What Does A Real Debt-Free Journey Look Like?
Are you currently on a debt-free journey? If so, you’re not alone.
According to a report from The Pew Charitable Trusts, 8 out of every 10 Americans are in debt.
That statistic is not surprising because I work in higher education and see how students have to borrow money to obtain their degrees every day.
My husband and I are currently on a debt-free journey, and we want to document the process and share it with you.
The goal is to help motivate and encourage you on your journey, so let’s get started.
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Our debt-free journey
I started my debt-free journey in 2014, almost a year before I got married. I had a full-time job, an apartment, my car was paid off, and my only debt was student loans.
My husband, who was my fiancée at the time, also had a full-time job. He had an apartment, and his only debts were his car loan and his student loans.
After the wedding, our goal was to pay off my husband’s car loan first. And then we could both tackle our student loans at the same time. But as we all know, life never works out in the way that we envision.
Seven months after we got married, my husband became sick and had to have several surgeries.
In turn, he wasn’t able to work a traditional job for the two years that followed.
We went from making a lot of money for our age to having our income cut in half.
My husband is fine and back to work now, but that is how we accumulated debt outside of our student loans.
Currently, my husband and I are $202,148.19 in debt. That is a huge number, and it doesn’t include our student loan debt (I will talk more about student loans in another post).
Let’s break down this number.
The first debt that we have is a medical bill for $827.48.
Next, we have $5,511.65 left on my husband’s car loan.
The next portion is $6,741 in collections from medical bills from 2015.
The remaining portion of our debt is $189,028 for a house that we purchased in May.
So $202,148.19 is the total of our debt outside of student loans. I know it may not seem like a lot, but to me, this is a big number.
$200,000 is a lot of money to owe someone else. If you just think about how much money you are spending from your paycheck every month to pay this number down, it’s overwhelming.
Debt payoff plan
The method that we are currently using to pay off our debt is the Debt Snowball method.
The Debt Snowball method has you to list your debts from smallest to largest, and you pay the smallest debt off first.
As soon as you pay that off, you roll any money that you were using to pay that debt off to the next one.
Each time you move to a different debt, you’re paying more per month, and you’re able to get paid down so much quicker.
As most of you know, I use Ynab for my budget. I love this app, and I have been using it since 2014. It makes my budgeting so much easier.
If you’re interested, click the link in the description box below to get a free 34-day trial and try it out for yourself.
I love this app because it has taught me how to live on last month’s income.
Living on last month’s income means any money that I make this month gets spent next month. What that does is creates a buffer in my budget.
It also gives me the financial security to know that my next month’s bills and anything that I may need are already covered.
The buffer helps me stay on top of my budget and ensure that I’m reaching my financial and savings goals.
I know that it will take us a little longer to pay off our debt using this method, but that’s what works for us.
In addition to our full-time salaries, my husband and I both have side hustles, so we make additional income.
Our side hustle income goes to fund Well Balanced Wallet. Anything on top of that goes directly into savings for a trip or a vacation.
If we don’t have anything coming up soon, the remaining money goes towards paying down debt.
I believe it is crucial to have a side hustle while on a debt-free journey. Multiple streams of income help you pay down debt much faster.
Since we’ve been on this debt-free journey, we have learned the importance of saving money, especially for things that we know will come up.
Our major savings categories are our emergency fund, our home maintenance category, and then our home repairs category.
We do have a few more that include car maintenance and repairs, vacations, and medical deductibles.
We also have a category for a car replacement because we know we will replace our cars at some point, and we have decided that we don’t want to take another car loan.
I know that may seem like a lot of savings categories, but we pace ourselves with our savings.
We don’t contribute to each category every month. We like to see what we have coming up in the next month to decide what we’re going to save for that month.
While 2020 has been pretty crazy, we have three goals that we would like to accomplish this year.
The first goal is to make $18,000 outside of our full-time income. The $18,000 will include any of our side hustles combined for the year 2020.
The next goal is to pay off our two smallest debts before the end of the year. The two smallest debts were the medical bill, which was a little over $800, and the car loan was just over $5,000.
Our third goal is to avoid taking on any new debt.
We just want to pay attention to how we’re spending our money and budgeting to make sure that we can pay cash for everything.
The bottom line
Don’t get discouraged by the amount of your debt. Sometimes it is unavoidable.
You have to realize that this is a journey and it is going to take some time. Keep working at it, and you’ll eventually be able to live debt-free.
Just focus on the goals that you’ve set for yourself, and do anything that it takes to make it happen.
Are you currently on a debt-free journey? Let me know a few of your challenges in the comments.
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