Just over one year ago, my husband and I started on a journey. We had over $66,000 in debt from a 2nd mortgage, a car loan, furniture purchase and student loans, not including our first mortgage.
While our interest rates were relatively low, ranging from .09% to 6.8%, we knew we did not want to carry all this debt for a long time. So, we set a goal: 3 years. Our plan was to pay off all our debt within 3 years or less, no matter what.
Planning to pay off our debt was only part of the solution, however. Changing our mindset and our spending habits was actually the first step in our journey. As our income increased over the years, we had increased our expenditures proportionately.
It was easy to justify buying a home, going on another vacation or upgrading to a new car as we got more promotions and salary increases. While I would consider my husband and I to be financially savvy individuals, we too admittedly started to fall into the spending trend many people find themselves in as income increases.
Unchecked, this can easily become a vicious cycle adding up to more and more debt.
Though my husband and I were very happy, we found that our increase in expenditures over the years caused an increase in stress and desire to pay off our debts as fast as possible. Just because we have started down a path did not mean we had to keep heading down it. Just like you can back track in the woods on a hike, you can realign your financial goals and get back to the basics. That’s exactly what we decided to do.
So, my husband and I sat down and did the math.
At our current rates of repayment and spending, it would be many, many years until we were debt free. It did not settle well with either of us. After a few hours of compiling statements, adding up balances and signing up for ReadyforZero.com (great debt resource), we began creating our map out of the woods.
We came across so many different methods of debt reduction and elimination. There were the debt snowballs, avalanches and everything in between. There were methods that suggested cutting every unnecessary expense including cable, eating out, lattes and date nights. Some people resort to extreme couponing or taking on additional jobs.
Many methods suggested tracking every penny spent and allocating every dollar.
There was a lot of information and there was a lot to consider. We knew that finding a general model and just subscribing to it would not work for us. We had tried budgeting in the past and it was cumbersome. We tried not eating any meals out in the past and we failed within two weeks. There were a lot of things we were uncertain about, but one thing was sure: we knew we had to make our own plan and we had to create our own custom financial future.
So, we talked.
We argued a bit.
We talked some more.
What came from the discussions was amazing. Not only were we creating a plan toward our financial future, but we were planning our lives and establishing goals together. We decided on short term goals, 1-2 year goals and long-term retirement oriented goals. My husband is more of a spender and I am more of a saver. So we had to compromise and agree on what was the right decision for both of us. We were communicating and it felt good.
Ultimately, we agreed on a hybrid approach that was simple, but effective.
We established a savings plan that would get us to 6 months emergency expenses within a year. We would save 15% of our income toward retirement. After our basic monthly bills are paid, we would use the remainder of our income toward increasing our debt repayments (using the avalanche method) and we would hold off any other major debt purchases for the next three years. We focused on all debt other than our primary mortgage and we would track our progress via ReadyforZero.
We also made small adjustments in our daily lives and expenses.
We started taking lunch with us to work daily (saved us $30-40 a week) and limited eating out to 3-4 times a month (usually with a coupon or GroupOn now). We kept our television (we love tv shows), but switched to DirecTV during a $300 Costco gift card promotion and it lowered our monthly bill. We recently purchased life insurance to ensure financial stability should something happen to one of us.
We have found ways to enjoy our lives and being with each other without having to spend money. We have managed to lower our monthly expenses by 10% while increasing our debt repayments. In addition to lowering expenses, I started working for a local consultant for 10-15 hours a month (an extra $250) and my husband umpires baseball games during the summer (about $40 a game). As a result, we have thrown an extra $3,000 toward debt in the past year.
Our debt payoff progress.
We started our plan in early October 2014 and we are 12 months into it. We have paid off just over $22,000 in debt since we started and have $44,000 more to pay off. We have also saved up 5 months of living expenses in our emergency savings account and want to save until we get to 6 months expenses.
We are on track to pay off our debt within the next two years and possibly earlier, considering we are putting all bonuses and tax returns toward debt repayment. We now have our map and we are finding our way out of the woods.
Our hike and journey will be long and I am sure we will have moments where we get lost; after all, maps do not account for life circumstances. We may even need to re-create our map in the future. But one thing is for certain; my husband and I have learned how to help ourselves and how to find our way.
We have weathered a few storms and we are preparing to weather more. We are getting back to the basics of enjoying life and working toward financial independence.
Most of all, we have learned how to be happy while spending less.
Author bio: My name is Brittney and I live in the beautiful Rocky Mountain state of Colorado. My husband and I both work in education and have two loving, but stubborn, labrador retrievers. I started my personal finance blog, Life On a Discount, to not only motivate myself to stay on track with paying off $66,000 in debt (accrued through student, mortgage and car loans), but to also share with others how my husband and I stay motivated by still enjoying and living life through strategic discounts, one day at a time.
How are you doing with your debt payoff journey?