This is our story of our we paid off $67,630.81 of debt in 16 months and we want to inspire YOU to get out of debt fast!
During our first year of marriage, we lived the way that you would expect newlyweds in their 20s to live. We traveled a bit, decorated our little house, got a dog, and went on a lot of dates. In short, we were livin’ it up!
Yet while we were enjoying life and spending money, we had almost $68K in combined debt. Our debt consisted mostly of student loans and two smaller car loans. We found our monthly bills to be affordable because we jumped on board the income-based student loan repayment plan that lowered how much we would have to pay each month. Score, right?!
Additionally, I worked in social services and was banking on the government forgiving my student loans after 10 years anyways.
TRUTH BOMB: It pretty much has to be an act of God for the government to approve 100% student loan forgiveness. In summary: it ain’t happenin’.
After about a year of paying our reduced payments, we noticed that the principal on our debt continued to climb higher each month. Yet we knew that we wanted a larger home, children, and the ability for one of us to stay home with the kids. The scary thing was that everything that we wanted translated into more expense and less income! Reality set in and we felt a shifting of our priorities.
We knew that we couldn’t make our dream a reality while lugging around car payments and student loan debt. The challenge seemed pretty overwhelming at first. But once we knew what we wanted and were unified in the task before us, we truly started to live a more meaningful life.
We surprised ourselves by discovering how few our wants could be and how freeing it felt to cast off the burden of debt. In just 16 months, we paid off $67,630.81 of debt on two modest incomes. We were blessed with a home and found out we were pregnant just as we made our LAST loan payment. We were debt-free (apart from our mortgage)!
Our goal in sharing our story of how we paid off our debt is to encourage you that no matter how much debt you owe or how much you make, you can live a full and debt-free life.
We’ve compiled a list of the general steps that we took to gain financial freedom. It may seem a little daunting at first, so take a deep breath and keep reading! We’d love to help you start your debt freedom journey, give you some encouragement, and pass on some practical advice.
How To Become Debt Free
Step 1: Find Your Motivation
The story of how we paid off our debt began with a question that you must also ask yourself: “WHY do I want to be out of debt?” This may seem like a “duh question,” but it’s really important. Being out of debt for the sake of being out of debt, isn’t enough! You have to want to change because of something much more important.
Maybe you’re mad at always living paycheck to paycheck. Perhaps you’re scared of another recession and don’t want to risk losing your home. Or possibly like us, you have a desire for you or your spouse to stay home and raise the kids.
There are a million tips, tricks, and hacks for cutting costs and paying off debt, but it starts with honestly answering this simple question. The motivation is your own and only you know what it is.
Step 2: Get a Positive Money Mindset
Your motivation will get you started on the road to financial freedom but your mindset will make or break your journey. Your money mindset is the attitude you have about your money that influences your financial decisions. Has your money mindset kept you from getting out of debt? It did for us!
Let’s talk about some of the main negative mindset pitfalls that most people in debt face:
Hopelessness: “The debt I owe is way too much. I couldn’t possibly make enough money to pay it off anytime soon.”
Procrastination: “I have time to pay it off once I get that job, once I get married, or once the kids move out.” (This is where we were hanging out before we paid off our debt.)
Denial: “Everyone has debt, it’s normal to always have a car payment, I’m still able to get by.”
When you shift your money mindset in the positive direction, you will begin to see the victories in your finances, even when those victories are tiny. Most people didn’t get majorly in debt overnight nor will they get out of debt the same way.
The right kind of mindset is one that sees that every small win, every sacrifice, every opportunity, and every baby step forward all adds up to freedom in the end.
Step 3: Conduct a Financial Audit
An honest look at our past expenses was the next step in how we paid off our debt. You don’t need a professional to tell you where your money has been going. Take a sober, objective, and unflinching look at your spending habits. If you’ve been sweeping things under the rug, it’s time to do some housecleaning and get real with yourself.
We started our auditing process by looking back over the previous 3 months of expenditures. Whether you do 3, 6, or even a 12-month review, your goal is the same: find out where the money has been going.
We’ve created a FREE Financial Audit Worksheet for you to print that will help you break down your recent expenses! You’ll need to gather together your paycheck totals, bank statements, and credit card statements. Then fill in the worksheet to evaluate your spending habits over the last few months.
Step 4: Set a Budget
Once you’ve taken an honest look at how you’ve been spending your money, it’s time to set a budget. A budget is a financial plan that outlines where you want your money to go each month. And a budget is not one size fits all!
Maybe you want a strict action plan that budgets out every penny you spend each month like the Zero-Based Budget. Or maybe you want to use a system that removes any temptation to swipe your credit card on something you can’t afford, so you decide to use the cash-only Envelope System.
There are several methods to choose from and you want to pick one that works best for you! For further explanation on budgeting methods, check out this great article from Mom Managing Chaos!
Our method of budgeting was to first pay all of our monthly bills. We then significantly scaled back and/or completely eliminated anything that was not essential to our happiness. When you budget, you don’t want to deprive yourself of all joy. Factor in what matters most to you each month that will keep your new spending habits sustainable.
As you begin to scale back on things, you’ll start to notice that living with less is much more freeing.
Step 5: Use It Up, Wear It Out, Make It Do, or Do Without!
