When my husband and I first got married, we lived like absolute rock stars. We both earned enough to live a comfortable life so we justified spending whatever we wanted, whenever we wanted.
Going out to eat at fancy restaurants became a regular occurrence and whenever Nordstroms had a sale I was always the first in line. Little did we know we were slowly digging ourselves into a $60,000+ hole.
The funny thing is, we did not care about the debt during the first few years of our marriage. The debt did not bother us because we figured everyone had debt and that is just how it is. Plus, as long as we make all of our payments on time this is helping us build our credit right? Boy, were we ignorant.
It wasn’t until one day I was at a Winco grocery shopping for a few items that my entire life changed in an instant.
My total came to $72.13 and to my surprise, my debit card was declined. I remember standing there staring at the card machine and reading the words ‘DECLINED‘ in big bold letters. I remember feeling completely embarrassed, angry, and humiliated. The worst part was there was at least 6 to 7 customers behind me watching me with pity in their eyes.
I ended up making a lame excuse to the cashier telling her I must’ve forgotten to bring the correct card with me and promised her I will be right back from the car… I never returned.
When I got in the car, I remember sitting in the parking lot crying with my head on the steering wheel for at least a solid 30 minutes.
I distinctly remember a puddle of tears forming on the floor of my brand new 3 series BMW and thinking to myself, “How am I driving a $50,000 car and I cannot even afford $72 in groceries? I am such a failure.”
Have you ever felt this way? Has life ever thrown you a curve ball that made you rethink the way you handle your finances? Well, I have been there too my friend.
Obviously things had to change so I came home that evening and started researching how to quickly payoff debt. Thankfully, my husband was on board with the plan and together we successfully paid off over $60,000 of debt in 18 months!
Here is exactly how we did it.
1. We figured out our debt number
Starting is the hardest part. I know it is easier to close your eyes and not think about the amount of debt you have accumulated. It is easier to ignore your problems then to face it straight on, but let me tell you, that is a huge mistake.
Go to a quiet room, grab a pen and paper, sit down in front of your computer with a hot cup of coffee, and turn your phone on silent.
Take this time to logon to all of the financial institutions you use and write down your total debt. This includes student loans, car loans, credit cards, personal loans, 401k loans, furniture you financed, cells phones you financed, and anything else you’ve financed.
Add it all up and this debt total is your starting point.
2. We created a budget
Creating a budget was vital in our success in paying off our debt. Whether you make $50,000 a year or $500,000 a year, if you spend everything that comes in you will never get ahead financially.
To create our budget, we simply wrote down all of our monthly expenses and our total monthly income. Seeing where all your money goes is both frighting and empowering at the same time. I recommend clicking the link below to get a step by step detailed explanation of how to create a budget.
To find out how to create a budget, read this post: The Complete Budgeting Guide: How To Create A Budget That Works
3. We drastically cut our fun money
Before we created a budget we were spending literally thousands of dollars on restaurants, shopping, and entertainment. This was immediately stopped.
My husband and I agreed to drastically cut our fun money to $100 a month. This money was used for whatever we wanted that did not include debt payments, bills, gas, and groceries.
Was it hard? Yes!
Going from buying whatever you want to severely limiting yourself was a complete mind shift for me. I had to say no to a lot things that required spending, but I knew this would only be temporary and it wasn’t forever. Reminding myself of this helped me a lot.
The funny thing is, I got so used to spending nothing that even after we became debt free I didn’t require a lot to have a good time. We now each get $400 of discretionary fun money (which is more than enough), where as before we each got more than $1000.
4. Removed all shopping temptations
I deleted all of my shopping apps, turned off notifications on my phone, unsubscribed to every store alert on my email, and avoided going into stores, except for when grocery shopping.
Doing this helped me avoid temptation to spend, especially in the beginning of our debt free journey. Although we are now debt free, I still implement this tip till this day and it really helps me to only make purchases we need and not buy things impulsively.
5. Cut grocery costs
I read an article one day that said the number three highest spending line item for the average American budget is food (housing being first and car being the second).
After reading this, I checked our previous months grocery spending and it was over $700 a month! That may not seem high, but $700 for two people is a lot. And prior to calculating the total cost, I honestly thought we spent around $400.
Figure out how much you spend on groceries and try and find ways to cut the cost. I wrote a detailed blog post chocked full with tips on how my husband and I now spend only $250 a month on groceries. See below.
