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joe-koss

Tell us a bit about yourself

I’m a mid-30s single man currently living in the Midwest.  I am an accountant by trade and teach as an adjunct at several colleges and universities in the area of accounting and finance.  I found a passion teaching personal finance by accident in my career.  I was not enjoying the way accounting was being taught at one of my colleges so they gave me personal finance as kind of a throw away class since it was an elective that not many students really took.  I found I could help people right away with their money with this class as well as help myself make better financial decisions by staying active in the discussion of financial literacy.

How much debt did you start out with?

I view my debt a little differently.  I had debt in the area of credit cards, auto, and student loans.  I had always paid everything on time and worked a debt snowball to eliminate them as quickly as I could.  I viewed my student loan debt as the big one that took the longest.  I had a total of $50,000 in student loan debt that took me around nine years to pay off as I paid everything else.  The big push was the last $28,000 that was paid off in 14 months.

What made you realize you had to do something about your debt?

What really motivated me was being an educator. I was teaching personal finance and helping students create and work toward financial goals.  I did not want to be a broke finance instructor that was not practicing what I was teaching my students to do. 

How did teaching personal finance at the college motivate you to stick with your plan?

The biggest thing was talking about money out loud.  Talking about money is considered so taboo in our culture so having this discussion with students and being open with them about where I was in the process made it easier.  I hold my students accountable and with being so open about where I was, it made me accountable to reach my goal of becoming debt free.  When I became more open about my finances in my lecture, the students really opened up more about where they were.  It truly made me a better instructor when the walls came down in the class and people started opening up about their finances.

What obstacles to paying off your debt did you face?

The obstacle at first was looking at the number.  $28,000 is a lot of money.  I evaluated my budget and found areas to cut wasteful spending.  I was able to find additional income by picking up extra classes.  It was a lot of work, focus, and discipline to reach the goal.  Discipline is tough because it meant I had to change some spending habits.  Going through each line of the budget and finding ways to cut something was a challenge.  It meant working with cable and cell phone providers to see if they could lower my bill.  That helped and I did find a full time position in the accounting field at that time which took care of benefits I was paying out of pocket with individual policies.  That saved me a few hundred dollars a month.  The biggest was the variable spending and was in the dining out category.  It was so hard to change that because the ease of going out.  I cut down to dining out once a week (sometimes even once every two weeks).  The interesting thing about that change is how much more I appreciated that one meal.  I would plan it and go somewhere a little nicer compared to going to get fast food.

What was your approximate income and how long did it take you to pay off the debt?

My income during those 14 months that I paid off the $28,000 was just over $65,000.

Why do you think your plan worked?

The plan worked because I did the math.  The math was the easy part of this by determining what I would need to pay each month and plug that in my monthly budget.  Going through the budget one month at a time simplifies things.  Spending my money on paper with purpose before the month began gave me control of my money.  The more intentional I was with my money; I was able to find even more that I could apply to the debt to get out of debt as quickly as I could.  Once I had a few good months of positive traction, the goal was attainable to me and I knew I could do it.  It pushed me even harder to get it done.

What were your living expenses while paying off your debt?

Not including the debt payments, my average monthly expense was around $2,000.   The key phrase you need to change here is “extra cash”.  That is not an acceptable term.  Each dollar needs an assignment.  The key was spending every dollar on paper with purpose before the month began.  It gives you the power to spend in categories you deem important and control your money. The zero-based budget where every dollar has a name is the key and once that is done, you follow the plan you lay out.

What advice do you have for those wanting to be debt free?

The best advice is create the goal.  With debt, we have the number because we have accumulated it.  If it is something we want to save up and purchase, we do the homework to figure out what we will need.  Once you have that goal and number, determine the time frame you want to accomplish it.  This can give you the monthly amount you need to pay on the debt or put toward savings.   You have to compare this to the monthly budget and see if it fits.  If it does, go for it.  If it does not, you may have to push the time frame out a little more or find away to make more money, cut expenses, or both to make it all fit.  That is why every dollar needs a name.

Honestly, the first month or two you do this, it may not work out perfectly.  It make take some trial and error to make it happen so you can make adjustments.  Remember, the budget is not in stone.  Life can happen and adjustments can be made.  The budget gives you that flexibility to make adjustments to the dollars and to your goals.  Personally, I hoped to reach the student loan debt pay-off in 12 months but had an extra 2 months because of adjustments.

Note: This is part of a series called “Debt Success Stories” which features people who were able to pay off a significant amount of debt. If you have a Debt Success Story I would love to hear about it. Please visit the contact page to let me know the details.