We finally did it! We are debt-free!
I’ve wanted to shout that to the roof tops for 14 years!
Before I dive into how our family became debt-free, take a moment to watch how we surprised the kids with the news…
We had a goal to pay off all our debt by the end of 2020. If we reached our goal, we were going to take the kids to Disney World. And if we didn’t reach our goal, we’d keep paying off debt in 2021 and take the kids to Disneyland instead. (Mind you, this was planned out years ago before there was a hint of a world-wide pandemic.) It was so fun to gift the kids with the news on Christmas Eve that not only were we finally debt-free, but that we are taking them to DISNEY WORLD to celebrate this summer. Woohoo!
How did we do it? How did we pay off over $92,000 worth of debt?
Before we share our advice, I want to start off by saying that what we share here shouldn’t be taken as a hard and fast rules. Please take all these tips as SUGGESTIONS. Use what you think is helpful, and leave what you know wouldn’t work for you or your family. I truly believe that personal finance is personal. There is no right or wrong way of achieving goals with your finances. Don’t get caught in the thought that you have to follow someone else’s suggestions exactly in order to achieve the best results. Trust your instincts, and if something doesn’t work change course and try something else until you get a positive result. That’s what we did and it made all the difference.
1. Build Up An Emergency Fund Before Paying Off Our Debt
When getting out of debt our number one priority should be avoiding adding to our debt. That means building up an emergency fund so we had a bit of a cushion for the unexpected expenses that happen because we live in a messy, beautiful world with a lot of plot twists. We suggest saving up enough for your emergency fund that you could cover real emergencies. Since we’ve dealt with layoffs before, we made sure to save up enough to cover our rent/utilities & food for several months incase something happened to our income.
2. Use Sinking Funds
To go along with our rule of avoiding going into more debt while we paid off debt, we stopped winging our expected (and unexpected) expenses and started planning ahead. We have multiple linked checking and savings accounts that we use as sinking funds to pay for expenses that we don’t necessarily have to pay every month. These are things like membership fees, kids school registration, holidays, car insurance, etc.
3. Lower Expenses to Free Up Money in The Budget
When we made our financial recovery plan, we lowered our expenses and spending amount. We downsized into cheaper housing, stopped eating out, called around and lowered our car and rental insurance, changed phone plans, and cut our grocery budget. Lowering our monthly spending allowed us to create an initial debt-snowball that we used to throw at debt.
4. Increase Your Income and Add Side-Hustles
We started out as a one income family. I said goodbye to my content creation business in 2018 to be a full-time mama, and we transitioned to a one-income family. However, in 2019 when we started getting serious about paying off our debt we decided to work on increasing our income to pay off debt sooner. I took on a teaching part-time as an adjunct college professor, and James found an online college class to teach, as well as a few clients to do design and strategy work for. Instead of combining our income for our monthly family expenses, we opted to continue to live off one-income and use our additional take-home-pay towards our extra debt payments. Increasing income helped us achieve our goal a lot quicker, so if this is an option for you do it.
5. Celebrate Along The Way
We were on a debt-free journey for a looooong time, and have had to stop and restart many, many times along the way. One thing that helped keep us motivated the past few years was adding a lot more FUN to our debt-free journey CELEBRATING each and every single loan we paid off. We loved “surprising” our kids each time we paid off another debt or loan. Sometimes it was something small like ordering take-out to give ourselves a break from cooking, and sometimes it was bigger like surprising our kids with an epic Alaska trip for my sister’s wedding. We highly suggest adding celebrations to your budget while you pay off debt. It was a wonderful way to keep us motivated and made paying off debt a lot more FUN.
6. Find your “Why”
You’ll hear this phrase a lot in the motivational world, and there’s a reason for it. Knowing WHY you’re working towards a goal is something that will help keep you motivated. I have a lot of dreams of living abroad, traveling the world, replacing my falling-apart-leather-couch… but they aren’t my WHYs. My real WHY is providing for my kids. My real WHY is living a life of FREEDOM that affords me options. My real WHY is having a life I can control. My real WHY is showing my kids that they can do anything they set their mind to. You need to dig deeper than just wanting to get rid of minimum payments if you are on a debt-free journey. Think about the real reason and feeling behind your desire to be debt-free and what your hopes are for your future. Then focus and remind yourself often WHY you are working so hard and sacrificing so much.
7. Don’t Quit
We fell on hard times and literally were in “survival mode” for almost three years where our bills were more than our income. We get it! If this is you, give yourself grace and realize that literally thousands and thousands (have I mentioned thousands?) of others have been in similar circumstances. You aren’t the only ones you have fallen on hard times, but you can set yourself apart from many by NOT QUITTING. Even if it takes you, ahem, fourteen years. Just keep working at it!
For more info on our debt-free journey here is a highlight reel of how we celebrated paying off all our debts:
5 Tips To Get Back on Track After Overspending
