We paid off $107,000 in 33 months making an average salary. Seems impossible, right? Challenging perhaps, but not impossible. Paying off all our debt was very possible once we set our mind to it and had a plan in place. The process took a lot of patience, but it was well worth the effort. There were some bumps along the way but with consistency we got there sooner than we ever thought possible. Here’s how we paid off $107,000 of debt in 33 months.
Before we get into how we paid off our debt, I think it is important to understand where we started. Oftentimes the mindset and motivation is much more important than the logistical steps we took to get there.
I Wasted My Twenties
Debt had been a normal thing in my life for at least 10 years prior to us starting this debt payoff. It was what I considered part of being an adult. Managing debt was commonplace in my life. I was single for most of that time and that contributed to me just ‘managing’ vs. ‘taking action’.
I continued the poor mindset of a college student into my working life and it set me back years. The result was that I wasted my 20’s managing and accumulating debt instead of building wealth.
As my student loans increased so did my credit card debt. If I could make the payments I never thought twice about the credit card debt.
I thought those that were out of debt were ‘lucky’.
I was wrong.
I have since learned that being debt free is about being intentional.
When my student loan payments hit after Graduate school I ‘suddenly’ had to manage about $600 of minimum payments each month in addition to my credit card payments. Sallie Mae, who I owed about $36,000 (a fraction of my debt) at the time, advertised being able to lower your monthly payments.
I called them up and they said they could lower my payments from $450 a month to about $250 a month. I was on board. To do so they changed the terms of my loans to be paid off in 25 years instead of 10 years. What I saved monthly was eclipsed by the thousands I cost myself in interest over the next 25 years.
This move basically summed up my 20s with regards to money.
Just Another Day
One random Sunday morning after church service I was talking to my Dad during coffee hour and this beautiful young lady and her Mom came up to us and introduced themselves. We exchanged pleasantries but nothing of substance was said in the conversation.
After they left my Dad looked at me and said, “you really blew that.”
I responded by saying “don’t worry, I got this.” Honestly, my track record with girls suggested I did not have it. This felt different though.
I remember thinking at that moment that I might have just met my future wife. That came true, but I would have no idea how impactful that day would be in my life when it came to money.
I quickly made my move after that meeting and we started dating. Maybe I did have this after all.
On our second date I mentioned that I had student loans. Erin, who was in school at the time for a second degree said that she had student loans as well although mine were twice as much.
I then said I had credit card debt. She responded by saying that she didn’t. Wait, what?
Why didn’t she have credit card debt?
What I learned over the following months was that she was a great saver and had been investing in her 401K and a brokerage account for stocks. She lived in a small studio because that is what she could afford. I know, that is crazy talk.
We both had debt, but, she had a drastically different view of living within her means. She didn’t ‘manage’ her debt. She had plans to pay hers off right away. This was a far cry from me trying to lower my payment and increasing the interest I would pay over the life of the loan.
She was the type of person I aspired to.
Well, things worked out and we got married in June of 2011.
When we got married we combined our debt. Three months later we financed a car. Our debt had quickly escalated.
There was a lot of moving pieces between my credit card debt, my student loans, her student loans and the car loan.
There was no question for us about whose debt was whose though. It was our debt. The income that each of us brought in was ours. It was up to us to sort through this mess together.
The First Domino
Once we got engaged we started discussing how we were going to tackle the debt. We didn’t combine our finances until we were married, but there were some difficult decisions that needed to be made right out of the gate.
The first 6 months of our marriage we sorted through my credit card debt. We took the money that Erin has invested and paid off my credit cards. You heard that right, we took the money she diligently saved coming into our marriage and paid off the debt I had recklessly accumulated.
She showed faith in me and it was up to me to deliver.
The good news for me was that the credit cards were gone from my life. I could start new and prove to her that I could change.
We were now left with the student loans and car loan.
I should add that isolating credit card debt and student loans is not how I would recommend doing it now, but that is how we did it for lots of reasons. It was very emotional debt for us and that was the decision that personally made sense for us at the time. I think we were also in denial about the larger debt number and it was easier for us to just focus on the credit cards.
A Closer Look At The Numbers
So, the weekend after New Year’s Day of 2012 I received a raise and a bonus. I said to myself that I finally wanted to start tackling the rest of our debt.
The next day we got the idea to add up our debt and see how much we had. We took each loan and added it up one by one. The number just kept getting higher and higher.
When the dust settled we saw that we had $107,043.73 of debt. Whoa!
