This article is part seven of a series I’m writing explaining exactly how my family and I paid off over $90,000 of consumer debt in less than two years.
$18,702! That’s all that remained of my family’s non mortgage consumer debt which had peaked at $90,415 only 17 months earlier.
My wife and I were using the debt snowball method of paying off our debt and even we were surprised with how effectively this debt repayment technique was working.
We had battled through the “reluctant spouse” issue, tweaked our monthly written budgets, cut back our monthly expenses, and both of us were working an excessive amount of overtime at our respective jobs.
Our monthly take home was over $6,700 per month and we now had over $4,000 of “discretionary” income to apply to our debt snowball payment each month.
All that remained from our original list of debts were two student loans at an “average” annual interest rate of 4%.
Had we stuck with our debt snowball plan, we could have easily paid off these debts in less than 5 months and been free and clear of any financial obligations other than our monthly utility bills.
Unfortunately, my wife and I had been bitten by the housing bug and we convinced ourselves that “now” was the time to purchase a new home before real estate prices rose even higher.
The Housing Bubble and Our Plan to be Debt Free
Instead of using our $4,000of “discretionary” income each month to repay our remaining student loan debt, we decided that we would be “better off” if we saved for a down payment on a new home.
At the time, we were living in an incredibly small apartment in Cambridge, MA with my sister in law (this helped share our housing expenses). The “housing bubble” was reaching its peak, and my wife and I decided that buying a home for our new family was our highest priority (you know, before homes became too expensive for us to afford! [lol]).
Further encouraging us to suspend paying off our remaining student loans and save for a new home was the news that my wife and I were expecting our first child (due in July 2006).
We had always wanted to move back to Maine (our home state) to settle down and raise a family. Now that our financial situation was improving (less debt, more income, and better money management skills) we convinced ourselves that we “needed” to purchase a home.
Our snowball payments went directly into our new home purchase fund and by November of 2005 we had a decent down payment saved along with an emergency fund of about 3 months worth of “expenses”.
Like most first time homebuyers, we had been keeping up with the real estate market with eye for the perfect home to purchase.
After a few weeks of driving through neighborhoods, talking with locals, and researching various school systems (for our unborn children), we fell in love with a two story home in the area we wanted to be in.
The house was already under contract with another buyer but there was a clause that allowed the seller to accept offers from other individuals as well.
The first buyer was in the process of selling their current home and they didn’t qualify to carry two mortgages (if they bought the new house before selling their old one). If the seller accepted a “secondary” offer, the first buyer would be forced to close on the house within 72 hours or the secondary offer would become effective.
Looking back on it, making a secondary offer on the home and forcing the original buyers to make a move was probably not the friendliest thing to do.
When we learned the original buyer had arranged the financing to purchase the home my wife and I were devastated. There’s a reason real estate experts tell you not to get emotionally attached to a property before you buy it!
This unfortunate turn of events was actually a HUGE blessing in disguise! It allowed us a second chance to prioritize our financial obligations and do the right thing for our long term prosperity. Now that we had overcome the housing bug, we had money in our savings to pay off our remaining student loan debt and be completely debt free!
On November 22, 2005 and my wife and I wrote one check for each of our remaining student loan debts. I was 28 and she was 26, it was the first time in our adult lives that we had been completely debt free! All the hard work and sacrifice had paid off and we were on our way to financial independence.
For some, it may not have seemed that we had much of a life during the process. In actuality, the debt snowball phase was an incredibly fulfilling time in our lives. It brought my wife and I closer together, and helped us to appreciate the important things in life. We were no longer buying things we couldn’t afford to impress people we didn’t like (as financial guruDave Ramsey likes to say).
With no more debts to pay, a steadily increasing income, and improved money management skills, it wasn’t long before my wife and I had rebuilt our emergency fund along with a healthy down payment on a new home. By the summer of 2006, construction was nearing completion on our custom built home, our first daughter was born, and the days of my family’s frivolous spending was over (hopefully)!
In addition, our careful budgeting and planning allowed us to downsize to one income as my wife stayed home to care for our newborn child. You can read more about this decision here.
Each individual situation is different. Yes, we had a decent income during this two year span, but we also had a lot of debt. With the focus and determination my family and I had (once we decided becoming debt free was a priority), I’m confident we could have become debt free on less than half the income we had.
I hope that sharing our debt free success story has inspired you in your own financial goals! What started off as a single post entry has evolved into more of short story of what not to do financially and then how to fix it.
