When bad habits and poor choices joined together with medical issues and loss of income, it was a marriage bound for debt disaster. It took us over 15 years before we decided it was time to divorce our debt. Now we are celebrating our first DEBT-iversary!
It’s been a whole year since we started attacking our debt. May 2017 was the first month we made a debt snowball payment, and we’ve had quite a wild ride. Through all the good and bad times, we managed to pay off over $30,000 of debt in the first year, and we have a plan to do just as much or more in the upcoming year!
This post contains affiliate links. For more information, please read my full disclosures.
It’s still amazing to me how much we were able to pay off just by changing our habits and lowering our expenses. Of course, we still have a LONG way to go, but we have NEVER made this much progress in one year (or 5 years). You can see some months were better than others, but the key was consistency! You have to stick with it through all the twists and turns. It’s WORTH IT!
|2017 – May/June/July||$6,912.63|
|2017 – August||$1,602.62|
|2017 – September||$6,875.22|
|2017 – October||$2,462.47|
|2017 – November||$1,543.72|
|2017 – December||$1,880.48|
|2018 – January||$1,249.82|
|2018 – February||$4,157.08|
|2018 – March||$2,032.54|
|2018 – April||$1,841.17|
|TOTAL DEBT PAID||$30,557.75|
I’ve been working on a post that digs deep into the details of the changes we’ve made, but here are the top 5 changes that have helped the most.
1. Budgeting with YNAB
Finding YNAB (You Need A Budget) was truly life changing. We had a budget and tracked our spending, but our system was not effective! We were drowning in debt and totally stressed. YNAB changed everything. It even got us to face reality and stop using credit cards when we couldn’t afford things.
Seriously, budgeting rocks. Most people think budgeting leads to deprivation, but it really doesn’t! It gives you complete control, which then leads to feeling more free – free from worry and stress and guilt!
YNAB is a budgeting tool that you can use on the web, on your phone, and on your tablet. It allows you to assign your money to categories so you have real numbers to work with. Instead of wondering IF you can afford groceries and gas, YNAB will show you HOW MUCH you have assigned to each category. Then you can feel confident in your spending decisions because you know spending on one thing won’t wreck your plans for something else.
Although YNAB started as software, it’s SO much more than that. YNAB has an entire budgeting philosophy and they offer tons of free training and support. For all the details, read my YNAB Review.
2. Stopped “saving” beyond $1,000
We were technically trying to save money each month because that’s what you’re supposed to do, right? We never actually accumulated anything because our overspending would lead me to transferring the money right back into our checking account, but I was always feeling guilty or worrying about it.
We worked hard to get a baby emergency fund in place of $1,000. Once we had that, we stopped saving and stopped thinking about it. While it’s not much, it’s more savings than we’ve EVER had in our adult lives. It gives us peace of mind that we won’t have to use a credit card if life goes crazy. Surprisingly we haven’t touched it even with all the unexpected things that happened, but it’s there if we need it.
In case you are wondering, we DO plan to build up to a 3 month emergency fund after we knock out the debt. For now, the $1,000 is plenty for us.
3. Reduced expenses
We reduced costs on many of our bills including natural gas, electric, internet, water, wireless phones, and insurance! We also utilized balance transfers when possible to reduce our interest costs while working to pay off the debt once and for all.
I put my ROTH IRA contributions on hold for now, and I cancelled Weight Watchers. I have a retirement plan at work that is more than adequate, and I’ll start adding more to my ROTH IRA again in a few years. Weight Watchers used to be my top priority, but I hadn’t been going to meetings or following the program. I was just paying to feel guilty about not going. I can always rejoin when I’m ready!
I wrote another post about finding money to pay off debt that might give you a few more ideas. What worked for us may not work for you, but it should at least get you thinking about what WILL work for you. You have to do something different if you want different results.
4. Created a debt pay off plan using Undebt.it
Undebt.it is a free website that helps you create your debt payment plan and figure out what method works for you. You can also see how extra payments can speed up your pay off. As you record your payments each month, you can see progress reports and updated pay off dates.
Finding this service was a game changer for us in terms of debt. Once we saw all the debt in one place, we were able to create a solid plan of attack. We had tried doing this before with spreadsheets, but the website is SO much easier. We can change one detail and have our entire plan adjusted automatically. This is especially helpful if we are considering a purchase that would take money away from our debt payment for the month. We can plug in a reduced payment for the month and see what the impact would be on our big picture.