Our combined income at that time, even after my raise, was $83,000 a year. We had more debt than we made in a year. While our income was higher than the average household in America which is $59,000, I’m going to go out on a limb and say our level of debt was higher than the average household.
By adding up our debt that morning we completed the first step to getting out of debt. If you haven’t done that then that is the first thing you need to do after reading this article.
Please note these are not listed in the order we paid them off. It was just how we listed them out originally which shows you the variety. Go to item #6 to see what order we paid them off.
The next day I told my family that we were going to pay off $107,000 of debt within 5 years.
They were supportive, but probably skeptical at the same time. This was because they hadn’t heard of anyone doing that without inheriting money or winning the lottery.
They needed to see it to believe it.
It couldn’t just be talk. There had to be action.
I had hope though.
The Dave Ramsey Show
I randomly came across the Dave Ramsey radio show and I was instantly intrigued but I didn’t know what I was getting myself into.
His book the Total Money Makeover is a staple for those looking to get out of debt.
The show is primarily listeners calling in to ask Dave questions. I started to hear stories that were worse than mine. I also knew that I wasn’t alone.
Each episode also features what is called a debt free scream. These opened my eyes.
At first, I was obstinate and didn’t quite believe them. Through repetition though I started listening and heard stories that I could relate to. The difference was that these people had taken action.
They were seemingly paying off more debt than I had in less time than I did.
The day we added up our debt and saw that we owed $107,000 I knew that we could do this. I shared with my wife that on the Dave Ramsey show people pay this amount off all the time in a few years.
Because of that show, we believed that we could get rid of this debt once and for all. That was the only thing that gave us hope.
If you don’t have a positive mindset at this moment about debt payoff, keep listening. It will change for your benefit over time.
How We Paid Off $107,000 Of Debt In 33 Months
The following items are the critical steps we took to blow this debt out of the water.
1. Make A Budget
Once we knew how much we owed there was another set of numbers we had to figure out.
We had to do a budget.
How else would we know much we could put towards the debt? We knew that there was extra money to be found but weren’t quite sure how much.
I never really kept a budget before. My idea of a budget was looking at my checking account and seeing if there was money in it. That wasn’t going to fly if we were going to tackle this debt.
Erin had introduced the app Mint to me.
This is a great place to input your budget and track your expenses in one spot. This was huge for us. Honestly, I can’t reiterate this enough. This is a must.
Mint made budgeting less boring. Since we had a bigger goal of debt freedom that also helped it to not be so dreadful.
Did we fight over the budget? Yup.
Our fights always centered around entertainment. I liked to go to concerts, buy music and Architecture books. That would have to stop. Erin’s form of entertainment was to buy a fountain drink for $1.50. Somehow, I didn’t feel like we were giving up equal things.
I was getting caught up in the small stuff though. The big goal meant much more to us than the small things.
2. Stop Eating Out
A critical part of the budget is your food budget. This is our biggest struggle to this day although it is easier now than it used to be.
If we wanted this debt gone, we had to control our food spending. Here are 3 key ways we did this.
- Take our lunches to work
- Limit the amount of times we ate out each week to 1-2 times total
- Have food ready to go for meals
After taking my lunch to work every day I started to notice this strange phenomenon. There was the same amount of money in our bank account on Thursday as there was a few days prior. By not eating out every day it helped us get out of the notion that our bank account was drained a little each day.
Just seeing this reinforced that we could do this. We saw that there would be a significant amount of money left over at the end of the month.
Here is some more information on how to keep food budgets low including how we spent $280 total one month.
3. Made Spending Cuts
Eating out was big but we also needed to look at other areas for maximum effect. I mentioned that we cut entertainment as well and made a specific effort to streamline those costs.
We also made the following cuts.
- Got rid of cable and replaced with Netflix
- Kept phone costs low
- Stopped going to concerts, movies, etc.
- Kept cost of clothes shopping low
- Erin stopped dying her hair
The thing to realize is that small cuts do add up. They can be powerful and when we combined reducing our food expenses and these other cuts we found an additional $1,200 in our budget that first month.
4. Examined Our Why
No one likes to make cuts but the reason why we were able to do so is that we had a plan and a reason for why we were doing this.
This why is what helped organize all our decisions and keep us on track.
Quite simply, we were newly married and were being asked if we were going to buy a house and have kids. What people didn’t know was that we had $107,000 of debt!
That is life changing and not in a good way.
On top of that, if we did have kids, Erin wanted to stay at home with them which meant only one income. That wasn’t going to happen if we had this debt.
So, when making spending cuts we didn’t look at it as depriving ourselves. Instead, we saw the goals down the road and saw that we would gain having a house and family without debt. That was a huge motivation!
