how I paid off over $40,000 in debt
In January of 2013, I decided I was SICK of being in debt. We were great with spending money, but not great at saving it up. I have decided to show you how we went from there to being debt free (besides our mortgage) and so much happier with more freedom and security. I know that this isn’t decor related, but I am hoping my success in this realm will help you too. I was listening to the book Big Magic* this morning and the author, Elizabeth Gilbert really discourages creatives from going into debt because it restricts you. She says
Thanks to my upbringing, what I never had was debt, even when I was living on a shoestring, and I think that mattered. I think that made me feel free.”
I think it matters too. So here are the steps I took to getting out of debt, what I owed, and how you can do the same.
Where I started:
For my New Years resolution in 2013, I decided that I would get out of debt. Here is how much we owed then (listed lowest amount to highest, not counting our mortgage):
- Plane Tickets $1,874.60
- Medical Bills $1,887.86 (my husband was in an accident and had to have a major surgery)
- ATV $2,171.11
- Truck $4,748.09
- Credit Cards $10,650.64
- Student Loans $22,650.57
- TOTAL: $43,982.87
Looking at that amount now, even though it’s all gone now, makes me SICK! We had minimum payments of $862 to just our debt. We weren’t making a ton of money and so it felt like every penny we made was going to debt. Not fun!
What I did to get out of Debt:
- I got on the same page as my husband. I was ready to go and SO excited about getting out of debt, but my husband, not as much. He was working a stressful job and making the most he ever had up to that point. He didn’t want to cut back drastically when he was working hard to earn money. We talked and talked (and really disagreed on the topic), but finally, what worked for us was a compromise- I asked him to try it for two months, if it didn’t work for our family, we would stop.
- I got motivated. I sat down and wrote down the reasons why I wanted to get out of debt. I got so fired up about the fact that I never wanted to be tied down by debt again, I was passionate to change my life!
- I got a game plan. If you want to get out of debt, you HAVE to get Dave Ramsey’s book The Total Money Makeover*. I went to the library and borrowed the book version and the audio version. More recently, I found a copy at the thrift store for $1. However you can get it, just do it (the link above takes you to a $5 used version on Amazon)! This book has absolutely changed my life, and it will change your’s too. The best part of the book is that it takes you through step by step directions of doable ways to get out of debt. (Side note, you could also get Kindle unlimited for free for 30 days with this link to read on any of your devices. I’m giving you a million options because it is that special of a book for me)
- I put $1000 in my savings account. We lived without a savings account for so long, that it seemed crazy to have this much in the bank. In the past, we had always had a credit card tied to our checking account so if we over drafted, it just went on a credit card. You have no clue how much I am cringing writing that down, but that’s where we were (everyone has to start somewhere)! The $1000 emergency fund was a nice security blanket and the first change to not living off of credit cards
- I paid for things in cash. I got cash out of the bank every two weeks and put it in envelopes. $50 for a weeks worth of groceries. $80 a month for Christmas. $20 for dates/eating out (Dave Ramsey says to cut this category, but part of my compromise with my husband is that we would still have some fun). Paying cash really helped me stay on budget! If there wasn’t enough money in the envelope, I couldn’t get it. At the grocery store, I would keep a running amount on my grocery list of how much each item cost. If I went over my $50 allotment, I put the item away. I was hard core 🙂
- I lived on a written budget. I made and Excel spreadsheet and listed out how much we made and the subtracted all of our bills. I then subtracted out budgeted items like groceries, dog food. I then subtracted out remaining balance to the debt payment for that month (at the beginning, it was $650 that would get paid to debt a month). After that, there wasn’t any money left. Every penny went to a bill, a budgeted item, or debt. At first I hated the budget, but I have come around to loving it. Why? Because it is freedom. It’s a plan so that you are in charge of your money and you tell it where to go. If I wanted to run a 5k, I would put it in the budget and then I didn’t have to worry about not having enough money for it. I was in charge! The other thing I love about a budget, is it helps you out for the next year. At first, I had lots of “surprise” bills- the car registration, tax bill, and 3 birthday presents were all due at once so I was scrambling to cover it. Now, I can look at last year’s budget for the same month and get a really good estimate on what the electric and gas bill will be and what annual bills will be due.
- I cut back majorly. This part was painful, but everywhere we could cut back, we did. We bought cheap toilet paper, we ate at home for most of our meals, we brought bagged lunches to work, we found the cheapest gas, we didn’t buy unnecessary clothes or makeup or anything really (sob!). Wherever we could, we spent less or nothing. We got creative and borrowed books and movies from the library. We went on dates to the park to throw the ball for the dogs. We didn’t go to a gym to work out, but ran outside. Pretty much, we became the cheapest people around (that’s why my house is in such a need for updates!).
