How We Paid Off $100,000 of Debt on a Single Income

Hello! Today, I have a great debt payoff story from Sarah. Sarah is a Southern California mom of 3. She blogs over at Let’s Talk Mom Business about the budgeting and frugal living strategies she and her husband used to crush $100,000 in debt while living on one income.  Shortly after having our second child…

Michelle Schroeder-Gardner

Last Updated: April 7, 2021

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Hello! Today, I have a great debt payoff story from Sarah. Sarah is a Southern California mom of 3. She blogs over at Let’s Talk Mom Business about the budgeting and frugal living strategies she and her husband used to crush $100,000 in debt while living on one income. 

How We Paid Off $100,000 of Debt on a Single Income #payoffdebt #debtpayoff #manageyourmoneyShortly after having our second child 6 years ago, my husband and I decided that we wanted to get serious about paying off our debt.

We had been making our monthly payments, but we weren’t really making any progress. Some months we were even adding to our total debt by paying for unanticipated expenses on our credit card. 

I am a stay-at-home mom so we were living on one income, and we knew that carrying such a large amount of debt was dangerous, especially without much of a savings. 

We outlined a strategy to budget by paycheck using a zero-based budget, and I created a budget binder to help us track our finances.

This strategy helped us pay off $100,000 in 4 years on a single income while growing our family (and we’re NOT rich!).

Other debt free stories to read:


Where Did Our Debt Come From? 

When my husband and I got married, I was completely debt free thanks to my parents’ help with college and a car. My husband’s debt wasn’t over the top, but he did have around $35,000 in school loans. 

The rest of the debt was accumulated in the first several years of our marriage. My husband needed to have $20,000 worth of dental work done over a 3 year period. 

We also moved quite frequently for my husband’s job, and we sold a home after only owning it for a short period of time. We took a fairly substantial loss on the home after all of the real estate fees. 

And we can’t forget credit cards and car loans on two new cars. We had essentially been living slightly above our means month after month causing us to rack up around $12,000 in credit card debt.

In total, we had just slightly above $100,000 in total debt.


How to Create a Plan that Works for Your Family

I truly believe that there is no one size fits all approach to budgeting, because every family has different priorities and resources. There’s no set amount you should spend in a specific category or save as an emergency fund. Those things are very different from family to family.

The very first thing we did was to sit down and talk about our goals and priorities along with what we were willing to give up.

Like most couples, my husband and I are different in the way we view finances and how we prioritize things, so we needed to compromise on things like eating out, clothing purchases, leisure activities and vacations.

This conversation helped us outline spending categories and set realistic goals around how long it would take us to pay off our debt. You may decide to be more or less aggressive on your debt payoff time table than us based on your own goals.

Our main priority was that I continue to stay home with our kids, so we had to outline our budget in a way that allowed us to pay off debt but also add to savings to protect ourselves from things like unexpected job loss or large emergency expenses.

Next, we printed out 3-6 months worth of financial statements to include checking account, savings accounts, credit cards, and loans. We wanted a realistic picture of what we were actually spending each month in our budget categories. For example, we thought that we were spending $800 per month on groceries, but we found out we were actually spending around $1400.

I find that a lot of people, ourselves included, believe they spend far less than they actually do in many areas of their lives. Looking at our spending history over several months gave us a more accurate picture of our spending habits.


The Budgeting Method We Chose

We are paycheck budgeters who use a zero-based budget to track our finances. I am the one in charge of our family’s finances, and I have been a pen and paper person over budgeting apps since the beginning. We could never figure out an app that both of us could stay consistent with. 

Budgeting by paycheck means that you create a mini budget for each individual paycheck. When you receive a paycheck, you essentially write out all of the bills that fall within that given paycheck. You then take the amount that’s left over and assign that to your variable expenses like groceries, entertainment, dining out, and so on. You can adjust how much you spend in these variable categories to open up income to allocate towards debt and savings.

You assign every single dollar of that paycheck a job until you have zero dollars left to plan for, which is a zero-based budget.


Who does Paycheck Budgeting Work Best For?

I honestly think that we will always be paycheck budgeters, even if we have a lot leftover at the end of the month some day in the future. I believe in assigning a job to every single dollar and being intentional with finances.

That being said, paycheck budgeting is amazing for people living paycheck to paycheck like us. I really struggled with a monthly budget, because if you give me $800 to spend on groceries for a month, I’ll spend $600 of it in the 10 days leaving nothing leftover at the end of the month.

With paycheck budgeting, you’re setting goals for a shorter period of time, which I find much easier to track and stick to. 


The System We Set Up for Our Finances 

When we first started budgeting by paycheck, I had a sticky note on my desk that listed the paycheck amount along with all of the bills that needed to be paid with that paycheck.  

When it came to our variable expenses, savings, and debt, I was kind of flying by the seat of my pants tracking everything and tallying totals. I decided to create my own budget binder to track all of our personal finances in one place. I ended up with a 25 page budget binder that I use to track and manage all of our money.

I follow the same steps every month to track and document our progress towards various financial goals.


How We Track Our Finances Step-by-Step


Step 1: Print Out a Blank Monthly Calendar

Each month we print out a blank monthly calendar and write down which days we receive paychecks along with due dates and amounts for our fixed bills. This helps me see which bills I will need to pay within a specific pay period. 

I also write down any special events where we may need to spend money outside of our normal budget. This could be things like holidays, birthdays, scheduled date nights, kids’ extracurriculars, scheduled car maintenance, or pretty much anything that’s anticipated but not typical to every single month.