It is critical for you to find your why when getting your finances on track and to be reminded if it daily.
5. We Tracked Our Payments And Went Deep Into The Numbers
I will admit that this isn’t everyone’s cup of tea. Now, I don’t like tea, but I do like spreadsheets.
We made a comprehensive spreadsheet that tracked every payment we made towards debt. Not only that, we broke out the amount that went toward principal and interest.
It was critical for me to know this information so I could feel in control for once and all.
I wasn’t interested in letting the lenders tell me how much I owed. The idea was to dissect the payments and understand why we owed what we did.
I learned how to calculate interest on debt and made an amortization schedule for every single loan we had.
Then I calculated how much we would pay if we just paid the minimum payments for the life of the loans. Talk about a wakeup call!
In combination with the amortization schedules I saw that we would be making payments into our early 50’s and that $107,000 would actually be about $156,700 including interest.
If we weren’t motivated before hearing the success stories, we were now. We saw an opportunity to recover that money.
When all was said and done we saved ourselves about $40,000 in interest! That is $40,000 that we could now use to build wealth for us. It is a huge shift from paying interest to making interest.
6. We Used The Debt Snowball
We had 15 loans total. Where would we even start?
Enter the debt snowball. This is what Dave Ramsey recommends and since I had never heard of so many people having success with debt that is the route we went.
The debt snowball is where you start paying the loan with the lowest balance first. The alternative is the debt avalanche where you pay your loans off starting with the highest interest rate.
While the math says the avalanche method is the most cost effective, it isn’t necessarily the most successful for people completing their debt payoff. We wanted results though, not just math equations.
About half way through I change the order slightly to create the most efficient order based on our loans. This was calculated by more spreadsheets I made showing every possible order of loan payoff. It resulted in a hybrid method.
At that point I found something to motivate us beyond the snowball method.
That is the key. The snowball does the best job at keeping you motivated. If you can find something else that motivates you even more then go for it.
A great site that allows you to calculate you’re snowball and avalanche approach with your specific loans is Undebt.It. Check it out if you haven’t.
7. Set Monthly Goals
From the very beginning I realized that we couldn’t focus on the whole amount at once. We just needed to focus on what we could do that month, week or even day. The rest would fall into place.
These small decisions you make daily are really what makes all this possible. As a result, we established monthly goals that these decisions would affect.
At the beginning of each month we completed our budget. This gave us the idea of how much money we would have at the end of the month to put towards debt.
With 15 loans it wasn’t uncommon for us to be paying one off every 1-4 months at a time. If possible, we aimed to finish paying off a loan each month.
If that was not scheduled to occur that month we would try to hit a milestone such as $80,000 or 50% complete.
Since I was tracking all the numbers we had the ability to find a goal.
We always found something to strive for each month to keep us moving forward and that method was a huge part of keeping us going.
8. Debt Thermometer
As part of the monthly goals we established we tracked our progress using a debt thermometer. We broke the debt down into $3,000 increments and colored in the thermometer every time we hit that next $3,000.
For just a piece of paper, it sure did hold a lot of weight with us and kept us motivated.
What was so great about it was that it served two purposes. It was like the carrot at the end of the stick and we kept pushing to color in the next $3,000. It also helped us to see just how far we have come. It is a long journey and when you get frustrated it is helpful to look at this and realize what you have achieved.
Between this and the other goals we always found something to strive for each month.
When we made our debt thermometer there weren’t a lot of resources on the internet for us to use. We had to make our own. I have since made one that automatically fills in the numbers for you that you can download at the link below.
9. Celebrate Your Victories
Step by step, as we got closer and closer to our goal it became more and more apparent that we’d be debt free.
Celebrating small victories and giving ourselves credit along the way was so important.
As we made progress we would take a day trip or maybe go out for a special meal when we did eat out.
As a result, we really appreciated those moments which made them more special. It wasn’t just another meal out. These had meaning.
Oftentimes, during these events we would discuss our progress and talk about next steps. They became productive not only as a goal to reach for but also to guide us forward.
There is room in your budget for small victories and rewards and I encourage you to celebrate your victories.
10. We Used Previous Money Saved
When we started our debt payoff we had about $10,000 in the bank that we had saved in the prior 6 months but mainly from Erin’s prior diligence.
Most likely, you have some cash floating around that you can use as a resource. Once we got on a plan we knew what to do with that cash and how it could better work for us.
While Dave Ramsey recommends keeping $1,000 only and pay off debt with the rest, we didn’t want to just pay off $9,000 of debt right away.
