How One Marine Is Getting Out of Debt Before Retirement

MSgt Rachel Gause knows a bit about discipline and focus from her military career, but when it came to finance, something was going wrong, and she knew it. She wants to be debt-free when she is eligible to retire (that will be August 2016), so when she realized a few years ago that retirement was on the horizon, she tried to figure out what it would take to get in the black.

First, her debt had been growing, and one of her biggest problems was the Toyota Sequoia she drove. It was justified — sort of — by having three kids and being a really hard worker who happened to get bored with cars pretty easily and who regularly got the itch to buy a new one (and as a result drove “upside down” much of the time). Determined to get rid of the high payments, she sold it and replaced it with a Corolla. Still, in the next six years, Gause traded it in for a Camry, and then a Sienna.

But she was at least watching what she spent. And with a good income and payment history, lenders were more than willing to extend credit. (Gause never missed a payment.) And yet, all the “yeses” were standing in the way of her goals. For her, the way out began with writing things down. How much of her income had she spent on cars? Gause looked back over the years and calculated more than $75,000. For credit cards (cumulatively), the total was more than $55,000, though the balance had never been that high. She figured that most of it was money she hadn’t actually needed to spend, and it certainly was not money she was paying back rapidly. She bought Christmas gifts with cash. She bought a house, but resisted the urge to paint, recarpet and buy new furniture right away. Still, somehow she wasn’t getting quite the traction she needed. She says her debt was continuing to grow, albeit much more slowly than before.

A Longer-Term View

A Dave Ramsey course (Financial Peace University) prompted her to take another look at her habits, her budgets and her bills. This time, things came into clearer focus. Paying cash for holiday gifts was good; spending $1,200 when she was trying to pay down debt was not. Generosity can be good, but was buying cars and bailing out relatives really helping in the long run? And was it worth sacrificing her goal of being debt-free except a mortgage when she retired?

With renewed resolve — and a plan — Gause began paying off her three credit cards, paying as much as she could on the smallest balance and minimum payments on the other two — Ramsey calls this the “snowball method.” Once she had paid off the smallest, she moved to the next one, adding what she had been paying on the first card to the payment she had previously made on the second. She put herself on an all-cash budget, using an envelope system. (She put allotted cash into 13 envelopes. And, if, say, the heating bill was $10 more than Gause budgeted, she’d have to find $10 to cut from someplace else; no paying it back next month.) She also had an emergency fund, so an unexpected expense wouldn’t throw all of her plans off track.

Hardest, she says, was learning to tell her family no. Her children had come to expect more expensive gifts than she could realistically afford if she was going to attack the debt, so Gause explained what she was doing, complete with charts showing how the debt was going down and celebrating milestones along the way. The children are now 16, 14 and 10, and they are learning if you want something, you save for it — and you live within a budget. She says they tell her what they’d like as gifts, and they recognize and respect the dollar limits she sets. “I make sure all their needs are met and some of their wants,” she says.

Gause says it was harder to break free of her habit of bailing out other family members. She had, for example, purchased cars for her mother and brother. Gause paid them off fairly quickly, but cars are a major expense. Her own expenses went up when she was stationed at Camp Lejeune, N.C.; it was so close to her native South Carolina that Gause made more trips home to visit. Family members had come to depend on her assistance because they thought “Rachel has the money,” and they had to learn to find a different solution. “The problem was, Rachel didn’t have the money,” Gause says now.

Helping Others Take Control

Now that it’s done, Gause thinks setting limits and cutting off aid was a bigger favor than saying yes and continuing to buy on credit. Her kids have watched debts shrink on her charts, and they have learned to tailor their wants to what is affordable. They can live within limits. Members of Gause’s extended family have learned to manage their money better, since they know no rescue is coming if they don’t. Rachel is finding she enjoys helping others learn to take control of their finances so much that she is majoring in finance (at this point in her career, her college education is a Marine benefit). “It’s become my passion,” she says. “Money is sometimes a taboo topic,” she says, “and it’s easy to live a big lie — going into debt to keep up with other people.”

She says she’s five months away from having no consumer debt at all. She will reach her goal before she retires from the military. Next goal? To retire her mortgage in the next 10 years.

She continues to check her free credit reports annually to make sure they are accurate. She says she doesn’t check her credit scores now; she still associates that with the times she used to check them just to see how much more credit she might be able to get. (However, we recommend doing so — a big change can tip you off to possible fraud or identity theft, and a steadily improving one can alert you it’s time to refinance your debt at lower interest rates. You can see your credit score for free on Credit.com.) She says she keeps a credit card for when she needs to make travel reservations, but she pays the bill off in full every time.