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Hey Fam, I have a great guest post for you today from Joel and Emily, creators of Beyond a Budget. Joel and Emily are a married millennial couple from a small town in the midwest. After starting their lives together, they quickly realized that their debt was holding them back from moving toward their ultimate life goals. They have big dreams for their future, which are easier now that they’re debt free. So, no big deal, they paid off $40,000 of debt in 12 months. I hope you enjoy their story as much as I did. Happy Monday! ~Jamie
Personal Finance 101
I remember sitting in personal finance class my senior year like it was yesterday. It was such a great class. Not because I learned about personal finance, but because all my high school buddies were in the class with me. That meant a lot of laughing and very little learning.
The jokes and stories we told each other were clearly more important than learning about our financial future, right?
We didn’t really care about 401k’s, investing, appreciation/depreciation, budgets, or any other personal finance terms. Especially when we could crack jokes and play curveball on our computers instead.
If only I would have paid just a little bit more attention in that class. Perhaps I would have learned to actually SAVE money. Or maybe I would have learned about the negative effects that borrowing and interest can have.
Regardless, like so many others, my wife and I had to learn about money the hard way!
By racking up debt…
Getting into Debt was Easy, Becoming Debt Free was Not
I was in college when I opened up my first credit card. I’d heard all the warnings about credit cards, but I also wanted to start building up my credit so I could do more “adult things” after graduating. I’ll never forget the first thing I purchased with it. A brand new Xbox.
I loved it, and I didn’t feel any remorse because it was interest-free for 12 months. I figured it’d be easy to pay off $500 over a year’s time.
That one purchase was all it took to get me subconsciously hooked!
About 2 weeks later I decided I could use a nice sound bar to go with it. I justified the purchase by thinking, “What could it hurt? The balance won’t gain any interest for an entire year! I’ll probably get a raise at work by then anyway. There’s no way I’ll still be paying for these in 12 months.”
As time went on, more and more little things came up that just kept adding up on this credit card. Any time I needed something but didn’t quite have the cash yet, I just swiped the card. Before I knew it I was up over $2000 and 12 months were up, but now the 29% interest kicked in. Yes, you read that right…29%!
I could never get ahead of this ridiculous debt, and I carried the balance (plus absurd amounts of interest) all the way into our marriage. I was ashamed to still be paying off an Xbox from college while trying to manage our finances and be the man of the house.
Do You Vow to Pay Each Other’s Debts?
Planning our wedding was so much fun. I know a lot of people get stressed out, but we genuinely enjoyed it. My wife is an amazingly talented decorator and really loved the opportunity to plan out our dream wedding.
We were blessed to have about 2/3 of our wedding paid for by our parents. However, the 1/3 that we covered was all loaded onto multiple credit cards.
Honestly, I’m still not sure how it got so out of hand. It didn’t seem like we were buying much, but after sitting down the day after our wedding, we noticed that our credit card balance was up to $10,000. Whoa!
You know what the sad part is? We used almost all the money that our incredible friends and family gave us as wedding gifts, to pay off our stupid credit card bill. Isn’t that embarrassing? The money that was intended to help us start our lives together, was already spent.
One would think this type of bad money management would knock some sense into us, but it wasn’t…not yet at least.
I was fortunate enough during college to have my schooling paid for by my parents. To this day I still can’t thank them enough for eliminating that strain from my life, and I plan to pay them back tenfold one day!
Although I didn’t carry this particular burden into our marriage, I knew my wife would have some student loans that would need to be paid off.
After we were married, we focused on having fun and enjoying our mid-20s. We were never really concerned about being debt free. Everyone has it, and no one else was doing anything about it either. Minimum payments became a way of life.
Adding Up All the Debt was Humbling, and Scary
We were married in June of 2016, and by the time we hit January of 2017, we had $40,000 of total debt.
Student loans – $30,000
Credit card debt – $6,000
Personal loan – $4,000
Total Debt – $40,000
This…Isn’t Working. Our Lifestyle Needed to Change
After 6 months of marriage, we began to evaluate some of our long-term goals such as upgrading our vehicles, buying a house, investing for retirement, and building up an emergency fund.
The problem was, we couldn’t find any extra money to start saving. We could make our minimum payments, but there was never anything leftover. We realized it was time to reassess our finances.
My uncle gave us a book as a wedding gift called, “The Total Money Makeover” by Dave Ramsey. I didn’t really have any idea how to start learning about personal finance, so I decided to start with that.
After finishing the book, I convinced my wife to read it also. From the moment we both picked up the book, we acquired a different outlook on money.
For those of you who haven’t read the book, in a short summary, Dave Ramsey lectures about drastically cutting expenses, working hard, and eliminating debt as quickly as possible. Living off of nothing for a short period of time in order to create a better future, debt free.
