For those of you that have been tracking my website recently, you are aware that my wife and I just became debt free! We are still super excited and would like to share our story so that the rest of you can benefit from our experience. Hopefully, after reading this personal story, you’ll have a better idea of how to pay off your debt fast.
It is pretty common for students to amass debt these days, which is unfortunate (but at least they’re able to write off a tax deduction for up to $2500 of the interest on those student loans). Did you know that the average student loan by graduates in 2008 was $23,186!! That is one huge number! Luckily, my wife and I only had a total of about $18,000 in debt, but that’s nothing to sneeze at either.
On Christmas day, 2009, I received the book, “Financial Peace”, by Dave Ramsey. This book strongly encouraged living a debt-free life, and I really wanted to buckle down and get rid of our $18,000 in student loans too. Starting in January, 2010, my wife and I decided to agressively pay down our debt.
Luckily, both my wife and I were working (extra income), plus her job was only 1 block away from mine, which allowed us get by with only one car! That meant we didn’t have to pay that extra gas, car insurance, or car repairs.
Also, since we were focused on cancelling out our debts, we decided that we would spend a very little amount in clothes and fun (I wouldn’t recommend this method for most, since it often prompts splurging on something later). With a tight budget on food as well, we were able to live on about half of our income, and put the other half toward our debts every month.
This worked great for the first few months (we paid down our debts by $6,000 by April), but then we had an issue…. the car. It was dying.
We knew that our car was going to die (and remember, we only had one), and we needed to save up money for the next one instead of paying down our debt further (taking out a loan for a car would only put us back into the position of debt that we started with, so we decided to save and pay with cash).
Sure enough, our car died at the end of July, and would have cost $3,500 to repair. It was not worth it to fix it, so off to the junk yard it went. It was a good thing we were saving for this moment, because we needed a car desperately!
We had about $6,000 saved up, and it was just enough to purchase our Jeep (that we still have today). Once we were confident in our trasportation, it was time to pay down that debt again.
Paying off the Remainder of the Debt
We still had about $12,000 of debt to pay off at this point, but we were ready to get going on it again. We decided to cut even more out of the budget this time. We no longer spent money on clothes or fun (unless we came up with the money though an unconventional avenue on our own – ie. baby sitting, dog sitting, etc), and we planned on paying about 60% of our income toward our debts.
In the next 7 months, we paid off that $12,000 and we’re now debt free!
Since we have become debt free, I realize how much weight was actually on my shoulders these past few years. Every decision I made was dependant on those loans, and it was keeping me from living life and enjoying my time here on this earth!
We are now moving onto the next goal — we have dreams of buying our first house together. Since we do not owe any money to anyone, we are able to save up money at an alarming rate! If things go as planned, we’ll have quite a large downpayment by the end of this year and will be ready to move into a place of our very own. I can’t even describe to you how excited I am about putting a nail in the wall and not feeling guilty about it! 🙂
Paying off $18,000 (plus buying a $6,000 vehicle in there as well) within 14 months seems fast, now that I think about the numbers. But, while we were making the effort, it felt like that debt would never go away! Time was moving more slowly than I ever thought was possible. If you feel the same way, just keep plugging away. It will never feel like you are paying off the debt at lightening speed. But, if you keep putting your money toward those loans on a consistent basis, your debt will soon be zero, guaranteed!
It really is a great feeling.
Have you paid off debt? Or are you in the process of paying down some debt? Do you ever feel like you’re going nowhere with the balance? What keeps you going?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.