In this series, NerdWallet highlights people’s ways of paying off debt. This month, Jae Bratton shares how she and her husband focused on paying off debt, motivated by the hope of raising a family.
Paid off: More than $53,000 in 3 years
My story of paying off more than $53,046 in debt for two teachers’ salaries is a story of pain, perseverance, and collaboration. But it’s also very much about love. My husband and I began paying off debt shortly after we got married in 2016, and we made the final payment three years later, just before our son was born.
I was adamant that we would not start a family until we paid off the debt to zero. Rumor has it that kids are expensive, so I wanted to make room in our budget for the inevitable medical bills, childcare, and college funds.
That rumor turned out to be cold fact.
Our four main strategies provide a roadmap for others working toward financial independence.
1. Make a battle plan
Debt is an opponent, a monster that needs to be killed before you can move on to the next level. It requires a well thought out plan of attack.
First, we assessed our opponent by identifying our debt and organizing it in a Google sheet. We had seven debts, including student loans, two car loans, a home loan, and the balance of my engagement ring. When every guilt was conquered, I erased it from the chart, and oh, the satisfaction.
We’ve gone for the debt snowball method of paying off, where you concentrate all the extra payment money on the smallest debt while continuing to pay the minimum on the others. I needed a few quick wins to stay motivated before tackling bigger, more intimidating balances. We paid off our smallest debt in the first three months, $926.
No problem if you prefer the avalanche approach, where the biggest debts are tackled first. The simple act of choosing one that fits your lifestyle and personality is more important than the approach. Snowball and Avalanche are just two different ways to get the same result.
2. Budget consistently
After listing the debt and deciding on a strategy, we created a budget each month. First, we determined our combined income. Beginning our debt-free journey in August 2016, my husband and I were bringing home $4,694 each month. By subtracting mandatory expenses like mortgages and utilities, groceries, and minimum debt payments, we knew how much money we had for additional debt payments.
A few months we paid the minimum debt and that was it. Then, when the money was more plentiful, we made additional payments, up to $3,500 in some months. In both cases, the budget dictated how we spent each dollar and kept us disciplined. Did we stick to the budget every month? Absolutely not. But every month we tried. And as this month ended, we started again with the goal of doing better than last.
Many budgeting strategies, tools, and apps can help you design and stick to a budget. Pen and paper work well too. (My budgets were on sticky notes and dry-erase boards.) Whether you prefer the 50/30/20 budget or like stuffing cash envelopes, know that any budget is better than none. Without them, you risk forgetting about bills, running out of money before payday, and delaying your debt repayment date.
3. Earn or find extra money to pay off debt faster
Send extra money to debt
Most of the big cash inflows left our bank accounts before we were tempted to spend them: tax refunds, job bonuses, and side job earnings. For example, my husband received a scholarship to coach basketball and I taught summer school. We both sacrificed time to make more money, but in a way I got it back with interest: now I can be with my son after work instead of going to another job. This time with him is really priceless.
Increase your income
I spent two years earning a professional certification that increased my salary by 12% and increased my net salary by $250. At that point, my car loan was $223 a month, so it was like an extra car payment.
Many jobs reward employees for adding certifications or credentials. If this isn’t the case for you, consider negotiating a raise or finding another job that pays more.
If necessary, adjust the tax deduction
If you get a refund after filing your taxes, it means too much of your paycheck goes to the IRS interest-free. Sure, that money will eventually be paid back in one lump sum, but you’ll get smaller paychecks throughout the year.
After getting married, I filed a new W-4 to change my filing status from single to married filing jointly. At the same time, I adjusted my withholding taxes after using the IRS Tax Withholding Estimator Tool. That increased my net compensation by $269.
4. Reduce costs
“Just skip the daily trip to Starbucks.” That advice has become a cliché. But paying off thousands of debts takes bolder steps — and more painful sacrifices — than skipping lattes. So I did the following instead.
Charity donations paused
Some people will disagree with my decision to eliminate giving while paying off debt. When, how much and to whom to give is a very personal decision. Taking a brief break from giving to charity has worked for my husband and I. You have to decide if it’s right for you.
Reducing or eliminating expenses is inevitable when trying to pay off debt. The good news: There are many ways to do this. Check your bank and credit card statements and look for trimming opportunities. Here are some ways we’ve reduced our cost of living:
My husband found a job closer to home, cut his commute from 31 miles to 6 miles, and saved on gas.
We waited a year for our honeymoon, paid for mostly in cash from wedding gifts.
We saved whenever possible: I started buying groceries at a cheaper supermarket. My husband, an avid bowler, gave up playing in a league to save about $20 a week in fees. He even switched to a cheaper razor brand.
5. Save strategically
I’ve consistently built my family’s emergency fund, surpassing $1,000, which some say is enough for those paying off debt.
While this decision delayed our debt-free goal, a healthy emergency fund gave me a financial cushion and priceless security. I knew that in times of financial distress I could cover expenses without going back into debt.
Imagine your life after debt
Fuel your debt payback journey by imagining an afterlife.
I felt light and had a deep sense of accomplishment as I made the final debt payment in 2019. For three years I was so focused on our journey. I alternated between regrets about financial mistakes and sorrows about things I couldn’t afford. After paying off $53,000 in debt, I turned my gaze outward and began giving to charity and giving to others again. The best part was that I was free to start a family.
Photo courtesy of Jae Bratton.
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Jae Bratton writes for NerdWallet. Email: firstname.lastname@example.org.
The article How I got out of debt: How two teachers wiped out more than $53,000 originally appeared on NerdWallet.