Want more money to play with in your budget? It’s time to trim the fat!
Take a look at your fixed and variable expenses. Fixed expenses are costs that remain the same regardless of usage (For example, rent, health insurance, car loan, Internet bill). Variable expenses are costs that change based on usage (For example, groceries, utilities, gas).
Now it’s time to start reducing, renegotiating, or eliminating those expenses altogether! What you plan to eliminate is up to you. But be brave! Once you’re out of debt, you can start adding some of these luxuries back into your life.
A few examples of how we paid off our debt by cutting expenses were:
- Trash Pickup: Take it to the landfill for free.
- Health Insurance: Sign-up for a Christian Healthcare Sharing Ministry.
- Subscriptions: Amazon Prime, Cable, Hulu, Netflix can be cut, or consider sharing a plan with someone.
- Cell Phone Bill: Review data usage and go for the lowest plan.
- Internet Bill: Renegotiate or consider switching to another provider.
- Haircuts: Learn to cut your own hair.
- Home Café: Make your coffee at home.
- Groceries: Find our ULTIMATE Guide to Saving Money on Groceries HERE!
- Do it Yourself: Don’t pay someone to do that which you can do yourself! Be sure to check out our DIY tutorials.
A few services to consider doing yourself:
- Cut your own hair
- Take off your trash
- Cut your lawn
- Grow some of your own food
- Mend your own clothes
- Be your own photographer
- Make crafts at home for kids instead of buying new toys
- Cook your meals at home instead of takeout
- Learn to fix things around the house via free YouTube tutorials before you hire a handyman
- Change your oil on the car instead of paying a mechanic
Step 6: Get Your Side Hustle On!
Cutting costs was a HUGE factor in how we paid off debt. But earning extra income is another way to become debt-free. In order to have more cash to throw at your debt, find ways to increase your income.
Here are some of the best ways we paid off debt by adding extra income:
- Ask for a raise
- Get paid to teach from home with VIPKID!
- Get a second job
- Have a yard sale
- Sell items on Amazon, eBay, or Facebook Marketplace
- Open an Etsy shop online
- Become a mystery shopper
- Freelance on the side on sites such as Fiverr
- Earn money by searching the Internet
Ready to dig deeper with earning extra income? You’ll definitely want to read Make Money FAST with these 10 Tricks!
Step 7: Pay It Down
So where should you start picking away at that mountain of debt?
The two main debt payoff methods are:
Avalanche Method – Payoff your debts in order, beginning with the highest interest rate loans.
Snowball Method – Payoff your debts in order, beginning with the smallest balance.
The Debt Snowball method is popular in large because of Dave Ramsey. The purpose behind it is to get early momentum. Success breeds success, so by knocking out small debts first, you’re doing at least two things. First, you’re gaining confidence. It feels really good to eliminate an entire loan from the books. Second, you can use the freed-up cash from small debts to begin knocking down the subsequent debts.
The Avalanche Method will get you out of debt faster because you will be paying less interest. This method was how we paid off our debt because our motivation and mindset were laser-focused on the end goal to eliminate our debt as fast as possible.
No matter which method you choose, the important thing is to just start. You’ll discover along the way which method works best for you!
Step 8: Keep Track
A great way to reinforce your success is to be able to visualize your progress! When we were paying off our debt, it was the BEST feeling to be able to check a loan off of our list.
Get creative and have fun tracking your debt payoff progress! Share your successes on social media (there is an INCREDIBLE support system with the #debtfreecommunity on Instagram)! Or head to Debt Free Charts and choose from a ton of INCREDIBLE debt tracker charts to print for FREE!
Be sure to have a focus time each week to discuss how your finances are looking and what steps you plan to take the following week.
And you better believe it when I tell you that tracking your progress will become one of your new favorite activities. When you review your progress week to week, you can find out what’s working, what’s not working, and then make adjustments accordingly. And, perhaps more importantly, when you can tie your efforts to tangible results, it’ll give you the drive to continue on.
Step 9: Celebrate Your Successes
Being debt-free is something to get excited about. Now, you can seriously start building wealth. Trust me when I say that saving money will be easier than ever. Not having to make a monthly payment on a car, student loan, and/or credit card will free up an amazing amount of cash. You can build your savings, pay off your house early, and start investing like never before.
But before you do that, you need to do one more thing:
Tracking your progress helps to keep up the momentum, but celebrating lets you memorialize the achievement. It is said that we don’t remember days only moments. Take time to etch this memory into your mind and make it a part of your story.
You made it! Go on vacation, let the good times roll, and enjoy the fruit of your hard work!
So Now What?
Our hope is that by sharing our debt payoff story you have been inspired to begin your journey! There is no perfect way of paying off debt. But the main things that WILL make your journey a success is that you know your motivation, have a positive money mindset and just START. The how-to is easy after that: live on less than what you make.
We want to inspire you to take a look at your finances and challenge yourself. I promise you that your views on money and material things will change for the good.
You may find that the pressure to keep up with what everyone is buying or where they’re going begins to lighten. Or you may even find a new hobby or skill you never knew you had until you attempted to DIY it!
We’re rooting for you.
We’re praying for you.
Please introduce yourself and tell us more about your debt-free journey.
We can’t WAIT to hear your story.