The reason why was because we had so much debt that we had to look elsewhere to solve the larger problem. If we were going to be successful it was through the daily decisions and actions we made in order to be successful.
So, throughout our payoff we pulled from that money and slowly took it down to $1,000 by the time we were done.
If our debt was $9,000 then that is a no brainer, but for us, our hole was much deeper so we needed a different shovel so to speak.
11. We Increased Our Income
I mentioned earlier that when we started we were making $83,000 a year after that raise I had received. Erin was also in school. Eventually, she graduated and got a better paying job. We also each earned raises through that time.
When we were done we had boosted our income to $107,000 a year.
We now had more income than debt at that point. It just goes to show how much you can change during a short time.
Each raise was put towards debt. Typically, most people allow their lifestyle to inflate with each raise. If we wanted to get rid of that debt we had to keep our lifestyle steady and pay off debt with it.
We also sold some stuff and Erin even had a small extra job to earn some more money.
Cutting your expenditures is critical, but you can sometimes only cut so much. Increasing your income after cutting makes a big impact on your progress.
12. We Believed
There’s a powerful catalyst towards achieving goals you might have. That is knowing it’s possible!
So, let us tell you this. IT IS POSSIBLE.
We know it is possible because we have seen others do it under more difficult circumstances.
Having previously failed at paying off debt on my own, I can tell you that something was different this time. We were going to do this. We believed this time.
While the marathon of paying off debt was overwhelming, we knew at the end of the day we’d eventually get there. Listening to other people’s stories was key to our success. By listening to other people’s stories, we came to the realization that we were no different. No more of this “it might work for them but not for me” business. We could have the same success.
No more ‘buts’ and no more excuses. These success stories let us know that those no longer applied.
The Dave Ramsey show was a great way to learn from other people’s stories. We listened to what worked for them, believed we could do it too, and then did the same things they did. Their actions lead to success for them so there was something to learn from it.
Blogs and podcasts are a great way of also finding these stories too.
13. We Were Willing To Try Something New
Being willing to try something new and apply those actions are important.
Many of us have the tendency to keep trying the same thing repeatedly, doing what “works for me”, and thus yielding the same results. It’s important to step back and look at other people who’ve had success and emulate their actions in our own life. If you want to be good with money, surround yourself with other people who are good for money.
If you and your friends are broke, then you need to try something new.
In my case, I couldn’t just manage debt anymore. That clearly didn’t get me to where I really wanted.
We had to be open to change.
A book I recommend is The Millionaire Next Door. The habits of the rich will show you what rich people actually do.
Hint – It isn’t what poor people do or what we think the rich do.
Success Is Exponential, Not Linear
When we looked at the cold hard numbers and projected our debt payoff date it was overwhelming. Erin found the time factor of the equation to be the most frustrating.
When it came to our debt, she didn’t want to wait 5 years. She wanted to fix it now and be done with it. Of course, given the size of our debt this simply wasn’t an option. We had to stay the course.
By doing so we ended up achieving our goal in 33 MONTHS! While we believed from day 1 it doesn’t mean we had all the answers, but we were willing and open to change.
The journey taught us so much and was really a stepping stool for future success that we could have never imagined on that eventful day of adding up our debt and taking that first step.
When we completed our debt payoff we went to Nashville to do our Debt Free Scream in Dave Ramsey’s studio!
Pay Off Debt
It’s so easy for the “numbers” to get you down. Whether that is the amount of debt you have or the amount of money in your bank account.
Just remember your current state of finances is not a reflection of the present. Your current state of finances is just a reflection of the past and decisions of yesterday.
What matters is what you do NOW.
Eventually your present will become your past. It’s time to move forward and show kindness to your future self. Approach your debt payoff with love instead of fear.
Payoff the debt to empower yourself and provide a better future instead of being motivated by fear of poverty and piling debt.
I promise you, there are many exciting things waiting for you on the other side.
Regarding snowball vs avalanche, I think the best way is whatever your friend or relative or coworker is doing deserves support. It’s not so much a time to argue which way is best but encourage one another in making progress.
107k in 33 months is pretty darn impressive!
Thanks! Totally agree on just being supportive of whatever someone chooses. The snowball vs. avalanche is a divisive topic actually, but yes, if it is working for that person then be supportive. Otherwise, talk through it to see why one over the other is important to them.
Wow, congrats! This is such a major accomplishment in a short amount of time. Thanks for sharing your journey.
Thanks so much! Looking back I still wonder how we did it but it never seems like you are doing something remarkable when in the middle of it.