How did you acquire $50,000 in debt? What did that debt consist of?
I had always planned to go back to school for an MBA. Rather than return to my alma mater in the west where I could have probably graduated debt free, we opted for a completely new and unique experience. We ended up moving to the Midwest for me to enroll in a respected program that aligned well with my goals and values, but it cost us an extra $65K, $45K of which we borrowed.
We had our 3rd child during my 2nd year of school. We could have continued to stuff all three car seats in the back our 1992 Camry, but I got a good deal on a minivan for $5K. When you’re $45K in debt, what’s another $5K? I don’t advocate that type of thinking, but I’d be lying if I said I didn’t have any of those thoughts.
What did it feel like to have that much debt?
Annoying! I’m a fairly conservative guy when it comes to money, and I’ve always had a cushion to make me feel safe. But when I went back to school, I replaced that emergency fund with a bunch of debt. It was kind of like having a rock in my shoe. It was uncomfortable, and I wanted to get rid of it. I probably would have had a heart attack from uncertainty if I weren’t able to line up a job fairly quickly. Luckily, I did have a good job to look forward to, and I had a pretty good idea of how long it would take us to get rid of our loans.
How long did it take you to pay it all off?
We took care of about 20% of it right away with a signing bonus from my new job. We continued to chip away at the rest paying at least $1,000-$2,000 for each of the next 18 months. I also continued to contribute enough to my 401k to get the full match from my company. Then 18 months later, not only had we paid off the debt but we also had $20K of savings!
What resources did you use to help you through this process?
I used Mint.com to track all of my account balances, and I was constantly updating my “get rid of debt” Excel spreadsheet.
Did you face any challenges along the way?
We may have been lucky in this department. We didn’t experience any significant challenges or financial surprises. We had some car maintenance here and there, but the main challenge was just scaling back our lifestyle and postponing some larger purchases.
How did this affect your marriage?
They say money is the biggest cause of arguments and conflict in marriage, but we haven’t found that to be the case for ours. Amanda is frugal and has enough on her plate that she gladly lets me deal with the family finances and bills. She trusts me to stay on top of it in that department, and so far I haven’t let her down.
During this period, she did start working for the first time since we had kids. Her main reason for going back to work was unrelated to our debt, but she was able to help pay it off. We did have to figure out how to balance the needs of two working spouses with young kids. I don’t know if the debt added more stress to the new dynamic of having 2 working parents, but it definitely didn’t reduce it.
What were you doing for a living while you were paying off the debt?
I had recently started working as a financial analyst at a large manufacturing corporation, and Amanda started her own violin studio.
How did it feel once you paid it all off?
Relieved! When the day finally came though, it honestly didn’t feel as momentous as I thought it would. I think that comes from having a carefully laid out financial plan. It’s a reality that sinks in gradually as you get closer to your goal. The moment in which you finally submit the final debt payment shouldn’t be a surprise, which sort of takes away the fun, but it’s still definitely worth it. Looking back, we are glad we took care if it when we did. We have friends who took on loans and graduated at the same time as I did who are still making payments. It’s great to have more flexibility with that money now.
What practical tips do you have for people looking to pay off their debt?
Write down a plan! Run all the numbers at a detailed level, and update it consistently. That may be the CPA side of me speaking, but knowing exactly how and when you’re going to pay off your debt is so critical and empowering. If you’re not sure how, ask a friend! There are tons of Excel nerds out there just waiting to show everyone how much spreadsheet magic they can work!
Some specific things that helped us pay it off quicker included delaying major purchases, taking advantage of Craigslist and garage sales for clothes or other necessities, credit card signup bonuses (oh the irony!), and always asking for better deals! One thing we did not do was couponing. My wife hates couponing, so we didn’t do it. We focused on our strengths, and it all worked out.
What steps are you taking now to stay out of debt or to build wealth?
We have not saved at the same rate as we paid off our debt, but we plan to do so with a renewed focus in 2015. I’m going to continue working at my “real job” as well as experiment with how big I can grow my CPA practice during tax season without spreading myself too thin. My wife will continue to teach violin part time and might even take on more students as her schedule allows. I’m now running a site where I blog about my experiences with money as well as give free individual advice on user-submitted budgets. I also convinced my wife to take her music business digital, and we should have her site about teaching violin better up and running soon. We are looking forward to a new year of experimenting with several new sources of income.
To learn more about Mark and his family’s journey to wealth, and to get some awesome free financial advice, you can head over to his blog, Bare Budget Guy.
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 Cards
With the average credit card interest rate around 15%, this could save you a ton of money over the long haul. Check out Credible who will help you refinance your credit card debt to as low as 5.99%.
Want to refinance your student loans? Credible can help you get as low as 2.78% APR. Use this link to get $150 cash back if you get approved for refinancing your student loan. The average graduate who refinances through Credible saves $18,668!