instead, think in terms of experiences. Save for a weekend away, treat yourselves to a nice dinner out, or take the kids somewhere fun for the day. The memories from these experiences will be worth far more than a new pair of shoes, car or smartphone.
Embrace Minimalist Living
We didn’t realize it while we were focused on getting our accounts back in the black, but by selling the majority of our possessions, we’d inadvertently changed our mindset about stuff.
We saw firsthand the benefits of not owning anything. We had more time on our hands because we were no longer spending all our time maintaining everything we owned. It’s amazing how much time goes into looking after our possessions (admin, upkeep, services etc.) -- they end up possessing us.
By ditching one of our cars, the rental property and other items, we lowered our monthly expenses significantly and were less stressed. We’d completely reframed our thinking and now realized spending money on experiences provided far greater dividends than say, new clothes or furniture.
Stick to a Budget
Even though we no longer buy indiscriminately, we still stick to a strict budget. Ours lists our income, expenses, bank account totals, grocery budget and spending breakdown.
The income column tallies what we’ve earned, minuses our total monthly expenses, and shows us what we’re left with. This money almost always goes straight to our savings account.
The expense column is especially detailed. It includes everything we pay for each month, from medical and household insurance to bank charges, cell phone bills, rent, groceries and retirement annuities. We also include an additional amount to cover unexpected outlays like contributing to a colleague’s birthday gift.
Because groceries and food are our biggest expenses by far, we break them down into specific categories: general (food, toiletries, cleaning materials etc.), snacks, superfoods, supplements, eating out and takeout. Seeing exactly where we spend our money helps us adjust our habits accordingly.
Track Every Expense
Our minds have a nasty habit of underestimating how fast those seemingly insignificant expenses (coffees, chocolates etc.) add up.
Make sure you add each and every expense to your budget. It helps you make sure you don’t overspend, and it’s also an excellent way of keeping things in perspective. Seeing your coffee habit in black and white can have a pretty sobering effect.
Will You Become a Minimalist?
Selling nearly everything we owned helped us get out of debt, and now helps us grow our savings faster than we thought possible. We’ve found the less we own, the more we have: more money, more time and more peace of mind.
Your Turn: Have you considered selling everything you own? Would you try it?
Angela Horn is a Cape Town-based freelance writer and minimalist lifestyle blogger on a mission to declutter the world. She’s also an urban hippie, slow living advocate and a huge fan of peanut butter.