I remember when I decided to go to Dean Junior College in Franklin, MA. It was the only college that accepted me. In the midst of being ecstatic that someone actually wanted me at their college, I didn't care how much it cost because everyone had student loans.
One year at this junior college cost me $19,500. With the incentive to do well, I transferred to LSU, which cost around $18,000 over the next three years. Once Kayla and I got married and the grace period of student loans concluded, we owed around $70,000 to cover our four degrees (graduate and undergrad) along with one vehicle loan.
But, everyone had student loans. For the most part, this is accurate but it doesn't mean we necessarily liked it.
Newly married with multiple degrees we were staring at $70,000 of debt while making under $38,000 on two incomes. In fact, over the last five years we've never made over $60,000 in yearly income. This is important to note because we paid off debt while making under $30,000 per person.
Before we talk about the lovely "B" word, I want us to talk about our perspectives when it comes to being financially free. The budget is the least significant part of debt payoff. It's a system. But, the system can't be executed without willing individuals operating it.
Let me also give a disclaimer: We never went through an organized financial process -- like Financial Peace University with Dave Ramsey. In fact, I never heard of Dave Ramsey until years into our system. There's many things I agree (and disagree) with him and his philosophy.
The important thing is to find a system and strategy that works for you. That's the best one!
Here's four strategic things we did to pay off our debt:
1. We set a goal.
From the very beginning we had an end in sight. We wanted to be 100 percent debt free by 30-years-old. That gave us seven years to pay off $70,000.
We did the math. We had to pay roughly $10,000 a year to debt. I remember looking at our first married (two income) budget and laughing. There was literally no way possible we could afford $833 a month allocated to debt.
But, we started with what we could afford. We were comfortable at $400 a month, which was the summation of all the minimum payments on our loans. It would be tight, but we figured after a year of doing this we could increase that amount. After all, we had a goal in place.
2. We said "no" a lot.
As we started at $400 a month we slowly paid off the first loan. We then did what Ramsey calls a snowball. True story: I thought I came up with this in my early 20s -- yeah, I was wrong!
The $400 turned to $500, which turned to $700, which eventually climbed to $1,200 a month for years.
When you are paying 35 percent of your monthly budget to debt you have to learn how to say no. We've said "no" so much that people seriously do not even ask us to go out to eat with them anymore.
It wasn't just eating out that we politely stiff-armed. We said "no" to a considerable amount of things:
- No to cable. (here's a life-hack: Hulu is $7.99 a month. You're welcome)
- No to unlimited data. (we have a 3GB plan)
- No to new clothes or shoes -- maybe once a quarter.
- No to new furniture. (a lot was gifted to us, so that helped)
I could go on. Something we did always value was vacation. It was something we would say "yes" too. To live an intentional life to debt payoff -- you must, must, say no and be content with it.
3. We capitalized on secondary income.
From the minute we both had full-time jobs we always had secondary income. Whether it was designing resumes, building websites, writing for magazines, or even a part-time administrative job -- we understood that to hit our goal we needed secondary income.
Instead of using the secondary income to improve our way of life or what we could spend that week, we put it all toward debt.
In 2015, we were paying the $1,200 toward debt, which we we're doing for years. However, I had a job that paid commission. We used the hourly income to "live on" while we agreed to use the commission toward debt.
This one year -- with the secondary income -- nearly doubled our yearly debt payoff, which ultimately allowed us to be debt free a lot quicker than our original goal.
Did we want a second job? No. Our full-time ministry jobs created enough on our plates, but we prioritized paying off debt. We wanted to be financially free.
4. We waited to start a family.
There's one element that helped accelerate our debt payoff. We decided to wait to start a family until we paid off our debt. God honored that request.
When we set a goal in 2013, we knew we couldn't achieve that plus adding a member to our family.
I'm not suggesting for you to do the same -- it's very personal decision by you and your spouse, but it is key for our context. For some of you -- staring at your debt with a child is daunting.
Honestly, it's not something in which I have experience. There's a good chance you can't do what we did because of life-stage, but I'm certain you can do something.
Something ... that's the goal here.
Let's talk about a budget.
I've been asked for years to help individuals with their budget. I've sat in countless one-on-one meetings and described my system. I'm certain there hasn't been one person who has stuck with it.
That's not a dig toward anyone, but living on a budget is all about discipline. It's no different than trying to eat right or work out. It's all discipline.
In a budget every dollar has it's place. A budget allows you to tell your money where it goes. The discipline comes in when you see you have $1,300 in your checking account, but according to your budget, you have $100 of spending money for the week. Once you hit $0 from that $100 -- it's over.
Here's an approximate estimate on our budget breakdown.
Debt: Student Loans, Car, etc.
Housing: Everything household related. (Rent, Electricity, Internet, Hulu, etc.)
Giving: Supporting the local church and missionaries.
Living: Everything that costs money. (Car insurance, gas, phones, spending money, haircut, dog expenses, clothes, groceries, etc.)
Savings: Building a general savings account.
A few notes:
In your context, "giving" may not be a priority, which I understand. I believe because of the context of giving even in the midst of our lack (in some cases) that a Supernatural God created a way for us to debt free. You may call that crazy, but it sounds about right to me!
In college before we started paying off debt, we individually saved money. When we got married we had thousands of dollars to start. With a nest egg set, we put in a small amount because we wanted to attack our debt.
I don't consider a mortgage bad debt, nor do I student loans. An education is an investment into yourself as a individual and your career. A mortgage -- in likely instances -- is an investment you should receive increase from over time. Don't ask me to add how much rent we've thrown down the sink in six years.
In late April we finally reached the finish line -- we paid a total of $70,000 of debt in just under five years.
I hope you can gauge our heart. I've opened our expenses, debt, and even salaries all to paint a realisitic picture. You -- yes you -- can work toward being debt free. You can do something. You can.
Call me a weirdo, but one of the most fulfilling things I've ever done was click "pay" on a loan. I treated it like a game. What's the fastest way I can get this number to zero?
Some of you make a significant more income than what we make together. Some of you don't. But, you can do something!
I really hope you're encouraged to look over those steps. They truly worked for us. I've waited years to write a blog like this hoping that it could inspire just one person to do the same.
On a personal note: Kayla and I are expecting our first child in October. We're (hopefully) moving into our first home in June. The pie-chart is going to look a lot different very soon. But, there's now margin being debt free to live a life of freedom.
We can't help but thank God (literally) that he was ultimately the orchestrator behind it all.
He inspired the goal. He gave us the discipline to keep our perspective right. He opened up opportunities to supplement our income. He honored our request of waiting on family.
Pay off your debt. Start now. Strategize and dream of that day it's gone. It's closer -- and easier -- than you think.
If you have a specific budget-related question or want to talk further about it, fill out the form below or leave a comment. I'd love to answer any questions!