In a recent article from GoBankingRates and as seen on Yahoo Finance, 11 people shared their debt free story. The amounts paid off ranged from $25,000 to $300,000. If you add up the overall amount all 11 people collectively paid off it was over $1.1 million! We were fortunate to be included as one couple who paid off $107K in 33 months. When sharing numbers like these there always tends to be a lot of comments expressing cynicism or disbelief which is understandable. While there are supportive comments, the number of repeat claims about what is involved with paying off debt makes it clear to me there are several misconceptions about paying off debt. Knowing firsthand what it takes to pay off debt, I want to share the truth about those who pay off debt.
The Truth About Those Who Pay Off Debt
Have you ever done a complete 180 on what you think about a topic? Regarding this very topic I have completely changed my mind. When I first started hearing crazy stories of people paying off over $50,000 of debt in a couple years I thought they were lying or were lucky.
How can anyone pay that much debt off?
The good news is that I changed and became one of those people I didn’t quite believe or was jealous of.
That mindset I had then is still shared by many out there based on the comments from the article we were included in.
The difference for me though is that I am sitting on the other side of a debt payoff that I once thought was impossible and only for the lucky. With this unique perspective I would like to address 3 common myths about people who pay off debt.
Myths About People Who Paid Off Debt
Honestly, none of the comments appeared to be directed towards us specifically, but for the case of dispelling these myths, I will draw comparisons to our experience.
1. Myth: You Have To Live With Your Parents Or For Free To Pay Off Debt
Housing, whether you rent or have a mortgage, is typically your biggest monthly expense. Ideally, it would account for 25% of your monthly income but for some people that can creep up to 40%. Yikes!
It is easy to think that if we didn’t have to pay for housing then we could pay off our debt. These comments below echo exactly that sentiment.
Personally, we lived on our own paying about $1,200 a month in rent. While if we had fallen on hard times and needed to live with one of our parents we could have which wouldn’t really excite either party, but that simply isn’t the case here. That is a luxury to have that ability in dire circumstances, but it wasn’t part of our story and is not a part of most debt free stories.
It does occur, but you will see that is only part of the story typically.
Truth: You Don’t Have To Live With Your Parents To Pay Off Debt
It took us 33 months to become debt free. Paying $1,200 a month over 33 months meant that we spent $39,600 on rent during that timeframe. Even if we had lived rent free with our parents or someone else, we still would have had to pony up over $67,000 to pay off our debt.
That is a significant amount left over so even if we had been so lucky as to live rent free we still would have had to make a budget and live on less than we earned.
Now, some people do decide to live with a parent to accelerate a debt payoff. The reality is that you give up a lot when you do that. You have less freedom, you get criticized from pretty much everyone (darn millennials), and you still have to make up the rest of the gap.
There is an implication that if you live with your parents that you are lazy. In the situation of people who do live with their parents and pay off their debt, that shows commitment and determination to changing your situation. Paying off thousands of dollars of debt while living with your parents is not a sign of laziness.
2. Myth: You Need A High Income To Pay Off Debt
It seems logical to assume that to pay off over $100K of debt that you would need a significant income or to be “rich”.
The idea of what a high income is can be subjective though. A reasonable assumption of what a high income is starts with at least 6 figures and goes up much higher from there.
Also, from the previous comments in the first myth, there is the implication that free rent isn’t enough, and you will see they coupled it with a high income. Here are some additional comments suggesting a high income is required. I find it fascinating how the level of assumed incomes increase with each comment.
The average household income in the US is about $61,000 a year.
Admittedly, our income was higher than that which is something we have never hid. We started at $83K a year and finished $107K a year.
That was with two incomes though, which meant that if each of us could make about $40K-$50K a year we could hit those income levels. That isn’t unreasonable for a married couple.
In all honesty, we could have cut more, such as a couple vacations, during our debt payoff so we could have done it faster or done it on less income.
Truth: You Don’t Need A High Income While Paying Off Debt
A high income helps, but the critical part is your income compared to your expenses.
If you make $60,000 a year net and then spend $30,000 a year you have $30,000 left over. In another scenario, you could make $100,000 a year net, but then spend $70,000 of that and you still only have $30,000 left over to put towards debt. The income didn’t matter but spending did!
Even if you have a high income there are some massive amounts of debt being paid off in this article. It just goes to show that they are being responsible with their high income and doing what is right for them.
The truth is you need to grow the gap between your expenses and your income.
The easiest thing is to cut your expenses first looking at these areas of your budget. You have the most control over that immediately.
Then look to grow your income either through your job or a side hustle.
This is how people pay off their debt.
If your income is low, you have to get it up or get creative. Plain and simple. But if others demonstrate massive debt payoff can occur with an income like ours or through the measures stated above by another commenter, then acknowledge that.
Do what you can, and you will probably surprise yourself. Otherwise, the income level requirement is just an excuse to delay paying off your debt.
