It's interesting, the things you can learn on our discussion boards. I'd always understood the importance of wiping out credit card debt as soon as possible. But I never stopped and thought about what it's like for someone after he or she has actually done it. Then I ran across a great post by Fool Community member jthrelkeld on our Credit Cards and Consumer Debt board. Here's part of what she said. (The whole post and the ensuing discussion are worth reading.)
[My significant other] and I paid off over $125,000 in non-mortgage debt in February of this year. That was 10 months ago. Paying off the debt felt strangely anticlimactic for the first few months, primarily because we just didn't see that much difference in our "positive" balances. But after about four months, we started to see what happens when you're saving money rather than sending it to creditors.
For one, our mortgage payment felt like a mere blip in our budget. It's so easy to pay it now! Also, we needed to replace our range, which died unexpectedly after probably 25+ years of service (it came with the house). Rather than buy the cheapest replacement, I bought the range I really wanted for $1,600. Again, this was a blip ... it meant that much less went into the e-fund that month. And I am so happy with my new range! We've taken several vacations this year (making up for lost time), and all were saved and paid for. Mere blips. So that covers the spending blips.
Now for the savings news, with a new age twist. We're maxing out our self-employment Keogh accounts (25% of pretax income matching) and our Roth IRAs. We'll be putting away around $40,000 into retirement this year between the two of us. Our [emergency] fund has grown from $1,000 to $26,000 in 10 months.
She noted, "I won't go into all of the near, medium, and long-term personal goals I've set for myself. But suffice it to say that being debt-free is enabling me to consider most of them achievable." And she ended by relating an experience at a bank. She found a receipt from a previous user in an ATM, and it read: "Cash withdrawal: $80, Account balance: $1.92." She said, "Man, I am so glad not to be there anymore."
Perspective
If you're like me, it's hard to imagine contributing $40,000 into any investing account in a single year -- but that doesn't mean we can't still make big bucks for ourselves. If you invest even small amounts in the right stocks or mutual funds, you can do very well over the long haul. For example, check out these average annual gains for some well-known companies over the past 20 years: Valero Energy
Mutual funds such as the Muhlenkamp Fund
If you have $25,000 invested and it grows, on average, by 12% per year, you'll end up with close to $250,000 in 20 years. At 10%, it will top $150,000, and at 15%, it will top $400,000. Add to your investment over the years, and you'll end up with much more.
If you'd rather not pick the best stocks out there on your own, I don't blame you. Instead, I invite you to try our Motley Fool Champion Funds newsletter for free -- where you'll be introduced to lots of terrific mutual funds. I have discovered some good new investments for myself there. Our fund expert Shannon Zimmerman has recommended funds that have, on average, returned 23% and are currently beating their respective indices by over 8%. That's a big deal when every percentage point makes a big difference in the long run.
But back to credit cards and debt
Learn much more about the surprisingly interesting credit card industry by visiting our Credit Center, which also features tips on getting out of debt, along with guidance on how to manage your credit effectively. Really. I mean it. There's some great stuff in our Credit Center, and it's all free reading. We even offer spiffy Motley Fool credit cards, some of which offer cash back or rewards -- I've got $92 coming back to me on my Fool card.
The following articles can help you, too:
- The 8 Commandments of Credit
- The Best Low-Interest Credit Card?
- Urban Credit Legends Exposed!
- $24 Billion to Card Companies . for What?
- Sneaky Credit Card Tactics
Finally, consider forwarding this article to anyone whose financial future you care about. Just click on the "Email This Page" link near the top of the page.
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Longtime Fool contributor Selena Maranjian 's favorite discussion boards include Book Club, Eclectic Library, Television Banter, and Card & Board Games. She owns shares of Home Depot and the Muhlenkamp Fund. For more about Selena, view her bio and her profile. You might also be interested in these books she has written or co-written: The Motley Fool Money Guide and The Motley Fool Investment Guide for Teens . The Motley Fool is Fools writing for Fools.
