What a wild ride! We started our debt free journey on January 20, 2016. My husband Dallas and I paid off nearly $195,000 in 18 months, and we can finally say “WE’RE DEBT FREE!!!!” I’ve said it before, and I’ll say it again, this achievement did not come without sacrifice and hard work. My hubs and I are normal folks though. Well, fairly normal depending on who you ask! We just set a plan, worked the plan and the payoff has been incredible! Without further ado, here’s how we did it.
We admitted we had a problem!
Full disclosure – we were blissfully ignorant and had no idea how bad our financial situation was. We were paying every bill on time but were living paycheck to paycheck and were swimming in debt. A LOT of debt. You see, I have a Bachelors in Accounting and an MBA with an emphasis in Accounting and Finance. My 2016 arrogant self-knew exactly what I was doing and didn’t need to change a thing. Boy was I wrong! Once we (and by “we” I mean me) admitted that we could learn a thing or two about managing our finances, we were ready to make some serious changes.
We ended the comparison game!
We learned pretty early on that we had to stop comparing our situation to others. Not only did we have to stop comparing ourselves to the folks going on vacations or buying a new house or car but we also had to stop comparing ourselves to those paying off debt. It was so easy to look at another couple and say, things like “they probably make more money than we do, that’s why they’re paying off debt so fast” or “they just sold their cars, of course, they’re paying off debt a rapid speed.” Comparing our situation to others was just a way to excuse away our situation. Instead, we took responsibility for where we were at financially and more importantly where we were going. We decided to take our journey, make our own decisions and be proud of our progress and goals.
We became budget bosses!
We had to stop the money hemorrhaging… enter budgeting! We started zero-based budgeting every month. This method helped us to budget every cent of our income and left no gaps for waste. To see exactly how we budget and to get my free budget templates, head over to my Budgeting 101 blog post!
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We stopped going into debt!
Queue the scissors! We cut up every last credit card and canceled those cards. If we wanted to get serious about ending our long-term dysfunctional relationship with debt, we had to cut ourselves off from the source. We saved up $1,000 for an emergency fund as soon as possible and destroyed those credit cards pronto. Once we did, we had no choice but to stick to the budget.
We started using cash!
You know, cash? The federal currency? To our shocking discovery, cash works just as well as a debit card! We started paying with cash for things like groceries, fun money, and clothing. Paying with cash helped us stay on track and not waste money that could be otherwise allocated to debt. I cannot even begin to think how much money we saved at the grocery store by paying with cash. We would take our weekly cash amount to the grocery store and would stay within that allotment. We’d take a list and stick to it! If it wasn’t on the list, we wouldn’t buy it. Period.
We paid off debt frequently and quickly!
Oh, how our paychecks came and went so quickly… Since we were zero-based budgeting, we paid off debt as soon as we got paid so that we couldn’t use that money for anything else. This is where we went wrong before January 2016. Back then, would leave the debt payoff to the end of the month and then would end up wasting that money on junk instead of paying off debt! Paying it right away forced us to stick to our budget and not spend on frivolous items.
We also wouldn’t use leftover money from other budget items for anything other than debt. So if our grocery budget was $100, but we spent $96, we would pay $4 to debt instead of using that money for our next trip to the coffee shop. Yes, you go that right! We made multiple payments to debt for less than $5. Sounds crazy, but it worked!
We cut our expenses!
This was seriously a blast! We would look for any way we could save money in the budget, and it was amazing how much we were able to accomplish here. It’s truly incredible how much stuff you don’t need. We stopped eating out as often, we negotiated our insurance rates, dropped some monthly memberships and stopped shopping online. This was a fun game and taught us valuable frugal skills that we will use for the rest of our lives.
We continued to give!
Say what?! Yep, you got that right! Giving stayed in the budget. We gave 10% of our income and even included fun money in our budget, all while paying off all of this debt! Who said you have to be miserable on a budget? Our budget just helped us tell our money where to go. Sure it limited our wasteful spending, but it allowed us to work smarter and not harder.
We sold a lot of stuff!
At one point, I was afraid my husband would sell my dog! Just kidding, but we did go crazy selling stuff. We started out small with some designer purses and some brand name clothing. Then we sold some stuff laying around the garage and then sold my motorcycle (it wasn’t worth much, only $2k and wasn’t rideable)… and then we listed the hubs motorcycle. This was a traumatic decision and one we changed rapidly after much deliberation! For us, that motorcycle is our freedom; it’s something we do together and love. It was our reprieve from the otherwise difficult work we were doing. We decided that since we could pay off the motorcycle within the year that we’d keep it and include it in our payoff. Some would say that was a poor choice, but we knew the consequences of our decision either way.
A large portion of our debt was paid off via the sale of our condo. We had moved to a neighboring city a few months before the start of our journey. So we had a condo that we had turned into an investment property and were renting out. When we looked at the numbers, it made more sense to sell the condo and forgo that extra income. Boy were we right! We eliminated that mortgage ($82k) from our debt and were able to pay off a nice chunk of debt ($45k) with the equity we had in the condo, but with over $60k left in debt, we still had some work to do!
Many would (and did) disagree with us selling that condo; we got some grief for it… but that decision gave us an incredible boost to slaying our debt. Outside of the condo sale, we paid off over $66k, including interest and we can always buy another investment property!
We used the debt snowball!
During this time we were sticking to our budget and using the debt snowball method to pay off debt. Our total minimum payments on all of our debt was about $1,700 a month. Yuck! With the debt snowball, we ordered our debt by balance from smallest to largest. Then we took all of our extra money and applied it to the smallest debt until it was paid in full. Then we took all of the money (minimum payment and extra) from that first debt and start paying it toward the second smallest debt. With this method, we saw small, quick wins and also an accumulation of funds to crush our debt.
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We communicated about our finances, A LOT!
Seriously, we talked about every single purchase and discussed the budget a few times a month. I’m the budgeter, so I tend to know what’s happening all of the time, and Dallas reviews it with me a few times a month. We both play a huge role in deciding what to do with our money, and we communicate about it often to ensure we’re on the right track.
We made some friends on a similar journey!
We made some friends working toward paying off their debt and having folks close that had an idea of what we were doing was invaluable. We would potluck it every month with these folks, and these friendships mean the world to us. Do you know how refreshing it is to be able to talk openly about your finances with close friends? When doing something that is counter-intuitive to the world that views debt as normal, it was a huge reprieve to find like-minded people who encouraged us along with your journey. We will always cherish these friendships.
We both upped our side hustle game!
We read somewhere that wealthy folks tend to have multiple streams of income. More income would mean a quicker debt payoff and eventual financial freedom. So, I started a side hustle, and Dallas worked hard to continue to grow his. A side hustle is a great way to earn some extra income to achieve your financial goals. Check out my side hustles blog post to get your juices going and maybe start your own!
So what should you do to jump start your debt payoff journey?! Other than the above-mentioned items read Dave Ramsey’s Total Money Makeover and The Millionaire Next Door by Thomas J. Stanley and William D. Danko. We gained a wealth (haha, see what I did there) of knowledge from these books and followed Ramsey’s plan pretty closely. Also, keep in mind, financial freedom looks differently from family to family. If it takes you ten years to become debt free, that’s ok! What’s important is that you are working toward goals that you and your family see as pertinent to your financial freedom. It’s not about doing exactly what your neighbor is doing; it’s about setting a plan that works well for your family and achieving your own goals.
What are you waiting for?! Go out and grab your slice of financial freedom today!
Until next time, spend safely!
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