I also want to thank those of you who have sent me encouraging emails and made thoughtful comments throughout this series! If you haven’t already, please consider subscribing to my free daily email updates! I have many more money stories to share, and your subscription will ensure you don’t miss a thing! Also, feel free to share this story with friends and family!
If you have any questions, comments, or you just want to share your own debt free story, please leave a comment in the form below!
Thanks for reading, and GOOD LUCK!
{ 27 comments… read them below or add one }
Thank you so much for sharing your story! I have to wonder… How much do you think that “dream home” that you almost bought is worth today compared to what you were prepared to pay for it then? Hmmm….
You know…we got caught up in the home buying fever in 2005…unfortunately, we didn’t have anything get in the way. We are living with the pain of that decision, and it is VERY difficult. Having found Dave Ramsey and his books, I have hope now, but I’ve had 4+ years of agonizing over our horrible decision. Stories like yours give me hope, too.
I’m sorry to hear about your predicament Anna. If it wasn’t for a lot of sweat equity when we building our house, we’d probably be in a similar situation!
Keep positive!
I’m confident you will overcome your situation in short order based on your enthusiastic comments! Good luck and thanks for your encouragement as well!
Wow that was one hell of a story and a very important blog series too.
I have about $35-40k of debt right now and it’s hopefully getting locked away in debt management and I waiting for the companies to freeze interest, which it looks like they will.
That leaves me the opporytunity to save up that cash and then pay off in lump sums…. My earnings are only around $1-1.5k a month right now but I am convinced this will double by the end of the year and I can get some capital behind me to get them gone.
Thanks for the serious inspiration…. Will be following all posts from now on.
Thanks for your postings. I was eagerly waiting each day until your posts popped up on google reader. Just an awesome and hopeful story. I bet every purchase you make now feels so much better.
Thanks for the inspiration!
Thanks for the encouragement Ted! It is amazing how our family’s paradigm has shifted when it comes to making large (and in some cases small) purchases.
This culminated with the purchase of our “new” Toyota 4Runner we purchased with cash early last year!
I’m glad you found our debt free success story motivational and thanks for signing up for my email updates! I’m not sure if I’ll be able to top this latest series, but I have some interesting personal finance articles and stories lined up for sure!
Ben,
Excellent writing. After finding your site from your post on The Total Money Makeover Money Talks yesterday (Feb 13) I bookmarked and read it this morning with my coffee. You and yours will be happy to know I will be pointing those who I work with on their debt-free journey to your site. I begin to sound like “blah, blah, blah” to them, you will give a different voice (in words) to what we both know is the only way to be (i.e. debt free).
Dave’s Babysteps are so simple yet powerful. They are also, as you have proven, flexible. The end is the end and if they need to be tweaked along the way they provide that opportunity.
I say after BabyStep 2 you move into BabyStep-YOU. Everything after debt allows our money to be all about us.
Good luck, thank you for your story, and God Bless.
Kirk
Wow! Thanks for the kind words Kirk! And thanks for sharing my debt free story with others!!
Thank you so much for sharing your story and praise God for being debt free, enjoying the blessings of your wife being able to stay home and also the joy/and work of home ownership. We are currently debt free and are beginning to really focus efforts on putting money towards retirement (we are both 52) and maybe someday being able to buy our own home. My husband is a Pastor and we have always lived in a home provided by the church – this has financial and emotional positives and negatives. Again, thanks for all your sharing and I look forward to reading more on your blog.
Thanks for reading Joyagg! I appreaciate your kind words! It must be tough living in “someone else’s” house for so long, but it quite a nice perk to have!
First I have to say that I was very impressed by your debt payoff story. I have a short attention span yet I managed to read all your posts! My husband and I also got caught up in the housing bubble. We almost bought more house than we could afford. Luckily for us, we were outbidded twice. If not, we would have been in serious trouble. We were approved for a large loan that we really could not manage, especially since the recession put a stop to raises and affected our freelance income. Sometime I tend to get judgmental about other people’s financial decisions. I just have to remind myself how close we came to making the worst financial mistake of our lives! Your story is inspiring.
Oil and Garlic,
I’m glad you found my story inspiring! That was my hope when I laid it all out there for the world to see! Thanks for reading!!
Congratulations on paying off your debt. The elephant in the room though is that your income is much larger than a great deal of the American population. It is much easier to pay off $90k debt when you are making the incomes you and your wife are.
