Finances & Money

When you put your mind to it…

…you can accomplish anything. That’s what I realized today while discussing our debt with a friend. You see, I know how much debt we started with ($112,890), and I know how much we have remaining ($54,737), but I never thought about how we got down to that amount.

$112,890 – $54,737 = $58,153

In the last 2.5 years, we reduced our debt by $58,153. Technically, it was a bit less than that due to some very minor student loan principal payments, but those are negligible in the big picture.

How that $58k breaks down

• Auto Loans: Paid off $30,702 since March, 2005
• Credit Cards: Paid off $14,148 since April, 2006
• Student Loans: Paid off $13, 303 since, well, the last 5 years. I’d say that a large majority was paid in the last 2 years though since the first 2 years were all interest (stupid me), and the next 3 were not much more.

How did we do it?

Sometime in 2005, I realized I was tired of our debt. It was really holding us back from even thinking about our long term goals. We felt we weren’t as mobile as we needed if we wanted to move to a different area, or if one of us needed/wanted to be a stay-at-home parent. I will admit, though, that in the last 2 years, three job hops by me and one by my wife have significantly improved our earnings by about $41,000 per year total. Not everyone can improve their earnings, but there are other things we did.

1. We spent less. We now restrict dining out for dinner to just weekends and special occasions (out of town guests, birthdays, etc.). Our monthly grocery and dining budget are $200 each, and we stay within that budget, usually. Also, we only have basic $20/month cable.

2. We don’t buy crap. Yeah, that’s right. I don’t buy gadgets. My wife doesn’t buy pricey clothes or knick-knacks. The most spending we do is on home improvement, and even then we keep it simple and inexpensive.

3. We fix things ourselves. We repair our home problems ourselves. I change our engine oil myself, along with some other more major repairs (like replacing transmission fluid in the Pontiac). We simply figure out how to do stuff ourselves rather than calling for help. Oh, and it helps to have an amazing handyman in the family to guide us.

None of these things is a significant savings by itself. Sure, we maybe save $600-1000 per year with basic cable, or $100-200 per month on dining out less, but it all adds up to help us send more towards our debt.

Put your mind to it!

You may have less resources that us, and you’re thinking “I can’t pay down my debt like Mike and Stacie did! Why should I even try?”. You’d be amazed in how much you can accomplish if you put the spotlight on your debt. Think about how much it’s holding you back, or weighing down on you every day, and you’ll soon realize it’s time to do something about it.

Here’s a quick guide to starting your debt reduction journey:

1. Look for big savings: Can you sell a car that you don’t need? Can you sell that pricey car and downgrade to a used one for thousands less? Can you cut out those dance/music lessons or recitals for a year to speed things up?
2. Look for smaller savings: Cut down your cable bill. Switch to Vonage (let me know if you want an affiliate link) or just cut your home line altogether. Downgrade to DSL if you don’t need cable internet speeds. Reduce your dining budget and stick to it.
3. Look for more income opportunities: Perhaps you can ask for a raise at work. Or if you’re really dedicated to this debt thing, get a second job (one that’s fun). It turns out this blog generates a little funny money to help pay for some unexpected expenses (like the new pool pump, or Stacie’s birthday gifts). It’s small, but anything helps.
4. Sell your stuff: Need I say more? We’re selling our Malibu because we just don’t need it right now. That could be $10-11k towards our savings or other debts. I’m also itching for a yard sale, but that might be more work than it’s worth.
5. Reduce your interest rates: Call the credit card companies and ask for a lower rate. Refinance your auto loan if it will bring in a decent savings. Transfer your debt to 0% cards if possible, but make sure you can pay it off before the rate resets.
6. Look for tiny savings: This is where things can be either painful or fun. Personally, I like to have a little contest with myself sometimes to see how fast I can shower, or how long I can make a tube of toothpaste last. Overall though, you may find frugality isn’t worth the time and effort to earn smaller savings.

So put your mind to it and get out of debt already! If you’re really in trouble, see a credit counselor (perform due diligence to make sure they’re reputable though). They can help you to work with creditors to get your payments more in line with what you can afford. At the same time though, try cutting your costs. You’ll be amazed at how much change you can find in the couch cushions when you just take a peek!