How did you acquire $24,000 in debt? What did that debt consist of?
We had $151,000 total at our worst, but $127,000 was our mortgage, so we were $24,000 in consumer debt. It was mostly credit cards with a couple vehicle payments, but fortunately our taste wasn’t that of the Joneses so we were okay having older vehicles. I would say about $18,000 was credit card debt and we simply acquired it by spending more money than we had.
What did it feel like to have that much debt?
Slavery. It felt like pure slavery. I was forced to work a maximum workweek to pay minimum payments. I worked a full-time job and a part-time job to make ends meet. Once we decided to start paying it off, I started working substantially more than that. I’ll get into it more below, but at one point I ultimately had five jobs. That’s what a maximum workweek looks like. It wasn’t fun, but it was worth it, looking back.
How long did it take you to pay it all off?
Once we got serious and stopped paying minimum payments, it took just under two years. To fulfill my lifelong dream of serving in the military, we had to pay off our debt, because our debt-to-income ratio was too high for the Air Force’s standards. I dropped 50 pounds to get into shape as well, but I am more proud of eliminating the debt. Over two years we paid off all the consumer debt and turned our home into rental property since it was more home than we needed. As our huge four bedroom home was being rented to someone else, we were living in a 700 sq ft mobile home. Sacrifices.
What resources did you use to help you through this process?
Mostly books. I started with Dave Ramsey and branched out to more complex reading. I got so fed up with my debt that I read over 100 finance books in six months. I believe reading is truly what changed our financial situation. If you want to change something, get educated in that area. No one will change it for you, but you can change yourself and then you can change any situation.
As far as other tools, I started a budget and used an app called Goodbudget (at the time it was called Easy Envelope Budget Aid). I’ve used it ever since; it’s so easy to input expenses and track your money. Eventually I started using Personal Capital to get an overall picture and set goals for our net worth, but that wasn’t until we were almost out of debt.
Did you face any challenges along the way?
Absolutely. A family of three in a 700 sq ft mobile home isn’t fun, but honestly, getting out of debt was fun. It’s like Basic Training in the military, looking back on it, I am glad I did it, but I wouldn’t want to do it again. Of course, we also had the basic emergencies and unexpected expenses come up, but who doesn’t? Now I am an advocate for setting your emergency fund in place before you get serious about paying off debt – at least to $1,000.
How did this affect your marriage?
The stress of debt is hard on a marriage. My wife was much more knowledgeable with finances than I was when we got married, which means most of our debt came from my poor decisions. Financial issues are a primary cause of divorce and that’s why I’ve devoted so much of my life to teaching people how to avoid them. There is no doubt in my mind that we would have experienced significant marital issues if we would have continued down the original path I was leading our family down.
What were you doing for a living while you were paying off the debt?
I was a General Manager for Domino’s Pizza. Once we started getting serious about paying off our debt, I started to look for more jobs. At one point I worked 40-50 hours at Domino’s and 40 hours during the day at an auto body shop, all while working an overnight paper route, working occasional construction jobs on the weekends and doing web design when I could find the time.
How did it feel once you paid it all off?
It felt like pure freedom. From a financial standpoint, there is no better feeling in the world than knowing you don’t owe anything to anybody. We had freedom to take vacations and best of all, freedom to work when we wanted to work and as much as we wanted to work instead of working to pad the wallets of the credit card companies.
What practical tips do you have for people looking to pay off their debt?
Here were the primary two tips that made it all possible for us:
1. Learn everything you can. Constantly search out great finance books and actually read them, then apply what you learn. Knowledge without application is useless, but it just takes a little knowledge to be ahead of the game and change your life.
2. Automate everything you can. Automation was the key to making sure we were hitting our debt pay-off goals and now automation is the key to reaching our investment goals. We used the debt snowball method, so when one debt was paid off, I would automatically add the amount we were paying on it to the next debt. Each month we saw huge chunks taken out of our debt, automatically! The key is to automate more so you can really focus on the parts that need your attention, like cutting back on your expenses and sticking to your budget. For the rest of it, set it and forget it.
To learn more about Kalen and his journey out of debt and into wealth-building, you can find him writing at his blog, www.moneyminiblog.com .
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.
Refinance Your Student Loans or Credit Card Debt
With the average credit card interest rate around 15%, this could save you a ton of money over the long haul. SoFi will refinance your credit card debt to as low as 5.99% so that you can pay your debt off even faster. Use this link to get $100 cash back if you get approved. They also refinance student loans to as low as 2.355% APR.
Have a Lower Credit Score?
Check out Credible instead as they are able to help people refinance to a lower rate that don’t have great credit.