$110,000 of debt.
That number may or may not come as a surprise to you, knowing that my husband & I are both only 23 years old. And no, that’s not all student loan debt! I didn’t even go to college. Well, I did – for 2 weeks, then I dropped out. That’s a story for another day.
Before we get into how we’re paying off this much debt, I should tell you exactly what the debt is.
- $11,000 husband’s student loans
- $14,000 husband’s new car
- $85,000 mortgage
Those are obviously nice round numbers, because who really cares, right? Haha!
My husband’s student loan is actually broken down into smaller amounts for each individual loan.
Those look more like this:
$1,300 – $1,500 – $2,400 – $2,800 – $3000
How are we paying off our debt?
Put simply, we’re following bits and pieces of Dave Ramsey’s advice – namely the Debt Snowball method.
If you haven’t heard of Dave Ramsey, I recommend you pick up this book* that he wrote! (Amazon Affiliate link – I may make a small commission at no additional cost to you if you purchase through this link) He’s sold more than five million copies of this book & helped change tons of people’s lives. I won’t preach his methods as the end-all-be-all, as I have my issues with parts of his program. But this is one thing I’m 100% behind.
You’ve likely heard of it, but if you haven’t:
With the Debt Snowball method of debt repayment, you pay the minimum payments on all of your debt, EXCEPT the debt with the smallest balance.
You throw every dollar you can find at the debt with the lowest account balance due until it’s gone. Once that’s paid off, you continue onto the next smallest debt. Except now you’ve freed up the entire minimum payment amount of the debt you just paid off. You have an extra $50 (or however much) to apply to your next smallest account. This builds momentum.
Dave uses the term “Gazelle Intense.” Paying off debt is as if you’re a gazelle about to be eaten by a lion: You run! You see the progress of paying off your $400 Visa card balance much more quickly than you’d see results from making extra payments on your mortgage. Progress is encouraging and motivates you to keep going, which makes this system brilliant. (In my opinion, of course)
We’re working on paying off the student loans one by one, then we’ll be moving onto our car payment!
We have a budget, and I love our budget.
You can read my super simple step by step guide on starting your own budget here. We used a Zero Based budget, which means every dollar we earn has a pre-determined place to go, before my husband’s paycheck is even deposited.
Every extra dollar that we previously would have just put in savings now goes to debt payments! But don’t worry, we still save! We’re a month ahead on our bills, we have a well cushioned Emergency Fund, and we have separate savings for things that may come up that aren’t truly “emergencies.”
It’s going to be a slow pace, since we are a single income family. But the journey to being debt free is worth it! I don’t even know what I’ll do with myself once the payments are gone, it seems so far off. But we’re excited to get there!
A post breaking down our REAL LIFE budget, with real numbers is coming soon! I’ve had a few requests asking to show how our family really survives (and thrives) on one income. I’ll link to it here once it’s up!