Disclaimer: When I say “I”, I really mean “we” as my wife and I. She definitely had a HUGE role in what you’re about to read.
So I’m sure many of you reading the headline of this article seem to ask yourselves… “WHAT?! That’s impossible!” Especially when you consider that my gross household income during that period was about $2,500/month. I take home about $2,250 of that. I have since adjusted my tax allowances and status to married, so that has helped me bring home the correct amount.
Anyways, so you’re wondering, how did I pay off over $21,000 of debt in less than 7 months making only $2,500 a month? The math just doesn’t work, does it? We both feel extremely blessed to be debt free at such a young age, both almost graduated with a bachelors degree in our respective fields. I’m not going to make this complicated because I honestly don’t think it was. The hardest part is NOT complicating it so you can get out of debt.
Here’s how we did it:
- Budget. Keep it simple. Really simple. We did a budget which I treated as my bank account. I looked at how much was in my bank account at the start of every two weeks (I got paid every two weeks) and recorded that amount in our budget, and then we simply lived on less than we earned in those two weeks. We didn’t spend a penny that wasn’t on that list of income/expenses for that two week period in our budget regardless of what was in our bank account. The remainder went to debt every two weeks.
- Set Limits. What does this really mean? Once you’ve set a limit on how much you can spend on groceries, DON’T spend more than that. That simple. Make due with more pasta during that two week period if need be. Limits have to be set and kept to make this work. Diligence is the key. Second to this is to STOP using your credit cards…only deal in cash. It’s one of the best limits you can set for yourself.
- Save Money Creatively. My wife recently wrote a great blog post about a few key points that we did to help save money on groceries and food in general. Beyond what she wrote there about price matching, meal planning, and the works as far as creative meals to make on a budget, there was something simple that helped us. Make dinner at home at least Sunday-Thursday of every week. Why? Because you get to make a bit extra (make for 3 people instead of 2) so that I can have leftovers at work the next day. This ends up saving us money twice because we didn’t eat out for dinner and I didn’t eat out for lunch the next day. See how the money starts adding up? Also, might I add to my wife’s post that you should always compare prices based on the unit price. Only buy in bulk when it’s truly a good deal and you would’ve bought those items in the near future anyways. Otherwise, on a tight budget, you’re tying up your money in things that sit.
- Swallow your pride. As men, we have a lot of pride. Everything will always work out with what we’re doing. Sometimes that is absolutely wrong. Over $10,000 of that debt was tied up in my car that I had when I was single. I sold it and came out on top, and now we have two paid for cars (I went from a 2003 Audi A4 to a 1994 Toyota Camry) and it has never felt better. Along with no car payment, gas has gone down (better gas mileage in the Camry), auto insurance has gone down, and a whole host of other things have been freed up because the stress of having a loan is not over our heads. Swallow your pride and sell the things that you have the most money tied up in to get out of debt. If you’re in debt, you probably don’t “need” an Audi, a 60″ flat screen, etc.
Sometimes, even on a strict budget, all you can do is hope for some windfalls. We were lucky enough to get a few of those. My wife was in a car accident about a year ago and recently got a settlement of $3,000. All of that, minus a few hundred dollars for her, went straight to debt. We received an incredible tax refund, more than double what we had expected, mostly due to getting married, paying too much in taxes anyways, as well as the new education tax credit (both of us went to school in 2009). On top of all of that, our biggest windfall was selling the car, at a loan of just over $9,100, that was the last debt to fall.
It has never felt better! I wouldn’t change it for a thing. I don’t know how I can ever live with a car loan again. Those of who have one, what are your thoughts on this?
As of now, we almost have our 3-month emergency fund in place, and hope to continue growing it afterwards as a combined emergency/house fund. Our life has changed SO much. I can now focus on other side businesses that are going well, without being stressed that I may have to stay where I am forever. The freedom when you have no debt is incredible. The ability to focus on what’s important is now a lot more clear.
“The rich ruleth over the poor, and the borrower is slave to the lender.” – Proverbs 22:7
Have you recently got out of debt? How did you do it? What has it enabled you to do?
Tags: budget, car loan, debt, Finances, freedom, groceries, limits, pride