This gives me a really good picture of what to expect for that month so I minimize surprises.


Step 2: Outline a Monthly Budget

I know I said that we budget by paycheck, but I still outline a monthly budget at the beginning of every single month. Seeing the bigger picture of a month helps me set up more realistic spending goals in our variable categories. 

I use the monthly calendar that I created to account for any unusual expenses and adjust our budget accordingly for the month. 

A monthly budget is also really helpful if your rent or mortgage is a very large portion of your budget. We have been in positions over the years where our housing expense has been 40-50% of our monthly income. That means a mortgage or rental payment will take up most or all of an entire paycheck. A monthly budget helps plan for how much you need to roll over from a previous paycheck to cover all of your expenses.


Step 3: Break Your Month Into Pay Periods by Paycheck

Once I have a good picture of our monthly income versus expenses, I can budget by paycheck. We receive paychecks every other week (bi-monthly), so I set up two mini budgets within each month.

For each paycheck, I write down the amount of income received and list all fixed expenses such as utility bills with their amounts. I then calculate how much we have leftover after fixed expenses to allocate to our variable expenses including: groceries, dining out, entertainment, and miscellaneous. 

Once I’ve assigned a budget to our variable expenses, I calculate how much we have leftover in that paycheck to assign to debt payments and savings. After I’ve accounted for these, we should have zero dollars leftover in our calculation. 


Step 4: Set Up Systems to Follow-Through  

Of course it’s amazing to have our budget outlined and ready to go, but it’s only a bunch of numbers on some paper without a plan to actually stick to it.

The first thing we did was to automatically withdraw our savings from each paycheck. This went towards a retirement account and an emergency savings. The amounts were taken out of each paycheck automatically so that we weren’t tempted to spend that money. We basically adjusted to a new paycheck amount. 

As soon as the paycheck hit our checking account, I immediately made our debt payments. We found that if we waited until the end of a pay period, we overspent on variable expenses and weren’t able to pay off as much as we wanted.  

Once our savings was transferred and our debt payment was made, we were left with the money that would go towards fixed expenses and variable expenses.  


The Simple Method We Use to Track Our Spending 

When we were in the midst of our debt journey, things were really tight. We set up a realistic plan that we felt we could both stick to, and we knew that if we swayed from that plan we would be living outside of our means. 

Cash envelopes were (and still are) all the rage at the time, but I did not like the idea of carrying a large sum of cash around me with me. I was scared I would lose an envelope and our entire grocery budget would just vanish.

I also didn’t want to have a several different check accounts with their own debit card linked to it to create a digital version of cash envelopes. It just felt too complicated. 

To track our variable spending each pay period, I created my own cashless envelope system. I created three envelopes to track our spending:

  • One was marked food and covered our grocery spending and dining out as a family.
  • The second was considered miscellaneous and covered any family entertainment, random purchases at the store, or anything that didn’t fit within a category. 
  • The third was my husband’s lunch and coffee budget for work. He liked to go out occasionally, so this gave him the freedom to do that.

I put the ‘food’ and ‘miscellaneous’ envelopes in my minivan. I’m the one doing the bulk of the shopping, and we’re typically all together as a family in that vehicle on the weekends. I used these envelopes to collect receipts and track spending on the outside of the envelope. This made it easier to transfer everything over to my budget binder.


How to Communicate as a Couple 

Before jumping into our debt journey, my husband and I hardly ever discussed our finances unless something major was happening. About every 2-3 months we would take a look at our accounts and wonder why our debt was adding up so quickly when we didn’t feel like we were overspending. 

The way we worked to improve our communication was to start weekly money meetings. These weekly money meetings became a part of our budget binder and walked us through our progress and any challenges each week.

We were able to identify areas we were overspending sooner so that we could make adjustments before it got out of hand. It also reduced arguments since there were never any surprises.

Each of us has an area where we struggle to reign in our spending, so it helps us hold each other accountable. Also, seeing all of the numbers on paper regularly really helps to keep our motivation levels up.

Related content: Family Budget Meetings – Yes, You Need To Have Them


What About When Debt is Paid Off?

After 4 years we were finally able to say that we were debt-free! It would be so easy at that point to loosen up, but we set our sights on new goals. We don’t have debt anymore, but we are still living on tighter margins where we have to be really intentional about saving money.

Our goals have shifted to more specific savings goals, and we are using the same paycheck budgeting method to do that. This method really helps us avoid lifestyle inflation and falling back into the debt trap.

Related content: What To Do After You Pay Off Debt


Final Thoughts

Paying off a large amount of debt often feels like a huge mountain you’ll never be able to overcome. I can still remember feeling slightly hopeless that our financial situation could actually change just a few years ago.

You can create a budget that is easy to track and allows you to live a little. Long periods of feeling deprived make it hard to stick with it. Prioritize your goals and find a system that works for your family.

It is so worth it on the other side when you’re able to plan for the future rather than paying for what happened in the past.

Do you have debt? What are you doing to eliminate it?

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Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. all good things are possible to those who believe and do the transformation business work ๐Ÿ™‚

  2. Jennifer

    Hi Michelle! I enjoyed reading this post and found all your tips to be extremely helpful – I will definitely be keeping them in mind for the future. I am in a slightly different situation, but nonetheless a situation that involves debt. As a student with loans to pay off, I struggle to find a method that works and that I can actually stick to. Since I am currently in school, I simply do not have the time to work a full-time work-load and make serious income. I was wondering if you have any advice for students looking to pay off current debt while also trying to save money for the future. Thanks ๐Ÿ™‚