Related blog post: 10 Simple Ways to Keep Your Monthly Grocery Budget At $125 Per Person
6. Cancel services you no longer use
Make a list of all the monthly subscription services you use and determine how often of you use it. This can include your gym membership, cable, Hulu, Netflix, Amazon Prime, HBO, YouTube Music, Spotify, monthly subscription boxes, meal-kit companies like Hello Fresh and Freshly, apps, credit monitoring services, etc.
After you have made your list, cancel everything you no longer use. These companies are draining your bank account month after month and you barely notice it because it is most likely on auto-pay. If you don’t use it, simply cancel it.
7. Shop for cheaper car insurance
Out of every tip on this list this one is most likely the one you will not do, but trust me when I say it is worth it!
I must’ve read in a hundred debt payoff articles that said to shop around for car insurance, but I never did because I didn’t want the hassle. Plus I was happy with our current insurance.
Now I am regretting not doing this sooner. Spending three hours to shop around for car insurance has saved me an extra $1440 a year!
Pencil in a few hours this weekend to shop for car insurance and you will not be disappointed. I guarantee you will find a cheaper option.
8. Share one vehicle
My husband and I used to each drive our own car, but we decided to go down to one car and share. My husband works from home and we are almost always together, except for the rare occasion I have a girls night and he has his boys night.
I understand that not everyone can do this, especially if both partners works outside the home, but if circumstances allow try and consider going down to one car even on a temporary basis. Doing so will literally save you thousands of dollars a year from the reduction in car payments, insurance, gas, and maintenance.
Our plan was to share one car until we became debt free, but we realized that we didn’t miss having two cars. Till this day we both share one car and it has been wonderful, especially the thousands of extra dollars we are able to save.
9. Purchase second hand furniture
One of my passions, besides personal finance, is interior decorating. Interior design is beautiful and pleasing to the eye. I love being able to turn a house into a home and turn a blank room into a functional, yet gorgeous space.
However, furnishing a house can be expensive. Furniture pieces can literally cost you thousands of dollars and frugal me is not willing to pay that much for a sofa, but I still want a beautiful home.
I quickly realized the art of thrifting and buying second hand furniture pieces on websites like Craigslist and OfferUp. People throw away perfectly good (sometimes new) pieces of furniture for a few bucks!
I was able to furnish almost our entire home with second hand furniture and it turned out beautifully! My home is modern and elegant, yet cozy and feels lived in. I always get compliments from friends and family that our place looks like a model home in a magazine.
10. Negotiate a raise at work
Honestly ask yourself this question, “Am I being fairly compensated for the value I bring to my company?” If the answer is no then consider asking your employer for a raise.
Make sure to do your research first such as factoring in your company’s raise and budget cycles, know exactly what your work is worth by researching online, and you may even want to talk to your colleagues in a tactful manner.
Next, be emotionally intelligent about your timing. Don’t try to talk to your boss the first thing in the day when they may be busy with catching up on emails or right before they leave work. Pick a time during the day when you know they won’t be distracted and can focus on you.
Once you have set a date and time to discuss your pay, you may say something like this:
“I’m hoping we can talk about my salary. It’s been a year since my last raise, and I’ve taken on a number of new responsibilities since then. I’m managing all our copywriters and was even able to smooth out that long-running issue with the design team, which ended up saving us a ton of time in the last few months. I think things are going really well, and I’d like to talk about increasing my salary to reflect this new work.”
Obviously, you don’t have to say this word for word, but you get the general idea.
Make sure you focus on your accomplishments, not your salary. Talk about what you have been able to contribute to the company and how that in turn has positively affected the business.
If your boss says no, use this as an opportunity to ask how you can improve your performance to receive a raise in the future. A good manager should be able to explain to you what you’d need to do to earn more.
11. Start a side hustle
You can only reduce your expenses so much before you hit a plateau. Once we realized this, I decided to do some research to figure out how I can earn some side hustle money to help pay off our debt even faster.
Related blog post: How To Make a $100 a Day | 25+ Ways to Make Money Fast
That’s when I came across teaching english online with VIPKid. I brought in an extra $2,000 a month teaching on nights and weekends. It was tough, especially because I already worked a 9 to 5 job, but this side hustle helped us pay off over $60,000 of debt so much faster. I will forever be grateful for the opportunity.
