Disclaimer: We were hesitant to share our debt repayment story because we know debt is something most people struggle with or have struggled with. It can be discouraging to read about someone's success when you are still in progress, or maybe not yet able to begin. The truth is, this has been a FIFTEEN MONTH process of action and a TWO YEAR process of planning. So often we compare ourselves to someone's end without knowing where (or how or when) they started. We purposely didn't share this story (publically) until we were finished, but know that this was a strenuous climb with many hurdles and unknown expenses. The plan was 12 months but we finished in 15 (three months worth of hurdles). We began with 50k and ended with 62k (12k of unknown expenses). We share this with the hope of encouraging others in their financial journey and know that you are not alone in your struggle.
How We Paid Off $62,00 In 15 Months
At the end of 2016, we decided to tackle our debt. We had just gotten married and managed to pay the wedding expenses as we went and had just paid off one of our cars in full but we knew there was still big debt looming. After conquering smaller debt, we felt able and motivated to take on this bigger task. We made a plan, a timeframe, and most importantly, we were both on board. The main reason we were able to do this is that we both believed in the dream and trusted the process, even when we were thrown off track. We started in December 2017 with a total of $50,000 and a goal of 12 months. We finished (Halleluiah!!!!!) fifteen months later with a total of $62,000 paid off. All this to say that it can be done if you keep going. Do not stop until you've reached the finish line, even if it takes longer or the journey isn't what you expected.
Here is our 6-step process, including how to approach and plan for debt repayment and how to handle the unexpected (because you WILL have an unexpected financial pothole or two, or five).
Here is our 6-step process, including how to approach and plan for debt repayment and how to handle the unexpected (because you WILL have an unexpected financial pothole or two, or five).
1) Getting Started:
a) How much debt do you really have?
Helpful Tip: You can view your credit report to see all the lines of credit in your name. We bank with Capital One and used their "Creditwise" feature.
b) What are your expenses?
How much do you spend on rent, food, insurance, phone, internet, going out, etc? Punch in the numbers and create a budget. A family member, Paul Nicholson, gave us a helpful tip: live solely on one income. This may seem crazy but it's 100% doable and this is exactly how we were able to reach our goal. We lived on one income and used the other income (both incomes are similar) to pay the debt. Another way to look at it would be to say that we lived on half of our income: 50% was for living expenses and the other half was for debt repayment.
Helpful Tip: Start with rent: 30% of your income (that is, 30% of half of our income. Essentially the other half does not exist and this is the mindset we have maintained throughout the process). Then look at other basic expenses and determine where you can save- do you need cable? a phone upgrade? Can you use less electricity or water or drive your car less to save on gas/maintenance? Try to be very intentional about spending.
Helpful Tip: Do not question your debt repayments. My salary shows up in my bank account and is automatically transferred to the debt payment. It comes in and it goes out the same day. Every single time. Do not hesitate or ruminate or question yourself. Just automatically transfer it every single time.
c) Select a realistic time frame
Helpful Tip: Start with rent: 30% of your income (that is, 30% of half of our income. Essentially the other half does not exist and this is the mindset we have maintained throughout the process). Then look at other basic expenses and determine where you can save- do you need cable? a phone upgrade? Can you use less electricity or water or drive your car less to save on gas/maintenance? Try to be very intentional about spending.
Helpful Tip: Do not question your debt repayments. My salary shows up in my bank account and is automatically transferred to the debt payment. It comes in and it goes out the same day. Every single time. Do not hesitate or ruminate or question yourself. Just automatically transfer it every single time.
c) Select a realistic time frame
Once you have your total and your budget, determine how long it will take to accomplish your debt repayment and write it down. Write it in your calendar, tell people, make it real. When you run into hurdles (which will happen) adjust the timeframe if needed but KEEP GOING. Talk about that as well: "We're still working on the goal and we had a month setback but we're still going!"
2) Get to Work:
Let’s talk numbers! If we follow the PNT “Paul Nicholson Tip”, we need to survive on one income. Below are the actual amounts we pay.
1st Income: Monthly Expenses
Rent + Utilities $1670
Internet $0 (covered by Robyn's company)
Phone $30 (Derik’s company covers a portion)
Going Out/Mis. $500
Groceries $300
Gas $80
Car insurances $45
Tolls $30
Netflix $15
Leftover money goes towards the debt repayment.
Leftover money goes towards the debt repayment.
2nd Income: Monthly Debt Repayment
Debt Payments $3500 + leftover cash after expenses
Excess income: Tax refunds, bonuses, reimbursement checks, side jobs, etc, all went straight into the debt.
Ways We Saved Money:
Sold one car: Sharing one car was feasible for us it's a win/win: cutting our carbon footprint and saving money. The money we made from selling the care 100% went into the debt.
Phones: Not upgrading when we were eligible lowered our phone bill substantially and also saved us from a new phone payment plan.
No cable/internet: We haven't had cable for years and initially did not get internet in our apartment until Robyn got a job working from home and the internet is provided.
Home furnishing: You can read more about our zero dollar furnishing budget in a previous post, but this helps a lot.
Helpful Tip: Pay off small loans first.
3) The Unexpected
A lot of financial advisors suggest having a few thousand dollars saved before paying back debt. We didn't follow this, so when we had a hit we got hit hard. Examples: several car repairs, health costs, and owing taxes when we expected a return. Expect the unexpected expenses (you will get them!) and keep moving forward regardless.
4) Talk about it
Not talking about it only keeps you in the dark. Also, talking openly will give your friends and family a better understanding as to why you say "no" to things that involve spending excess money. You will gain accountability by talking about your financial goals, as well. Most people can relate to having debt so it's not something to be ashamed of, especially when you are working towards paying it off completely.
5) Don't let it hold you back
We didn't sit on the couch eating ramen noodles for fifteen months. A part of step one is making a realistic plan that you can stick to. Aim high but give yourself room to have fun because you deserve it. Take a trip but maybe drive instead of fly. Go out to eat but maybe split the meal or skip the appetizer and dessert. Go shopping but evaluate the long-term effect of your purchase. Basically, be a conscious spender and remember your goals but you do not have to be a hermit.
6) The Big Day
CELEBRATE! Plan a reward ahead of time- something this motivating and exciting to reach. Ours is a vacation. Yours may be a shopping spree, a fancy meal, or a fun experience. Set this celebration the day you set the goal and truly allow yourself to celebrate when you get there. You've earned it!
Final Helpful Tip: Don't keep up with the Joneses ;)
Final Helpful Tip: Don't keep up with the Joneses ;)
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