Debt Story

July 12, 2011 § 5 Comments

We bought our land in 1997. At the time, we were living in a tent on our friends’ land, saving our loot and waiting for the right property to present itself. I was working at a bike and ski shop, and Penny was working on a vegetable farm; over the previous handful of years, we’d managed to save about $15,000, in large part owing to summers spent camping or under the hove-in roofs of decrepit cabins we rented for $100/month.

It took us nearly a year to find the right place. It was a dispiriting year, spent trudging through swamps and logged-over stubble, trying to convince ourselves that we could make something of it. The land we eventually bought (and currently make our home and farm on) was found almost by chance, as a small for-sale-by-owner listing in a local paper. It was 40 acres, with about 10 in pasture. It was set far back off the main road. It was $30,000. It was perfect.

The bank matched our $15,000, although the interest rate was rapacious. Twelve percent, if I remember correctly. Our good friend Jerry, a fast-talking New Yorker who’d fled the city for rural Vermont with the proceeds from the taxi medallions he’d inherited and sold, lent us another ten grand with which to build a shelter. The interest rate was only slightly less insulting: ten percent. Jerry was a friend, but he wasn’t a fool.

We built what I euphemistically term a “hippie shack.” Sixteen by 32-feet, concrete piers for a foundation, a loft we accessed via an aluminum ladder and, for the first year-and-a-half or so, no running water. Another friend had gifted us three weeks of labor as a wedding present. It was enough to get the shell up and keep the rain off our heads.

By 2000, we’d paid back Jerry’s loan and convinced a different bank to loan us $50,000. This was no small feat, as our home was situated at the end of a 1300-foot driveway, and was not – nor would ever be – connected to the electrical grid. Banks aren’t really down with alt energy, but at this bank there was a family connection from way back, and he called in a favor or two and badabing, badaboom, we had our money. Or credit. Or whatever you want to call it. I remember being slightly stunned by it all; never in my life had I ever imagined I’d possess such a sum, although of course I didn’t really possess anything. It was merely numbers assigned to my name.

So we jacked up the hippie shack, poured a basement under it, along with a basement for an addition that by itself was larger than the shack. With our 50 grand, we bought materials. I took the summer off from the bike shop, and Penny starting taking three-day weekends. Our friend Bob, an experienced builder, came every weekend. By the end of summer, our shack had become a house. If you stood back far enough and squinted, you could sort of imagine what it would look like with siding and paint.

That winter, Fin was born. Appropriately enough, Penny went into labor at the lumberyard. When the midwife came (both boys were born at home), she looked around and said “you’ve got a long way to go.” I never had liked her much; I liked her even less after that. Fin’s arrival slowed our progress for a few weeks, but frankly, not as much as I’d expected. By the next summer, our house was finished enough that the bank converted our construction loan to a regular mortgage, which dropped our interest rate from 9% to 6%.

For the next six or seven years, we did everything in our power to pay off our mortgage. I have some theories regarding the genesis of this overwhelming, almost compulsive desire to absolve ourselves of debt, but they’re too complex and lengthy to get into here. Suffice to say that we eschewed many of the assumed comforts of 21st century America so that we might make double and occasionally triple payments. As such, our mortgage was paid off before either of us hit 40.

I hope this doesn’t sound self-congratulatory. I don’t mean for it to. But as I embark on my quest to better understand money and debt and austerity, I can’t help but reflect on my own history with these things. For as long as I remember, I’ve felt compelled to avoid debt, although obviously I haven’t avoided it entirely, and I’m extraordinarily grateful that we bought and built when we did, pre-real estate bubble. Even now, prices are at least double what we paid. There’s simply no way we could do now what we did then without a much greater debt burden.

For the most part, I think, I’ve avoided debt because I’m lazy. That is, one can draw a fairly straight line between having debt, to servicing debt, to working in order to earn the money to service the debt. It’s always seemed to me that the best place to shift that trajectory is at the outset: No debt = no need to service debt = not having to work to service the debt. It’s pretty simple, really, although I have to admit there were times – particularly when shivering through cold-water sponge baths in those pre-running water days – when it felt anything but.

Anyhow. Long enough. That’s part of my debt story. If you’re inclined, please share yours.

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§ 5 Responses to Debt Story

  • Mark Teague says:

    This is agreat story. i wish that I had lived it. I went to law school and grad school, and had about 165000$ in debt. I have a solid income now, but it took thirteen years to get here. No, most lawyers are not rich. My interest rate was consolidated at 8.25 percent back when that was good. It was a thirty year loan. I paid it off two months ago, sixteen years early, which will save me 208000$ in interest. I bought my little Chicago fixer upper for 146000, which was at forty thousand less than it was worth, and I have continued to refinance. It is now at 3.8%. More about that later. I still owe about 400$ on the new car I had to buy after my Mom died (had four dogs).