Online English teaching is an accommodating and lucrative side hustle you can start from the comfort of your own home. There’s massive demand to learn English from native speakers. If you’re a native English speaker and want to make money by helping students around the world learn English, click the link below. I explain everything from salary range, requirements, pros & cons, top ESL companies to work for, and the hiring process.
Related blog post: How to Make Money Teaching English Online – Salary And Best Websites
12. Resist lifestyle inflation
Spending more as you earn more is called lifestyle inflation, and it’s a common spending trap that can stand in the way of you building wealth.
Instead, make plans for that extra money and use it to further build your financial future. It can be a slippery slope, so if you find yourself itching to spend after scoring a big promotion at work, try these tips to keep the money in your pocket.
- Be Conscious of Lifestyle Inflation
- Value Experiences Over Things
- Hang Out With Friends Who Have Similar Budgets
- Use any extra money towards your debt payments ASAP
- Outline Your Goals and read them regularly
- Don’t Equate Success With Material Things
13. Monitor your spending daily
Before we started our debt free journey, I checked at our bank accounts only twice a month on pay day.
I have forced myself to get in the habit of checking our accounts, daily. I logon to our checking account and all of our credit card accounts. It was difficult to do in the beginning so I created an alarm in the morning to remind me. Now it has become part of my morning routine.
There are two things I look for when I login:
- Any fees the banks charged us – If I see a fee was charged, I will call the bank and request for the fee to be waived. 90% of the time, they waive it.
- Our prior day spending – I log every penny that was spent the prior day on our budget sheet.
Checking our accounts everyday has helped us know exactly where every penny goes. Everything is accounted for. If someone asked me how much we typically spend on groceries a month or how much we spent on going out to eat last month, I can answer the questions in 3 seconds. Now that is empowering.
14. We temporarily reduced our 401(k) contribution
This one is controversial, I know.
Trust me, I hated having to reduce our 401k contribution, but I wanted to squeeze as much money into our debt payments as possible and this was one way to do it.
Also, this was only temporary and I knew we would be able to raise back our contributions in the near future. We initially reduced it to 4% because our employers will match up to 4% of employee deferrals. As soon as we paid off our debt, we went right back to deferring a large percentage towards our retirement funds.
15. Sold things that we seldom use
You would be surprised at how much stuff you have lying around in your garage, closets, and drawers that you could sell. And the best part is, you don’t even have to leave your home!
There are so many ways to sell things online. I personally am a huge fan of the OfferUp app because it’s easy to post things and people will come to wherever you want to pick up the item. Some other options include Facebook Marketplace, Craigslist, Letgo, Poshmark, and Ebay. All you do is snap a picture, write a short description, and post!
I was able to make at least a few thousand dollars selling random items that we never use.
16. Use the Debt Snowball method
The debt snowball method is a debt reduction strategy where you pay off debt in order of smallest to largest, gaining momentum as you knock out each balance. When the smallest debt is paid in full, you roll the money you were paying on that debt into the next smallest balance.
It looks something like this:
Step 1: List your debts from smallest to largest regardless of interest rate.
Step 2: Make minimum payments on all your debts except the smallest.
Step 3: Pay as much as possible on your smallest debt.
Step 4: Repeat until each debt is paid in full.
Using the Debt Snowball method gave my husband and I the motivation we needed to pay off over $60,000 in 18 months. We managed to pay off our smallest two debts within the first 3 months and that gave us a huge mental boost!
By the time you’re paying on the bigger debts, you have so much cash freed up from paying off the earlier ones that it creates a debt snowball. Suddenly, you’re putting hundreds of dollars a month toward your debts instead of slowly chipping away at them with minimum payments. You build momentum, and that changes your behavior and helps you get out of debt for good.
17. All bonuses went towards debt
My husband and I get two bonuses during the year, once in the summer and once in the winter. In past years, we would use our bonuses as vacation money, but during our debt free journey we used every extra penny we received from work and threw it towards our debt, instead of mindlessly spending it.
It’s crazy to see how far we’ve come. We went from being completely broke, in debt, and stressed to being happy and financially free.
We do not make millions of dollars, but I can confidently say that we have so much more financial freedom. We no longer worry about money because we have consciously put ourselves in a situation where we can quit our jobs tomorrow and be okay for at least a few years.
I am so grateful.
How did you pay off your debt? Are there any tips you recommend? Write them in the comments below.