2019 was a tough year. We had a new baby, had just turned in our cancellation letter for a failed MLM business and worst of all, we were in $40,000 worth of debt.
I was scared, angry and honestly, lost. I had no idea how we were ever going to get out of the mess we made. We were drowning.
We were living in this constant cycle of making minimum payments, interest hitting and never being able to get our debt numbers to go down. Sound familiar?
I tried working with creditors to get them to lower our interest rate, payments, etc. but most of them wouldn’t budge. Things got so bad at one point, we had no choice but to stop paying minimum payments on our credit cards.
As you can imagine, our credit tanked.
We were drowning and nobody could save us.
One morning I looked into filing bankruptcy and even had an attorney lined up. All I had to do was pay the retainer. But I couldn’t bring myself to pull the trigger.
I decided enough was enough. I couldn’t take the constant stress, the phone calls from creditors and the looming debt hanging over our head.
Instead of bankruptcy, I decided there was only two things we could do to fix our situation: decrease our expenses and increase our income.
Sounds easy enough, right?
Now, let me be clear – there is nothing wrong with filing bankruptcy. I believe it’s a great option for many and can give a fresh start to life. But for me, I didn’t want to go that route unless I really had to.
So, we got to work…
Step 1 – Things Got Ugly
I’m a firm believer in one of the best ways to get over your fear is to face it head on even when it’s ugly and staring you right in the face (spiders are the exception here).
And let me tell you, when we finally sat down and wrote down all of our debt, it was ugly. I had this uncontrollable sick feeling in the pit of my stomach. It was bad.
But I knew that if we were ever going to get out from under the hold this debt had on us, we had to face the facts. And the fact was, we were in $40,000 of debt and that number was growing every day.
As Dave Ramsey would say, “you have to stop the bleeding”. I don’t agree with everything he says but I remember thinking that applied to our situation.
So, step one was really writing down on a simple piece of paper every single creditor we owed, how much we owed them, the interest rate and the amount the monthly payment was.
This may be the most important (and most emotional) step. You have to know where you are to get where you are going.
So, go and write down all your debt right now!
Step 2 – We created a plan
By the time we decided how we were going to proceed with our attacking our debt, we were heading into 2020. Yep, the year we were all on lockdown and stuck inside with our families.
Honestly, this ended up being one of the best things for us!
We created a strict budget, cut out unnecessary expenses, and decided we were going to do anything we could to increase our income. But one of the biggest things was that 2020 forced us to make sacrifices.
2020 gave us a reason to be home rather than out spending money which in return, forced us to make sacrifices that we may not have made otherwise.
We sacrificed by only spending money on things that were necessities and we had to get creative with ways we could make memories as a family without the need to spend money.
- We stopped dining out
- We stopped order from Amazon Prime (unless it was a necessity)
- We didn’t take any vacations
- We cut up all our credit cards and were forced to use our debit card for everything (this actually should be part of step 1 so you don’t continue to get further in debt)
- I stopped getting my nails done
- I stopped getting my hair done at a salon (my husband learned how to dye my hair at home)
- We cut our kids hair ourselves
- We watched YouTube and learned how to fix things around our house by ourselves
And because we were home all the time, we didn’t use as much gas in our car which also saved us more money.
Basically, if it wasn’t a regular bill (housing, groceries, etc.) or a need, we didn’t do it. SACRIFICE.
We also spent a lot of time making money online that year. With nowhere to go and nothing to do, it became a huge focus of ours.
So, let me ask you – what would you sacrifice for a short period of time in order to payoff your debt or reach your financial freedom goals?
Step 3 – We made more money
If someone said all you needed to do was make more money, you’d probably roll your eyes and say, DUH!
The truth is, everyone wants to make more money but not everyone has the time, energy or devotion to do it.
But I am here to tell you – find a way. Find multiple ways.
The more you increase your income, the faster you can pay off your debt. Once you get that ball rolling, it’s exhilarating and hard to stop.
Some ways we made extra money:
- My husband made logos for businesses
- My husband did some commissioned art pieces for people online
- I listed items on our local classifieds and Facebook marketplace (I had people Venmo me and then did porch pickup during 2020)
- I managed social media profiles for people online and became a Virtual Assistant for a few websites
- I promoted products using affiliate links (I made a comission based on sales of products for companies)
Honestly, there’s so many ways you can make extra cash these days. If you need more ideas, see my list of 50 Legit Side Hustles.
Step 4 – We Started Paying off Debt
Once we got used to our new lifestyle, we would pay our bills and then look at the money leftover. That money was our ticket to getting out of debt.
I would look at the list of our debts and would call our creditors to ask for a settlement offer. 9 times out of 10, it worked.
Side note: This really only works if you are behind on your bills, have collection accounts, etc. If you are current on your debt payments, this method will not work.
My conversation went something like this:
“Hi, I am calling to see if I can settle our account with you. I’d like to offer 50% of the balance to satisfy my account in full and request that you provide a letter stating you’d accept this settlement and will report to my credit as such”.
There would be times where the creditor would counter offer something like 60% of the balance but I was able to pay off my debt faster using this method.
I would then repeat the process over and over until our debts were paid in full.
Now, I am NOT telling you to stop paying your bills and try to get a settlement offer but I am saying, if you are already in this situation, it doesn’t hurt to try.
If you are current on your debt my advice is, throw everything you can at your debt and pay off the ones with the highest interest rate and/or the highest payment first (avalanche method). That will only free up more money to use on your next debt.
If you really need the motivation, try the Debt Snowball Method where you pay off the smallest debt first because then it gives you that boost of confidence to keep going.
I ended up using a combination of the two.
You can also look into 0% interest balance transfer offers to help you escape those high interest rates. I did this on a few of our debts that were current. It saved us thousands of dollars in interest (just make sure to pay off the card entirely before that 0% intro offer expires).
Step 5 – Enjoy Financial Freedom
I wish there was some secret to paying off debt that worked like waving a magic wand and poof it all went away, but there isn’t.
I can promise you though, the feeling you get from being debt free is worth all the hustle and sacrifice.
Imagine the freedom you’ll have when you are no longer attached to your debt. You’ll be able to breath, be less stressed and start focusing on bigger and better things like vacations, building a savings, and so much more!
The combination of these steps torpedoed our debt payoff plan and helped us pay off $40,000 of debt (and build an emergency savings) in less than a year. If I had to do it all over again, I would utilize the same strategy again.
Trust me when I say, if I can do it, you can too!
Recap of 5 Steps to Paying Off Debt
- Write Down Those Ugly Numbers – You need a visual of how bad things are so you can focus on what you need to get out of. Write down every debt you own (and regular bills too so you know how big your shovel of income needs to be).
- Create a plan – Part of creating your plan involves creating a budget, making sacrifices, and figuring out ways you can make more money to throw at debt. Go down to those bare minimums and get uncomfortable with where you are, it’s motivation for getting out of your situation faster. It is also important that both spouses are on the same page here.
- Make more money – Unfortunately, you cannot pay off debt without more money coming in that is outside of your normal bills. Make sure your main bills are covered and current then move on to attacking debt with any additional money.
- Pay off debt – Once you have the numbers, the plan and the income, it’s time to attack the debt. Take it one debt and one day at a time and soon you’ll start to see your debt numbers shrink. Keep going until your debt is paid off.
- Enjoy the debt free life – Once your debt is gone, you will feel liberated. You will have more freedom when it comes to money and life is a lot less stressful.