Life, Planning

The Year We Got Out of $20,000 in Debt

December 6, 2013

Mark and I spent way too much when we lived in Los Angeles. We had several credit cards and paid no regard to racking up debt on them. With a high cost of living and a high cost of “keeping up with the Jones’,” Los Angeles did not fair well for our bank account.

Once we moved back to St. Augustine, the cost of our living expenses went down, yet our spending stayed the same. It didn’t take long before we felt out of control.

I very clearly remember thinking about Christmas and getting a big pit in my stomach because it meant an even more inordinate amount of spending. Mark, thankfully, shared the same yucky feeling inside. So, last January, we decided that this would be the year that we would work together to completely pay off all of our credit card debts.

The absolute, hands-down most effective thing for getting out of debt, for us, was using the budgeting software called You Need A Budget (YNAB).

got out of debt: YNAB!!

The basis of the program is that every dollar in your bank account should have a purpose. Here’s a shot of an example budget (not ours—we’ve never had $16,475 to budget in income each month!):

got out of debt: YNAB

You only budget what you have coming in, therefore never allowing yourself to rely on credit cards.

It imports credit card transactions, creates beautiful charts and graphs to visually see your spending and saving trends, and has an iPhone and Android app so that you can keep track of your expenses as they happen. It’s an in-depth program yet is incredibly well designed and user-friendly. We bought the program on sale for something like $15, but it normally costs about $60. In all honesty though, it’s worth 10 times what you pay. We owe all of our success to YNAB! I can’t sing its praises enough! I didn’t go into much detail here, but if you’re interested in the program, shoot me an email or comment on this post and I can tell you a bunch more!

The second most-effective thing we did to pay off debt was trade in Mark’s Ford F-150 truck for a Ford Focus. We added it up and discovered that we spent, with gas, insurance and truck payments, almost $900 per month on his truck alone. This was an absolutely exorbitant amount of money to spend on something that Mark uses to drive, roundtrip, 10 miles to and from work every day. Although it was actually a really tough decision, we ultimately decided we needed to get him a cheaper vehicle. So, now, he has a sporty little Focus hatchback that costs a total of $450 per month. We cut our monthly vehicle spending for Mark in HALF.

favorite

The third thing we did to eliminate debt was stop all the shopping. Clothes, shoes, gadgets, video games, “extras” at the grocery store, household items, apps, Kindle books. We stopped going to movies and most of our eating out. We stopped it all. I unsubscribed from all of those sale sites, I deleted Amazon from my bookmark bar. When you only budget $100 for groceries because that’s actually the only money in your bank account that you are able to scrape up for food, you learn that you can’t actually buy the fancy, bubbly water or organic everything. And you can’t eat out just because you don’t feel like cooking.  For a solid 5 or so months, around the middle of the year,  Mark and I bought nothing new and only went out to dinner for friend’s or family member’s birthday-type celebrations or for a quick lunch when we had no other option. The old us would have been devastated by this, but after the first 2 weeks or so, it felt good not to accumulate “stuff” and to be in more in control. We actually ended up cleaning out our closets and old moving boxes (some still hadn’t been unpacked from moving 3 years ago!). We gave away SO much stuff. It was like a breath of fresh air. There’s something to be said for not having a ton of stuff to clutter your house and your credit card statements.

When we added it up, by trading in Mark’s truck for a cheaper vehicle and by not buying new stuff we truly didn’t need, we had an additional $900 per month. To pay down our debts more quickly, we put this $900, plus the maximum amount that our budget would allow, towards credit card payments. We focused on paying off the cards with the highest interest charges first then worked our way down until all we had left were 2 credit cards with no interest charges. We gave ourselves 4 months to pay off the no-interest cards in equal payments, thus giving us a little more “breathing room” in the budget. This happened just in time for saving for Christmas!

Around September, we began putting a little away each month for Christmas. You would not believe how great it feels to use your debit card to buy ALL of the gifts on your Christmas list.

We’re also currently saving for 2 trips next year, as well as a down payment for a house. And, as of next month, we will be completely credit card debt free.

I am being completely honest when I say, it’s one of the coolest things that Mark and I have done together and it has been one of the toughest. It’s not fun, it’s not easy, it’s just plain ugh. BUT, once you’re on the other side of Debt Mountain, you breathe easier and everything just feels better.

Mark and I are to the point, now, where we’re back to having a little extra money every month for a date night or for a little fun money if one of us wants to spurge or something small. But truly, the year has gotten us 100% out of our old habits.

I’m very open about this debt stuff, so if you have any more questions, please email me and I’ll be happy to help you in any way that I can.

Happy Friday, y’all!

xo

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