How We Paid Off $25,000 in Student Loans in 10 Months!
Our debt free journey began in May of 2014. We were in the middle of building a gigantic chicken coop since I surprised my husband with chicks while he was working one night (I’ll save that for another post!) when I discovered Dave Ramsey. If you are not familiar with Dave Ramsey, he has built an empire on helping people get out of debt and live on a budget. I read his book The Total Money Makeover and was hooked. I then quickly became obsessed with making a budget and paying off debt.
This post may contain affiliate links.
When we started our debt free journey we had around $45,000 in consumer debt (not including the mortgage). We owed $25,000 on my student loans, $12,600 on a Yukon Denali, and $6600 to the IRS! UGH. I had always kept a written budget but to do a zero-based budget was a little bit more challenging. Basically a zero-based budget consists of assigning every single dollar to something. When I had been doing my budget before, I would write down all the bills each week then I would spend whatever was left without really thinking about it. I didn’t like debt but I figured we were fine since we had money in savings and were saving for retirement.
Once we decided to become debt-free, I got busy planning out our budget for the next couple of months. I cancelled anything that was on auto-pay and we didn’t need; like magazines and radio subscriptions. I quit buying name brand products and started meal planning. Before we started really paying attention to where our money was going, we were spending around $1,200 a month eating out and on groceries. We cut our grocery budget to $600 a month and $160 for eating out for lunch for two of us. We sold everything we could think of and worked a ton of overtime. At one point someone even told me to quit “acting like you are destitute.” If you get comments like that on your journey, you are doing it right, keep going!
We used a tax refund toward our debt. I also adjusted our tax withholdings by using the IRS withholding calculator so that they would take out less and we wouldn’t get as big of a refund. I also shut off all our retirement contributions during this time.
We paid every extra dollar toward the lowest debt. Once one was paid off we started sending every dollar to the next debt. We knocked out the taxes and Yukon by December 2015. On January 1st, 2016, we started on my student loans. My original loan amount when I graduated in December 2006 was $28,000. So, in 9 years, I had only paid off $3,000 because of interest. I got MAD about this and vowed to do everything possible to get them paid off by the end of the year. I calculated how much interest I was paying daily and it was $4.62. EVERY.SINGLE.DAY. I stayed motivated by calculating how much we were saving daily as we went along. We ended up paying it off on October 28th, 2016.
If we can do this, so can you. You may not be able to do it in the same amount of time but progress is progress. Stay motivated by keeping track of your progress and keeping a written budget. Make sure that you have someone who can be your accountability partner to help you stay on track.
Where are you in your debt-free journey? Let me know in the comments.