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Keep reading to learn how we used adversity to pay off debt.
Pay off debt: Neiko's story
Pay off debt: Alexis' story
I was a high performing student throughout most of my school career. As a result, that translated into over $150,000 in scholarships and grants to attend Emory University.
Certainly, this lowered the total amount of student loans required for tuition costs. However, there was still a leftover balance.
Consequently, that resulted in roughly $25,000 in undergraduate loans. Not bad for an institution that was $50,000 per year. But, still 25,000 reasons why I was still in debt.
After that, dental school was up next. That is where the real debt monster reared its ugly head. I attended Tufts University School of Dental Medicine on a partial scholarship that covered at least half of my tuition.
However, half of nearly $72,000 plus supplies and fees every year I was racking up quite a bit of debt.
Thankfully, although I’d dug a big hole of debt, with my income and willingness to sacrifice I obtained a huge shovel to fill it.
Marriage and combining our debts
In 2013, we met at Emory University. We had a long-distance relationship while Alexis was attending dental school in Boston. After that, we got engaged in late 2017.
Shortly after, we got married in February 2018. Our decision to get married was followed by combining our debts and income. Our income fluctuates each month.
So, it was easier to combine our income to handle finances. In fact, this removes the money arguments that couples tend to have.
7 strategies we used to pay off debt
1. Organized our finances
To start, we sat down and figured out our financial plan. We needed to see our plan written out to come up with a plan to start paying off our debt. Above all, we wrote out the type of debt we had, amounts, interest rates, etc.
By taking the time to organize our finances we were able to create a plan to attack our debt. Ultimately, this gave us the confidence to go after paying off our debt.
Below are the type of debt and amounts we started with:
- Medical ($3,700)
- Credit cards ($11,700)
- Auto loans ($116,000)
- Student loans ($325,000)
2. Started a monthly budget together
One of the biggest things we always talk about is creating a plan for your money by sticking to a strict monthly budget. Having a budget allows you to tell your money how to behave.
After getting married, we started budgeting electronically using EveryDollar. We work very hard for our money. So, we got to the point of treating our money with respect.
Most importantly, we have a monthly meeting set on our calendar to sit down and do our budget. It involves reconciling the past month and preparing for the next month.
There are a lot of options for budgeting. You have to pick one that works best for you. All financially successful people have a budget for their personal life and/or business. This allows them to guide their money and create good habits.
3. Debt snowball payoff method
To begin with, there are a ton of strategies for paying off debt. Ultimately, you want to pick a method that works best for you. After trying a few different methods, we decided to use the debt snowball method.
This approach works regardless of the type of debt you have. Personal finance requires intentionality. Getting out of debt doesn’t happen by accident.
- List your debts smallest to largest by the remaining balance. Ignore the interest rates.
- Make the minimum payment on all of your debts except the smallest one. Throw all of your extra money at the smallest debt.
- After you pay off the smallest debt, take that payment amount and roll it into the next lowest remaining debt. This is the debt snowball!
- Continue this method until you have paid off all of your debt.
4. Set realistic goals and held ourselves accountable
Unfortunately, this topic is not discussed enough. When facing a mountain of debt it’s best to set some realistic goals so you won’t give up. During our initial conversation facing $450,000 in debt we set a goal to pay it all off within 5 years.
Our goal was to pay at least $100,000 a year to debt. Based on our income and monthly expenses, this was a difficult yet realistic goal.
We have found that each year we were able to pay our debt off much faster than expected by cutting our lifestyle and expenses. This made the debt-free journey much more special.
Above all, a very helpful tip we use is creating milestones similar to managing a project. Ultimately, this gives a realistic view of the financial goals that you want to hit along the way.
A great way to create some realistic goals is by using a debt payoff calculator.
5. Sacrificed our lifestyle
Creating a budget is a very important step, however, taking it to the next level is finding where you can cut costs within your budget. In the end, this allows extra money to go towards debt.
The biggest categories to focus on first are:
- Eating out
6. Increased our income
Paying off debt can seem like a long process. But, increasing your income can speed up the process. Once you create a very strict budget, it is time to find ways to increase your income.
There are hundreds of ways to find extra income. Below are some of our favorites:
- Swagbucks (cash rewards)
- Ibotta (cash-back)
- Survey Junkie (online surveys)
- Starting a side hustle (blog, etc.)
- Selling items on eBay
- Focus groups
- Trim (money-saving app)
- Rakuten (cash-back)
7. Celebrated when we reached a goal
Reaching a goal is a huge accomplishment and should be celebrated. The fun in the journey is removed if there’s no celebration throughout the process. Whether it’s paying off a small debt or your final debt you need to celebrate all of your wins.
We normally celebrate by going out to dinner or having a movie night with our favorite take-out. Ultimately, the key is making sure you keep momentum and staying motivated.
The debt snowball method allowed us to knock out debt fast and move right along in our journey.
Final thoughts on paying off debt
One of our favorite bible verses is Proverbs 22:7 “The rich rule over the poor and the borrower is slave to the lender.” Our decision on attacking our debt was one of the best decisions we’ve ever made.
Getting out of debt is not easy, but the short-term sacrifice makes it worth it in the long run. Most importantly, living in debt takes away from your future.
The strategies that we have talked about will help you pay off your debt much faster than you think.
How would it feel to be debt-free?
How would being debt-free change your life?
What are some roadblocks you are facing from getting started?