Gone are the days of “figuring it out later.” Now we can easily see the impact of our actions and make better decisions because of it.
After a few months using Undebt.it, we ended up paying for the premium membership so that we could customize our plan even further. It’s only $12 per year, but it’s not necessary for everyone. You can create your entire plan with the free service. (I also wanted to pay for the premium membership to support the developer since his service has helped us SO much.)
5. Tracking our progress
My monthly debt reports on the blog help us track our progress, and it has really saved my motivation many times. I’ve wanted to give up and spend money so many times I’ve lost count. When money felt tight or emotions were running wild, seeing the numbers in black and white helped bring me back to reality. Even if the progress is small, we have moved forward every month instead of falling further behind.
Of course you don’t need a blog to track your progress. Use a spreadsheet, use an app, or even use pencil and paper, but DO IT. Check in EVERY month to see your balances going down. You won’t believe how motivating that can be. It’s easy to get caught up in the stress and emotions and not realize that you’re still making progress.
The other thing that helps us is tracking our TOTAL progress instead of each individual bill. We are paying minimums on every debt except one. We put ALL of our extra money on one debt. Once it’s gone, those payments roll over to the next one. If I was tracking progress on the debt that is our lowest priority, it could be very discouraging. Looking at the BIG picture and seeing thousands reduced each month is really exciting.
We still have close to $155,000 in debt, or $108,000 without the mortgage. (GULP!) That’s STILL a big chunk, but it’s way lower than last year.
The majority of our debt (around $65,000) is student loans. We’re saving now for Landon’s college and teaching him better habits so he doesn’t deal with this crap when he’s an adult.
We also have 1 auto loan ($15,000), 3 credit cards that were 0% balance transfers (home equity loan $5,548 & student loan $19,828), and our mortgage ($46,000).
When we started out, our average interest rate was only 4.9%, but we were paying $725 per month in interest. Our average interest rate is now 4.1%, and we’re paying around $525 per month in interest. Dropping our interest rates by 0.8% doesn’t sound like much, but it’s saved us $200 per month in interest! We utilized 0% balance transfer credit card offers, and refinanced a student loan to get our overall interest cost down.
Our plan has us paying off EVEN MORE over the next 12 months which is really exciting to see. We have 2 big debts that will be paid off in 2018, and 2 more in 2019!
Some people and some experts would argue that we could have paid even more than $30,000 over the past year. I’m sure that’s true. We didn’t live on beans and rice. We still ate out (on a budget) and bought birthday gifts for family and toys for our son. We even splurged on a night away for our anniversary.
I firmly believe that we’ve been able to stick with it BECAUSE we’ve still allowed ourselves to live a little. Given the amount of our debt we had, it was going to take awhile no matter how strict we were. Is it worth it to be miserable to pay things off a few months faster? Not to us. We are not spending extravagantly, but we are budgeting for fun along the way.
You have to find a solution that’s livable in order to stick with it. Of course we’ve made some tough decisions or passed on some activities, but it was our choice. We would rather get out of debt than spend more money on restaurants and shopping.
It’s okay to say “not right now.” Many things we want (new car, new house, new computer, etc) are not true needs right now. We know in a few years we will be in a better position to indulge our wants, and waiting and saving is a good lesson for us to learn. If we knew about being patient 20 years ago, we probably wouldn’t be in so much debt today!
Once we had a handle on our spending (thanks to YNAB), we learned how to use credit cards responsibly. We now use our credit cards like debit cards and ONLY use them to buy something that is already in the budget. Using our cards this way allowed us to earn $810.71 in cash back and $723.19 in bonuses over the past year. That’s over $1,500 earned just for using credit cards and paying them off immediately!!
I do NOT recommend this unless you have a good handle on your finances and you have a system to stick to your budget. It’s too easy to overspend when using a credit card if you aren’t worried about having enough money in your account to cover it. Thanks to YNAB, we know immediately if we have gone over budget on a category. Then we have to move money from another category to cover it so we do not increase our debt.
We had lots of challenges this year and STILL paid off over $30,000 in debt. We’ve had car repairs, broken legs, funerals and weddings, toddler expenses, and more. It’s never going to be EASY, but it was simple.
Once we really clarified our priorities, it wasn’t nearly as hard to make the decisions that we used to really struggle with. Once we defined our WHY, the motivation followed. Do NOT accept that drowning in debt is just a way of life. It doesn’t have to be, and it’s easier than you think!
How has your financial picture changed in the last 12 months? If you’re not happy with it, NOW is the time to change!