You were paying monthly on your USAA card more than some people bring home in an entire month so please be mindful of that as you tell your story.
Thanks for your comment Jill!
Remember, it was our above average income which allowed us to get into an above average amount of debt. We would not have qualified for two expensive auto loans simultaneuoly, along with all our other debts, if our income were much lower (it was tight enough as it was).
Our change in mindset (not income) is what enable us to become debt free, up until we changed our spending habits, we had gone further and further into debt after each pay raise (as told in part 1 of the series).
Our above average income was mostly a result of the overtime my wife and I worked over this period. Had we not been so motivated to get out of debt, we would have only worked our “normal” 45-50 hours per week.
Thanks again for reading!
I think it is remarkable that you were able to have a change in attitude and become debt free at such an early age.
I’m 43 and will pay off my last debt next week. I do not own a home and still rent an apartment and really do not have much to show for the years of wasted debt. I get frustrated at myself when I think about it.
I congratulate you on your debt free attitude and think it is wonderful of the years you and your family have remaining to build your wealth.
Congratulations!
I began my career life 2 years ago. Since that time, I got married, had a child, and have realized that our debt needs to go. Together, my wife and I brought around $100k worth of debt into the marriage. For the last two years, I have been aggressively paying down debt. We haven’t gotten as far you as in the 2 years, but we are about half way ($50k) through our debt. I look forward to being debt free (except mortgage) in 2 more years!
This story is great encouragement. Also, it shows that it is possible to get rid of debt!
Keep up the good work Anthony!
Thank you so much for sharing your story, it was an amazing encouragement to the rest of us who are trying to become debt free. It just goes to show perseverance pays off.
You’re most certainly welcome Meghan! Thank you very much for reading my blog! It’s encouraging to get reader feedback, (even the not so positive comments)!
I’m glad you found a little motivation in my family’s debt freedom success story!
Wow! Congratulations on paying off your debt. I found your blog today as I researched Total Money Makeover and Debt Snowball. I have already read the entire series and plan to refer back for motivation. I know many have said it but thanks again for sharing your story. Its obvious the time and effort you put into your writing. Laying it all out there for all your readers to see/read adds a ‘real’ factor to the whole debt elimination process and it is truly appreciated.
Thanks Melanese!
Awesome series, very exciting. I got here via NCN, which was on my reader and has been an inspiration as well. I have a great salary too but my spouse had his own business that went kaplooey last year finally, after 8 yrs of “investing” (AKA debt) to grow it. Now he’s working at the mall for peanuts, but it’s a job. We both had credit cards through college, put much of our wedding on credit (I feel better seeing your story though). Needed new tires on credit, emergency hot water heater, etc etc Then we moved 3 times during the housing boom and failure because of my job transfers, each house became harder to sell, needed more fixing up, and twice we had 2 mortgages for 6 months…. it added up quickly. Unfortunately my job doesn’t provide overtime and I already work 60 hrs, and we’ve already cut the cable, dining out, private preschool, new cars, vacations, etc… just to keep up with the minimums. I just got a raise after the long recession so we’re able to do a small snowball toward our $50k. I can’t wait to use your tools and see what my debt-free date may be, THANK YOU!
So, after your experience, what lessons have you learned that you could share with others?
What an inspiring story! thanks for sharing it, I have just started paying off over $53000 of credit card debt and it is so encouraging to read how you did it, and that it is possible!
Thank you for your honesty & sharing your experience! Digging your way out of so much debt is NOT easy. I’m so glad to hear of a couple who stuck together through thick and thin. Many times couples split up because of money problems. I’m looking forward to reading your other posts! =)
Great series Ben. It’s amazing what you can do when you have no debt, don’t you think?
Ben, thank you for sharing your story. Your comment about debt being a “normal way of life” in this day and age really hit the nail on the head. What we forget is that the banks – the very same greedy financial “geniuses” that have brought the world economy to its knees – have a vested interest in getting people into debt so they make enormous profits on the interest charges.
Personally, I never liked being in debt and was lucky that my mum, who is savvy about money, taught me about it. At the age of 40 I own my house and car outright, have no debts apart from my credit card which is paid off in full every month, incurring no interest, and am financially free. It is such a liberating feeling not being in hock to the banks, who despite their fluffy and cuddly advertising, certainly do NOT have your best interests at heart. Best wishes, Mike Tomlinson. ps. thank you also for your explanation of how oil wells are drilled, which is how I came to be reading your site.