    I grow most of my own produce and rabbits and have put all my moey toward debt. I should save at least two thousand dollars a month if things keep up. I am not going to pay off the 142000 I owe on the house because it is a fifteen year loan and will be paid off the year I retire (I am forty-seven) if I stay, and I will sell it when I move.

    I want to move back to Maine (or Vermont) where I am from, and saving to buy a place with little or no mortgage. So, at this low interest rate, I will just keep the house.

    You’re story is inspiring. More people should work on their debt. mark

  • Zoe says:

    A very interesting post! I really appreciate when people share the nuts and bolts of these things.

    My husband and I bought our house for 30,000 six (seven?) years ago. It was an unimproved old Victorian in solid but… well, unimproved condition. We’ve been fixing it up and paying it off since. We got a $5,000 first time home buyer grant, which helped with our down payment, and we had some money saved to start us off on the repairs. We’ve done 95% of the work ourselves – gutting the house (while living in it), insulating, pouring a concrete floor, painting the outside, rewiring (we had some help from a pro), turning the big backyard into a garden, etc. We paid off our mortgage a couple years ago.

    Neither of us makes much money – we both work seasonally (he as a baker, me as a gardener). But our mortgage was relatively small, the amount matched our income okay, and we’ve been fortunate to be able to pay for improvements as we go. We hope to sell the house soon, and then buy acreage to build on. We’ve been lucky (and careful) so far, and are grateful for that. We too prefer to avoid debt… but it will most likely be a necessary next step.

  • Lynne says:

    I loved your story. A few years ago I finally realized that I was miserable and hated my job. I was working a state away from my family for most of the week and all of the money I was earning was going towards debt maintenance. I decided that it was a crime to earn a six figure income and not enjoy life at all. We decided to sell all of our property and home in Virginia and move to WV on a permanent basis where we have a small farm.
    Three years later most of the land sold, but the house was not moving. Our $300,000 home was now worth less than $185,000. Very sad. I had bought into the leverage financing that I was taught in college. We decided to enter into a short sale. What a frustrating experience. Banks make no sense to me anymore. If I paid on the debt they would not consider the short sale. I had to quit making payments and be at least 90 days behind before they would consider the short sale. We decided that we had no alternative. My credit has taken quite a hit, but we have paid off debts with the proceeds of the land sale and finally sold the house. I even raided my 401K to ensure that we would become virtually debt free.
    My main job now is to take care of my family, milk cows and goats, raise chickens, vegetables and pigs and just farm. I am so much happier than before. I was a financial services representative for 17 years. I have thrown out all that I knew or thought I knew about money and finances. I don’t need a stellar credit score when I am going to live on and with my land and within the money we make.
    I would love to see more people wake up and realize that they are working themselves into a grave to maintain the lifestyle. We are a nation of shoppers and give it to me now. I am relieved to have stepped off of that train and let it pass me by.
    I work harder now than I ever have in my life, but I sleep soundly at night.
    I think your ideas are extremely valid and I hope that you are able to reach a lot of people!!!

    Thanks!
    Lynne

  • ColoradoGirl says:

    Yours is an inspiring story. Thank you sharing it. We, too are working hard to pay off a mortgage ASAP! We didn’t build our home, but it’s an older home with a great story.

    I sure could use a new car, but refuse to purchase one. Just keep fixing the old one, until she can no longer be fixed. We grow our fruits and veggies, and save money by cooking from scratch. Most big items are searched for and bought used. We do not use credit for anything, other than a student loan, which should be paid by December of this year.

    Our goal is to be debt free within five years. At that point, we will save for our retirement. All the while living a frugal, happy simple life!

  • Victoria says:

    Love this. I wish more people talked about this idea. I, too, have this fanatical desire to be debt free. For the first time in my adult life I am not debt-free. Every spare penny we made went into paying off debts as fast as possible. When one debt was paid off, we automatically rolled the payment over onto the next debt. There were obstacles – heath issues and hospitalizations for both my daughter and husband. This set us back. But we plugged away, year after year. Twelve years after meeting, we had paid everything off and sold our city home.

    Now we are debt-free, and wanting to purchase land. We have enough cash in the bank to pay for a little bare land (15 acres or so), or a small house with no land. We’d rather buy the land. But that’s scary to me, too. There won’t be money left over after buying the land, to build on it. So thank you for the example of how you sacrificed to do it. I hope we can make it work, too.

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