3. Myth: These Debt Payoff Stories Aren’t Real
A couple comments suggested that these stories were outright lies. This either means that we are narcissistic and want attention and/or that we are making up a story to strike it rich blogging.
There might be some narcissism going on, but a small percentage of bloggers strike it rich. Me not being one of them.
Most bloggers, such as myself, write about the mistakes we made. Why would I do that if this whole thing was a lie? It only makes me look worse. Also, lots of personal finance bloggers don’t reveal their identity because it could cost them their job and it allows them to be more honest. It doesn’t really benefit them to be anonymous if their goal is to get super famous.
Also, for those of us that do reveal our identities, there are people that we know that could vouch for us. These are pretty bold claims we are making, so someone could easily call us out for lying considering how many times we tell the same story over and over. Usually inaccuracies start to reveal themselves with repeat tellings.
Whether public or anonymous, those that have paid off debt know what is possible on certain incomes. From experience, I know that one can pay off roughly $30K a year making $80K-$110K a year. If someone paid off $30K a year making $40K then they will either have an extreme situation that they have to back up or they are lying but even that is possible, and they should be commended. Some people do live off very little so learn what you can from them rather than dismiss them.
Truth: These Debt Payoff Stories Are Real
Well, if you want a spreadsheet tracking all our payments, here you go. You can see some of the messiness with it and odd calculations off to the side.
Note: This spreadsheet also happens to be the same debt tracker that we offer for free so that you can track each debt payment you make.
If you want to see our final payment, here you go.
We are real. Our story is real. We are as regular people as you get and so are the rest of the people in the article. Some of which I have personally met.
If you dismiss us it is because you are avoiding your reality.
I know this because I did the same thing.
The truth is that I was jealous of others who were paying off debt. By dismissing debt free stories as fake or lucky it meant that I didn’t have to acknowledge my reality. I could stay a victim.
It is OK to question if a particular debt free story is real, but with more and more stories coming out that have a lot in common it is harder to ignore them. In a way, paying off $100K isn’t what it used to be.
The idea that people are making this up to help their blog is just plain wrong. I am sure somewhere along the way someone has done that, but it isn’t the average blogger who puts tons of time into their site for little return.
Bonus Myth: Every Debt Free Story Has A Blog
Yes, it is actually a requirement from the bank for anyone who pays off their loans early. It is part of your original loan agreement in the fine print.
Just kidding! This is by far my favorite comment because it seems so true. I just had to include it here because I laugh each time I see it.
Getting control of your finances from such a deep hole can feel so empowering. Most of us start blogs because the people around us were tired of hearing us talk about it. So, we started blogs so that we can bore the crap out of you and no longer our friends and family. Guilty as charged.
There are lots of people out there that pay off the debt and never say much about it.
So many debt free or early retirement stories feature bloggers because they are known people who are easy to access. How else is a writer to know who is debt free if that person never steps up to tell their story? Yes, bloggers want more traffic to their sites, especially for the time they put in, but they also want to serve the mission of their site and help people clean their financial lives up.
Do These People Ever Have Anything Go Wrong?
There is an additional comment that I want to address as well.
Let’s be honest, for 33 months everything worked together so that we could pay off debt. There were no job losses, health issues and we didn’t have kids yet.
What we did have was a window to take care of business and get rid of our debt. Neither of us made a lot but together it was more than enough.
I sympathize with people who have long term health issues that prevent them from working, but there are two things about this we should realize.
- It echoes how important insurance and an emergency fund is for when events like that happen. When you are healthy and able you must make these a priority.
- You most likely aren’t injured/disabled right now, but if you are in your twenties there is at least a 25% chance that you will become short-term disabled before retirement. Don’t wait until it is too late to pay off debt and protect yourself.
Two months after my student loans went into repayment in November of 2008 I lost my job. I also just happened to have signed a new lease on my apartment and my car was facing a lot of repairs.
Through relying on credit cards and admittedly some help from my parents who really didn’t want me living back home, I managed to get by and 6 months later I had a job again. I was very good with my money during that stretch of unemployment. Before and after that, I wasn’t.
Life Happens But You Can Move On
Everyone’s circumstances are different, so I can only speak for myself, but by the time I lost my job it was too late. I simply had to ride it out and get by. I didn’t have an emergency fund to rely on. Once things got better I still didn’t take the action I needed to take. It wasn’t until some very real conversations with my fiancé and then wife that things clicked for me.
For those that don’t make much but are able to get by, know that if you raise your income you have the experience to live off less. If you are dealing with an injury that isn’t debilitating seek out those that have overcome it and once healthy take care of business.
I understand getting frustrated with debt free stories or feeling like everyone else is lucky. I was that way once, but once I realized that I have the power to handle my money right, things changed.
Forget about everyone else and see what you can do for yourself. Find stories that resonate with you and know that it is possible.