(I’ve recently updated this post to add detailed info about our income.)
As the creator of this site, I’m really happy to finally be able to tell our OWN debt free story here today. Of course I’d love to to see your debt free stories here too!
So here goes:
We’re officially debt free! We’ve paid off approximately $147,106 in debt — including our mortgage. (About $52,000 of that amount was consumer debt.)
Tell someone that you’ve paid off your house (along with a slew of other debt over the years), and you’re likely to get responses like these:
1. How did you do it?
2. How long did it take?
3. I wish I could do that.
Well, let me speak to that last response first: You CAN get out of debt. You don’t need debt to get ahead, or to buy the things you want. You can stand on your own two feet — saving for emergencies and the things you’d love to do. (Stuff you probably can’t do very easily right now, in fact, because of all the payments you’re making.)
Becoming debt free is totally doable, so long as you’re willing to do what it takes.
What it takes to get out of debt
If you wish you could pay off debt (whether that’s your house, your credit cards, your student loan, or something else) you’ve got to start by doing something that’s not as obvious as it might sound:
You’ve got to stop borrowing more money.
That was by far the biggest step we took. (And the hardest thing to do, in retrospect.) It sounds so simple too, right? “Quit borrowing money.” Well, duh. Yet many of us get so used to using debt for everything — emergencies, things we forgot, stuff we want — that the idea of getting by without it doesn’t even seem realistic.
But trust me, it is.
You CAN get by (and AHEAD) without using debt by saving up money for emergencies, planning for regular and irregular expenses, saying no until you’ve got the money for stuff you want, and getting creative about what you do spend money on. That’s how you do it, and how we did it.
It’s hard at first, because most of us aren’t used to doing that. But it’s absolutely doable. And once you start paying stuff off, it becomes easier and easier because your money isn’t flying out the door to service debt. The first time you pay off a debt and no longer have to send in that monthly payment is AWESOME.
Remember this: As long as you don’t give up, you can get out of debt.
Now, on to how long it took.
Our debt free story
We didn’t pay of $147,106 in debt overnight. In fact, if we’d sat down and figured out how long it would take us to become completely debt free, house and everything, I’m not sure we would have even started. Luckily, we didn’t even consider doing that.
Paying off our credit cards
We just wanted to pay off our credit cards, which were a combined $17,000 or so. That part took about 3 years, mainly because we didn’t really know what we were doing then. We didn’t use the debt snowball method to pay them off (because we hadn’t heard of it), and we didn’t know much of anything about personal finance.
Instead, we each (separately, since we weren’t married yet) used CCCS, paying them a monthly fee to basically talk to the credit card companies and come up with a plan. That worked for us, but looking back, we could have done it SO much faster if we’d only known what we know now. (And if we’d set up a debt snowball ourselves.)
Because it’s not about making “one easy payment”. It’s about changing our behavior. And we didn’t, really — with the (critical!) exception of deciding that we were never going to carry a balance on a credit card again.
Shortly after that, I lost my job. And it took me about four years (during which I tried to start my own business, and job-hunted) to get another one. But that was ok, because we felt like we were debt free — even though I had student loan, we had a mortgage, my (now) husband borrowed money to buy a car, and I borrowed money to buy rental property (which isn’t even included in the $147K total).
We didn’t try to pay anything else off during that time.
The most important parts of our debt free story: A mindset change, and goodbye loans
In late 2005, two important things happened: I got a part time job and we changed our mindset.
Suddenly — after years of living on pretty much nothing — I had money coming in. It felt like a fortune to me, and in 2006 I decided to pay off my long-deferred student loan, which had a balance of $9,759.46 left on it after years of sporadic payments. It took me less than 5 months to knock that out. (Click here if you want the details).
More importantly, I began learning about personal finance, and talking about it with my husband. The idea of becoming debt free really started to sink in for me.
My husband got on the bandwagon too, and decided to pay off his $15,500 car loan, which he’d taken out in March of 2004, and he began sending in extra money to it at full tilt — finishing it up in December of 2006. (If you haven’t guessed by now, we keep “yours, mine, and ours” finances.)
I came to my senses and sold the rental property. Then we began tackling the rest of our debt. We paid off the $10,000 no-interest home improvement loan we’d taken out. My husband and I paid off our last bit of consumer debt in October of 2009.
So that’s more than $35,000 in debt paid off in three years — while making almost the same amount we did while spending three years paying off $17,000 in credit card debt.
Taking a break
Then we took a break. After all, we were “debt free”, except for the $95K or so we owed on the house. We got our emergency funds fully funded. We began contributing to retirement with a vengeance.
Then we went through another layoff, which lasted more than a year. Eventually, we got better jobs and got raises.
We took trips various places. We paid for multiple surgeries, braces, college tuition for my son, months of weekly vet visits for our sick cat, more home improvements, a slew of “minor” car repairs like replacing a transmission, and major car repairs after an accident.
And somewhere during all that, we got the wild idea that we’d just go ahead and pay off the house, too. So we started off 2009 with the vague goal of paying off the mortgage early.
