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Debt is a small, four-letter word, but it has so much power. It can wreak havoc to your finances and to your life in general especially if you have five-figure debt or more.
In May 2018, while enjoying our honeymoon aboard a Royal Caribbean ship, which was paid for my maxing out a credit card, I realized that we made way too much money to be struggling and living paycheck to check. I vowed that as soon as I was back on shore I would figure out a way to get out of the financial mess we had created.
Once home, I started doing research by searching various hashtags on IG. I happened to stumble upon the #debtfreecommunity and I had no idea that so many others were fed up with their debt and wanted financial freedom. Seeing that others were just as determined as I was, gave me the inspiration I needed to get started right away.
I added up my debt, which totaled a number that I would have never guessed: $56,000.
Later, my husband and I would eventually combine our finances and our total debt amount ballooned to six figures. We had a total of $145,000 in debt between the two of us.
On the surface, this would seem like an impossible task to accomplish. After all, the amount of debt we owed far exceeded our yearly income.
But, using a number of tactics to help us save money and earn more, we were able to pay off $80,000 of debt, five-figure debt, in just 18 months.
Here’s what we did to pay off five-figure debt and regain control of our money
Read the Total Money Makeover
The Total Money Makeover was the first personal finance book I read. As soon as I discovered the #debtfreecommunity on Instagram, I learned about Dave Ramsey and this book. I instantly purchased the book on my phone and read it in two days during my lunch break at work. Reading story after story of so many others that paid off their debt was so inspiring. If they could do it, I knew I could do it too.
Made the commitment to get out of debt
After I finished reading The Total Money Makeover, I added up our debt and set a goal to start budgeting the following month. I organized my debt using the snowball method and made the commitment to pay my credit cards off by my 30th birthday, which was eight months away.
Established a why
Everything you do has to have a purpose. I knew that I needed to know exactly why I wanted to reach financial freedom. I spent some time reflecting on this after hearing “when you own your paycheck, you own your life.”
I realized that NO DEBT = FREEDOM. I created a mini vision board on my phone. Whenever I felt like throwing in the towel, I looked back at it to help me realize why I was making all those sacrifices.
My motto: A few years of sacrifice is worth a lifetime of financial freedom.
Created a budget monthly
Creating a budget aka a spending plan for our money was the game-changer. Telling our money where to go instead of wondering where it went relieved so much anxiety and stress. We were able to ensure that we had enough money to cover our monthly bills and learn to live within our means.
Tracked our expenses
Tracking our expenses goes hand in hand with budgeting. This helped us keep our budget intact and alerted us when we were nearing or at the budgeted amount for each category.
Cut out unnecessary bills
Before we started budgeting, we had a lot of unnecessary bills such as paying for a monthly printing subscription when we barely even used our printer. This is essentially throwing money away.
Creating a budget helped us understand each bill we had and we were able to determine if they were an actual necessity. If the answer was no, it got cut. This brought back so much money in our budget.
Sold unused items
Having a goal to pay off $18,000 in credit card debt in eight months wasn’t going to come easy. My husband’s job hours fluctuated and we have a toddler, so I had to be physically available as much as possible.
Getting a second job outside the home wasn’t an answer to bringing in more income.
I read stories about how so many others made money on Poshmark, Mercari, and Facebook Marketplace. I figured there was no harm in trying, so I shopped our home for items we were no longer using and listed them for sale and had no clue that I would earn over $3,000. Every penny went to debt.
Participated in no-spend challenges
No-spend challenges have been my secret weapon. They not only helped us save so much money, participating in these challenges monthly helped curve our impulsive shopping habits.
We learned how to go in a store and stick to a list, not buy what everyone else is showing off on social media, and how to be grateful for everything that we have. This was a complete mind renewal.
Meal planned and prepped
The grocery budget is the one category that would get out of control mostly for us. I’m sure you will agree too.
After doing a bit of research, I discovered how meal planning would change the game and boy did it.
Every Thursday, I would plan out the meals for the following week and then schedule a Walmart Grocery pickup order for the following day to pick up any items that were needed. I would make sure to include a few lazy meals as well, such as frozen pizza, for the days I didn’t feel like cooking.
This helped us stay within our budget. We only bought the things we actually needed and it ensured that we’d have food to pack for lunch every day. Taking lunch to work daily saved us about $20 a week.
Evaluated our auto expenses
My husband and I both drove financed cars. We were spending about $1,200 a month just on car payments. I know, I know.
At this point, we had trimmed our expenses as much as possible and got a handle on our monthly variable expenses.
In order to keep propelling forward, we knew we need to cut one of the auto loans and that’s exactly what we did.
This is one of the best decisions we’ve made on our journey so far. Bringing back $700 to our monthly budget was a complete game-changer.
There is so much advice out there about how to pay off your debt that it can be overwhelming.
Some teach to pay off the debts with the highest interest rate first while others teach to get rid of debt starting with the smallest balance.
Starting with the smallest balance seemed more doable to me and I’m happy we were able to focus on one method.
This allowed us to clear out our first debt the first week that we started budgeting. Even though it was just a bit over $400, we would have continued paying the minimum due for months if we hadn’t made the decision to work towards debt freedom.
Ate at home, a lot
Contrary to popular belief, it is much cheaper to eat at home. Not only does this save you money, but also you’re able to eat much healthier at a fraction of the cost. You even have leftovers that can be packed up for dinner or lunch the next day.
Got an accountability partner
This was huge for me.
At the beginning of our journey, my husband was not on board.
Since I was determined to reach my goals every month, I needed something or someone to hold me accountable. The #debtfreecommunity on IG did just that for me.
There are thousands of people in a small corner of IG that were documenting their journey to pay off five-figure debt and even more and inspiring others to do the same.
Strangers would root for me month after month and celebrate with me once I reached my goals.
I’ve even made friendships within the community, and I am forever grateful for all the love and support that’s shown daily.
Reviewed my wardrobe
I love fashion.
I’m one of those that would shout, “retail therapy” whenever I was going through something and needed a way to cope.
It’s safe to say that my closet was packed with items that I didn’t need and with stuff I never even wore.
During my purge, I sold a bunch of items and vowed to only keep things that I loved and would actually wear. I got rid of everything that I was saving for my ideal body type, didn’t fit correctly, or wasn’t something that could be easily interchanged with other items.
I realized that if I only kept items that fit and could be used to create multiple outfits, I would actually have a huge wardrobe that I loved and would no longer need to buy an outfit for every occasion because I could now mix and match to create outfits I had never worn.
I knew that if I could put my mind to it, I would do it.
This journey is hard indeed, but I always remember why I got started and imagine myself at the end of the journey.
I know that it is SO WORTH the hard work and that reaching financial freedom will help create the life I’ve always wanted.
Paying off this five-figure debt got us to the halfway point and if we keep the momentum going, we’ll be debt-free in no time.
There you have it.
15 ways we paid off five-figure debt in just 18 months.
You don’t need a fancy accounting degree to learn how to master your money. Through budgets, determination, and a little creativity, you can put your life in a better spot financially.
Do you have any creative tips to share on how you’ve paid off your five-figure debt? Share your tips in the comments below.