My husband and I have had a long journey to where we are now with finances. When we started dating I was in school and building student loans, and my husband had several old credit cards that needed addressed. A year later we owned a house, at some point bought a truck, and my loans were no longer in deferment. We made a pact to pay off my loans, the truck, and the house, and really focus on becoming debt free.
Somewhere in there we got married, had two kids, bought and sold several vehicles, my husband started (and completed!) the Sinclair nursing program. Then we made the stupid decision to buy a second house without our first having sold (yeah, don’t do that). Needless to say, we derailed from our “let’s be debt free!” mentality although it always lingered in the back of our minds. We really wanted to be debt free (who doesn’t?), but we kept sabotaging that goal with the decisions we made.
Last year, when my husband graduated school, we really, actually got focused on being debt free. Our intent was to pay off all of those “bad” debts (even my student loans) and then passively pay extra on the mortgage. Then it would pay off early, but we would not be penny pinching to get that done. Honestly though, we wanted to start doing some house projects and vacations, so we counted it a win when all we had left was the mortgage.
One of the main focuses we had was putting pen to paper on what our current situation was…how bad was it? When we wrote it down, we had about $150,000 in debt not including our current mortgage which is scary. I see large numbers like that a lot in the Dave Ramsey Facebook comments or even the debt free shout outs they do. Shortly after I always see people posting:
“How does someone on XX salary pay off that sort of number?”
“What are these people doing? You can’t realistically pay off XX amount of money in 1 year.”
I won’t speak to every person who claims to be debt free (maybe they invented a really cool tech!), but here are some ways you could pay off $150k in 1 year realistically:
You go from SINK to DINK or SIWK to DIWK (and maybe don’t say that one out loud)
We fell under this category. Our house effectively went from a single income with kids status to a double income with kids status (or maybe you fall under the no kids for the SINK/DINK). We had been living on a single income, and so having that second income really allowed us to start piling money towards our goals. Can everyone do this? No, but it’s one way you can really start to diminish that debt number, and I would venture to guess that’s how some of those people are paying off such large numbers.
Fudging the timeline
This is where I think others may fall prey to how they calculate their debt timeline. So for us, if we roll back to our initial conversation, we’ve been “focused” on paying off debt for 6 years. At the beginning I put extra payments towards student loans, and then life happened and other things popped up. However that lowered the overall interest we would pay and the principal. So now when we actually got focused about a year ago, the student loans were much lower than 6 years ago. So the $150k I mentioned was the actual debt load we had with the lowered student loans, but I could have easily made that number larger to include the original student loan amount. Then I could say I paid it off in a year, but really it was over 6 years and then intensity at the end.
Sell off portions of your debt
This is something I don’t think gets discussed enough when these stories come out. For us, selling the second home we owned was a game changer. That immediately removed that debt from the list, and with some equity from the sale we could put that towards other debts. Additionally, not having utilities to pay at two places helped to increase our paying power. That other home was the single largest debt in our $150k, and while it wasn’t knocked out easily, almost every domino stayed in place until we were able to knock that one down.
While some of these may not be options for you, hopefully it sheds some light on a more realistic debt pay off plan and how we (and others I’d guess) pay off such large numbers so quickly.
Just focus on your goals, develop a plan, and hopefully it will take you less time to get laser focused than it did for us.
Are any of you on a debt free road? Have any tips on how you have paid off a large chunk of debt?