The idea of removing debt from your life gives you the opportunity to invest more, save more, and enjoy more. All without being tied down to monthly payments. It simply gives you more freedom to pursue a life you desire.
We were instantly hooked to this philosophy. We were dedicated to changing our lives and better planning for our family’s future.
Once we fixated on our new goal of becoming debt free, we were able to pay off all $40k in just 12 months. It wasn’t an easy journey and required plenty of good old-fashioned PATIENCE (which I’m not always so good at). 🙂
How Did We Pay Off Our Debt So Quickly?
We get asked this question A LOT. How is it possible to pay off so much debt in such a short amount of time?
The greatest motivation for us was our ability to dream. Without a purpose or goal to work toward, where would the desire come from? We concentrated on the amazing opportunities a debt free future would give us.
My wife often talked about where we could travel, what our dream house would look like, and how we could donate generously. I liked to envision the opportunity of retiring early, taking fun family vacations, and living with NO financial stress.
We both fell in love with all the different possibilities that would be available. Everything seemed so much more attainable without debt!
We took action by creating a budget. We used one of the popular apps that synced with both of our phones, so we could always be connected.
Now, I’d be lying if I said we didn’t have some disagreements and maybe even a few tears shed over designing the perfect budget. It’s not easy to just immediately limit and track your spending. It took us about 3 months of budgeting until we finally got it right.
Budget, Check. Now It’s Time to Become Debt Free
It was shocking to see how much money was being spent on things like going out to eat, clothes we hardly wore, and “stuff” we didn’t need.
Once we started to minimize our expenses, we realized there was actually quite a bit of money available in our budget. All of which we could use toward getting rid of our debt.
Once we were able to see where our money was going, we made a plan to throw as much of it as possible at our debt. Any overtime or extra money helped us become debt free.
It wasn’t always easy and we had to learn to say NO more often, but it allowed us to make very aggressive payments. We averaged about $3000 per month paid toward our debt.
The first debt we tackled was our credit cards. We cut them up then paid them off. We figured the best way to stay on track was to eliminate ALL temptations.
The next debt was the dreaded student loans. These were unquestionably the hardest because of the large balance. However, once we started paying off large chunks at a time, the momentum we saw kept us motivated.
Last came the small personal loan, and then we were debt free!
What We Learned from this Becoming Debt Free
Cutting back on what most people would call “normal” things for a year allowed us to spend more time together, focus on our future, and get aligned with our long-term goals. We grew as a couple more over that year than we could have ever imagined.
In hindsight, you likely won’t remember all the places you went out to eat during a certain year or all the newest clothes you bought. But you will remember the things you accomplished and goals you achieved.
We will always look back at 2017 as the year we worked together to conquer a goal many believe is impossible. Paying off $40k in 12 months showed us that we can handle ANYTHING that comes our way.
Did we have to sacrifice a few delicious meals at our favorite restaurants? Yes. Did we have to give up shopping blindly at the mall? Yes.
However, we gained the ability to trust one another, enjoyed the free company of friends and family, developed a better understanding of our future, and obtained a new outlook on life.
If you ask me, what we gained FAR outweighs a few elaborate meals and new designer jeans. Besides, now we have the freedom to spend our money on anything we’d like! As long as it’s within the budget of course. 😉
What’s Next for Beyond a Budget?
After paying off all our debt, we decided to save up a good emergency fund to give ourselves some peace of mind. Now that we have that, the next step is to purchase our first home! We are so excited and are certain that the delayed gratification will be worth it.
Although we will need to get a mortgage to buy it, our goal is to pay it off in 10 years or less! We have many different entrepreneurial goals we’d like to achieve in the future, and don’t want any debt standing in our way!
It was a long 12 months, but we wouldn’t have changed a thing. We are filled with confidence and great aspiration for our future now that debt is out of our lives for good.
Wonderful article and story. Debt can be such a pain and is truly gives you the feel of bondage.
My wife and I found ourselves with about $42k in debt after we got married (and NONE of it student loans…). We took a lot of Dave’s advice and sold some stock, cashed out a whole life life insurance policy and took our savings down to $1k.
It was hard but we had this all knocked out pretty quickly and we haven’t turned back! You two are in a such a good position at such a young age. Not only that but you are TOGETHER on your finances with is key to future financial success.
Keep up the good work!
Thanks for reading, Cooper!
I think depleting savings down to $1000 scares pretty much everyone! The rapid elimination of debt is such a tough process, but I feel like if you can learn to live for the future rather than the now, it makes it much more manageable.
Appreciate the kind words, and it sounds like you and your wife are absolutely killing it! Glad to meet a fellow debt hater.