- I reduced my bills where I could. We cut internet and cable entirely! I called our phone provider and got a better rate. I went from paying for insurance monthly to switching companies and paying every 6 months to save a ton of money. We did our best to turn off lights to save on our electricity bills. It was painful to sit on the phone and ask for better rates (and I was told no a lot), but it saved us some money!
- Every Extra Penny went to Debt. When we saved money on the prior two steps, the extra went to debt
- I paid off our bills smallest amount to the largest amount. This is a signature Dave Ramsey move (and can be controversial). We ignored the interest rate and just paid off the debts off lowest to highest so that we had some small wins at the beginning. The debt we weren’t concentrating on, we just paid the minimum. Believe me, if I would have tried to pay off that massive student loan right away, we would still be in debt. This worked for us! I also love this method because it gives you a game plan so you can focus on one thing at a time.
- I used the “Snowball” Method– After we paid off our first debt, the plane tickets, I used all of that money and put it towards the next debt (the medical bills). This method worked like a snowball and helped me gain momentum. So the minimum payment was $25 on the plane tickets and we were paying $650 extra to that debt each month, once the plane tickets were paid off, we added $675 to the medical bills, which had a minimum payment of $84 a month. As you can see, with each debt we wiped out, our amount of money we had to pay off the next debt grew so that we could wipe out the next debt faster.
- I kept motivated. I did three things to keep motivated. First of all, I made a chart for the fridge of the debt we were working on so we could see the progress (I share my chart as a free download here). I paid the debt sometimes weekly so the extra money wasn’t sitting in our account tempting us. We had a paper on the fridge that we colored in as we paid off the debt so we could literally see all of our efforts were paying off (if you want a free printable of my debt thermometer, click here). Next, I blogged on my personal blog monthly where we were. Only my mom reads that blog, but it was enough to feel accountable and celebrate the small wins. Lastly, I listened to Dave Ramsey’s podcast everyday to help remember why we were doing what we were doing.
- I got creative. Every time we needed to buy something, we thought do we really need this? If the answer was yes, we thought of different ways we could get it. Thrift store? Craigslist? Can we get by with borrowing it once? One time, our vacuum broke. Going without a vacuum is not really an option with two dogs who shed. We brainstormed, but couldn’t think of anything. Then one day my husband came home with a Dyson vacuum! His best friend was getting a new vacuum and so he gave us his old one. There were a few parts that weren’t working, so we replaced those for about $50. That vacuum is the best vacuum we have ever had! If we would have had to buy if new, it would have been almost $400!!! So get creative and think twice before you run to the store.
- I opened up multiple savings accounts. My credit union is awesome and lets you have as many savings accounts as you want. I opened up extra saving accounts so that I could put specific savings in a safe spot. For example, I have a savings account called “insurance.” Each month I put in $80 so that when the 6 month bill comes due, I’m not scrambling for the money. I also have one for Christmas now (which works better than using cash since I buy a lot of my Christmas gifts online). Having the separate accounts was helpful to ear mark it and see what was saved for what instead of just seeing a ton of money in your account and wanting to spend it.
- I brought in extra money. My husband worked extra and mowed my mom’s lawn. I sold clothes on eBay. The extra money was super helpful to accelerate our debt pay offs.
- I did it little by little. I know this list is long, but I did it little by little. The quote above “Little by little, a little becomes a lot” was my motto through this whole thing. If I saved $5 grocery shopping it could be thrown towards debt. Sure, that seems like nothing when you have $44,000 in debt, but little by little, that extra $5 here and there really adds up! I didn’t cut my bills down all at once either, but monthly I would call one company and see what we could cut. Start where you are and get a little better every day.
The Benefits of Being out of Debt:
- Freedom! Now we can spend our money how we want! When we had our baby, I was able to cut back a bit at work. It’s really nice to own all of your cars too so that if something bad happened, no one could take those away from you. Not having debt means you have more choices and it feels sooooo good!
- We are a lot better with money. We no longer use credit cards and are really great at saving up for things. So, I guess we are adults :). We spend much less than we make and are able to save up for fun things like a vacation and furniture.
- We are on the same page. Paying off the debt was huge for our marriage. We are 100% on the same page about how we spend our money and it has really strengthened our relationship. We are a team!
- It saved us– In December of 2013, my husband was laid off and didn’t have a job for 5 months. Those were some really hard months for us. But I was so grateful too, because we had really made a huge dent in our debt and so we were able to live off my income and the small amounts he was able to bring home with his side projects (we were even able to make a few extra debt payments during that time). If we wouldn’t have started this project, we would have had to live off credit cards or borrowed money to make ends meet. I am SO grateful we got our act together and were able to weather the storm.
It took 2 and a half years to pay off our debt (besides our mortgage), so definitely not overnight. Some days were celebrating our wins, but most of it was putting our heads down and getting to work. I hope this post doesn’t come off as boastful, but more as helpful. I have focused on this for the past few years, so I figured I should pass on what I learned. This was a life-changing project for me, and I hope it will be for you too. If you have any questions, please feel free to ask!
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