In my last post, I shared about all we accomplished in 2016 and talked about how we paid off $30,000 in loans this calendar year (A 2016 Look Back | The Budgeting Wife)! This has been such an awesome celebration for us and I’m glad we got to share this with you guys!
I know that $30,000 is a good chunk of change, but I want to be transparent and show you the relativity of this $30,000. In 2016, my husband and I are still starting our careers and working entry level jobs. This year we made a combined household income of about $70,000 before tax. After tax we brought home about $52,000. We don’t make a whole lot as millennials of 25 and 22 just starting out, but we were able to put over half of our take home pay to our debts.
I am sharing this and our accomplishment not to brag, but to show you that is is possible-even as a millennial when the deck feels stacked against you. You can get out of a large amount of debt (yes, even in an entry level job) and live the life you want to live! Here’s how we paid off $30,000 of debt in 12 months!
1. We got organized
If you’re looking to pay off debt, the first thing you need to do is figure out how much debt you have! When we got married we sat down and figured out exactly what loans we had, their balances, and their interest rates to come to a grand total of $80,000 in debt. We then came up with a game plan. We enrolled in automatic payments on all our loans and then focused on attacking one debt at a time. It’s important to stay organized, figure out how much your owe, who you owe, and track where your money is going.
2. We got on a budget
Every month we sat down and created a budget-or a written plan. This is the backbone to paying off debt and if you want to learn how to create a budget, check out Creating a Budget. We used the budget every month to balance our income and expenses. Because we were able to make sacrifices in our budget, we were able to put the remainder of income after regular expenses straight to debt. This ended up being over half of what we brought home every month. The budget helps us plan and track where our money is going. I am also nerdy and make it like a game to see if I can cut down on regular expenses for the month to add a little bit more to debt. Every extra dime we could find through an extra babysitting gig or by cutting back from the budget went straight to debt.
3. We lowered our cost of living
We live in Portland, Oregon. Ranked the 13th highest cost of living city in the United States. That in itself is discouraging! But we tried to lower our cost of living in all aspects. We cut our housing costs by renting a small one bedroom apartment to even moving in with my parents to save some extra cash. We saved on electricity by using energy-efficient bulbs and using more blankets in the winter. The only extra utility we had was internet. Cable is so expensive and not worth it!
We also didn’t eat out. OK. Maybe a couple times we went to Chipotle or Chick-fil-A, but this was a once a month kind of thing. The only other times we would go on dates to restaurants was if we had a gift card. Instead of restaurants, we’d go on a few drives or walks around the neighborhood, and a whole lot of Netflix for date nights. By not eating out, we kept our food /grocery costs to about $200 a month.
4. We said “no” to A LOT
This is the hardest thing we had to do to get out of debt, and it shows just how serious we are. We had to say “no.” No to entertainment, no to wants, no to extras. A whole lot of “no’s.” We’re not trying to be grouchy people! We’re just trying to watch the budget. We know that saying no to things now will mean that we get to say yes to awesome things down the road. We only really buy things we need. In our monthly budget we did allow $25 per person each month as fun money, but that’s really not a whole lot. I’ll get a pedicure every couple months or grab a cup of coffee with a friend now and then. But if I’m out of money in my fun budget I have to say no. The part to look forward to is knowing that I get to say yes to a whole lot more in the future.
5. We utilized the debt avalanche
In previous posts I talked about How to Become Debt Free Quickly and Debt Snowball v. Debt Avalanche. These were the methods we used to pay off debt. We used the debt avalanche method to order all our student loans from highest to smallest interest rates and pay them off in that order. This helps decrease the amount we were paying extra in interest. It was also a checklist and was exciting when we paid off another loan entirely and got to check it off. The motivation that comes with the debt avalanche is what will keep you going.
So there you have it. We paid off $30,000 this year simply by doing these 5 things. Sounds easy but it’s surely hard. When you want to get out of debt, you’re going to sacrifice a lot now for the joy and freedom that you will get later. Delayed gratification is something to practice, my friends. I hope that this is an encouragement to you if you are trying to pay off loans. You can do this! YOU can become debt free!
Photography by Donny Zavala Photography