By 2010, the goal was to “Pay a minimum of $35 extra per month toward the mortgage”. (Hey, at least it was more specific.) Well, we did that, and then some. Sometimes we slacked off, and sometimes we hit it hard. My husband did a few odd jobs. I brought in extra money with my side business — a business that by then meant I essentially had two full time jobs.
By late September 2011, we were down to $49,500. We just kept at it, sending in as much as we could, as often as we could. There were some months when we made 8 payments to the mortgage, in varying amounts. And we obsessively tracked our progress using the debt tracker app I created.
Bottom line? We paid off that last $49,500 in less than a year, becoming completely debt free in August of 2012.
A hockey stick
If you graphed our debt payoff progress, it would look like a hockey stick. (A lot of slow progress that gradually sped up over time until it shot up with what seems like an unbelievable speed.)
But that’s the way it works. Getting out of debt is slow going at first. You’ve got to get the hang of it, you’ve got to get determined, and you’ve got to really want it.
You’ve got to want it most, and then make it happen.
You get through the setbacks, and start looking at them as personal challenges to overcome. You keep going through the down times. Recharge, and get fired up.
Until one day, you’re DONE.
It’s so worth it!
There’s more to the story, of course
Motivation (along with only spending money you already have) matters a whole lot.
However, motivation doesn’t mean you have to be gung-ho and upbeat all the time. It means you have to keep going anyway, no matter what, and make changes as needed. Even if you feel like crap.
Sometimes you might need to regroup, and I hope you have some fun too, but don’t let the bad times cause you to give up.
Because if you don’t get back on the horse again after the setbacks you encounter, you won’t succeed.
So there’s that. And while it’s hugely important to do that, it’s only part of the story.
You also need money. So let’s talk about that now.
There are two ways to get the money to pay off debt. You can reduce your expenses, and you can increase your income. It helps to do both whenever possible, and that’s exactly what we were able to do.
Let’s start with the money we made
Here’s a chart that shows our earnings and what happened during those times:
Obviously 2012 is when we paid off our house.
You can see that our income varied a LOT while we were paying off debt, but especially mine. I also had a young son during that time, and got $200 a month in child support. That’s not included in the chart.
Here’s our same income shown as a graph:
I have to stress again that we kept yours/mine/and ours finances the entire time. I’ll write more about that in a future post, but the gist of it is that we each sent the same amount of money to our joint account each month to cover our housing, utilities, and groceries. (This wasn’t a large amount for either of us.) Then we each paid the rest of our own bills and our individual debts. We both paid off the house together.
So basically, we had a good income much of the time, except you know, for when I was living below the poverty level. I didn’t pay off debt when I barely had any money. Instead, I reduced expenses during that time because I wanted to eat.
So let’s talk about expenses next
By reduced expenses, I mean I cut pretty much every single thing except:
- the money I sent to the joint account for my half
- gas money to take my son to his dad’s house, and to go to interviews
- liability insurance for my 1990 car
- some clothes and shoes
- gifts (but I found ways to get many of those for free)
- pizza now and then
- business expenses
I lived off the $10,000 emergency fund I’d built by having gotten a second job shortly before losing my first job in 2001, $200 a month in child support, $200 a month in unemployment, and some earnings from wedding photography (although those were mostly offset by the expenses.)
When my mom died, I also got a small inheritance from her. I used that money to go to Hawaii, spend about $1500 on our wedding, and put a down payment on a condo whose rental income equalled its expenses. So none of that money went to debt, savings, or even living expenses. Maybe that wasn’t the greatest use of the money, but it’s what I did.
Luck does help
I was lucky during the bad years, because I already had a place to live. I also drove a used Miata that I’d paid off before that just by making payments until the end of the loan. The 1990 Miata I chose not to replace with a brand new 2000 BMW Z3 after getting a job at a dot com. The dot com I was later laid off from.
I was lucky that I got divorced and got a grip.
That I saw how unstable things were at work, and got a second job to build an emergency fund. That my (now) husband moved in when my roommate left, and that I had a supportive boss who GAVE me money for a car repair.
Lucky my health problems didn’t prevent me from working, etc.
Luck does help, and I’m grateful for it. I don’t think anyone ever achieves anything all on their own, and almost no one gets anything by pure luck.
And I believe that choices matter too, in all kinds of situations.
When I finally started making money again, do you know what I did with my spending? I increased it some, but not by much until after I paid off my student loan.
Even now, we have significantly fewer monthly expenses than most people I know — not even including things people typically borrow for.
Then when both our incomes increased dramatically, our debt payoff increased dramatically too
Those things did not happen by accident.
I did everything I could think of to make more money: from filling out $3 surveys, to negotiating a huge raise (after first quitting), to working full time and sometimes more in my own business. I essentially worked two full time jobs for YEARS. My husband also found ways to make extra money, and he worked full time at better paying jobs.
Did we want to work so much? Not really.
Did we want to be out of debt MORE and still do things we enjoyed? Yes.
Was it worth it? YES!
I wish the joy of debt freedom for you, too. And I believe in you.