In 2010, my wife Nicole and I got married and started our lives together. Financially speaking, we both really enjoyed the DINK (double income with no kids) status in our first year of marriage. We had a blast going to music festivals, vacationing in the Caribbean and treating ourselves to countless steak dinners.
But something was looming that I hadn’t addressed … My mountain of debt that I brought into the marriage.
Prior to us tying the knot, I became very skilled at spending money I didn’t have.
I leased an Audi TT convertible which you could find parked in my mom’s driveway since I couldn’t afford rent and lived with her.
As soon as I saved up a little bit of money, I bought a house I couldn’t afford and opened a HELOC (Home Equity Line of Credit) that I used like an ATM card. I had to stretch each month just to make the mortgage payments. To make ends meet, I started eBaying everything in sight! Clothes, books, DVDs, CDs … you name it, I sold it. Once I ran out of all my worldly possessions, I pulled the last, most embarrassing lever. It went something like this … “Mom, can you help me out with a few bucks to pay my mortgage/water bill/gas bill?! Don’t worry, I get paid on Friday Mom!”
Last but not least, I decided it was smart to go back to school to get a Master's degree to advance my career. Since I didn’t actually have any money to pay for my classes, I took on subsidized and unsubsidized student loans to the tune of about $40,000. Yikes.
It Became Our Debt
All in all, by the time Nicole said “I do”, she was walking into nearly $60,000 of debt not including the house. I suppose it is covered in the “for richer or poorer” section of the vows, but I wasn’t totally forthcoming with my situation prior to us getting married mostly because I didn’t even know how much debt I had. I simply wasn’t educated enough to realize how big of a mess I had gotten in.
Even her engagement ring was purchased with a combo platter of HELOC loans and student loans. Talk about a life long bond! (Adjusting my nerd glasses now.)
The Fix is In
When Nicole and I started talking about having kids – something that was so important to both of us – it got me thinking of the severity of my (scratch that, OUR) financial situation. I wanted to change our financial family tree for the better. I wanted our kids to know how to avoid debt and start to build wealth early so they would be set on a path to financial freedom. If this family tree was going to change, I had to change first.
I became determined to educate myself in the ways of proper money management. Books, podcasts, blogs, seminars and a whole of lot of financial trial and error became my new way of life.
I learned the importance of monthly budgeting. It allowed us to start controlling our money instead of allowing our money to control us.
Nicole and I agreed that spending less than we earned would be the key to us making some real change in our lives. That decision was the complete opposite of splurging on steak dinners, concerts and caribbean cocktails, but we both knew if we were to continue down this path, we wouldn’t be able to realize our dreams together.
Slowly but surely over the next year, we were able to take advantage of our DINK status and pay off the HELOC and the “Mom loan”. The mountain of debt was starting to crumble.
We went to work on the student loans using the same strategy and had them paid off in two years. With every debt we paid off, we would celebrate. Those steak dinners started to reappear again except this time we were paying for them with our own money instead of on credit.
Then we started to dream bigger … We set a goal to both own our cars outright by the following year. We figured that the less we owe each month through our lease payments, the more of a life we could have together. After the challenge was laid down, Nicole ended up paying off her lease car 6 months later. I carried the same determination as my wife and saved up cash to buy my dream car later that year.
I’m proud to say that after 6 years of hard work, dedication, quite a few epic fails and a lot of patience from my lovely bride, we have completely eliminated all of our debt and we’re on our way to paying off our mortgage by the end of 2017.
Nicole was eventually able to stop working and stay at home to raise our two beautiful children, Zoey (4) and Calvin (2). We feel incredibly blessed to be in the position we’re in and the future looks bright.
4 Steps to Defeat Debt Starting Today
To recap, here are four habits that Nicole and I developed to get us to where we are today:
Find Your WAY Through Your WHY
To make impactful change in your life, you need purpose.
When Nicole and I decided to have kids, my purpose (or my Why) was clear. I wanted to make sure our kids had the best lives possible – no students loans to worry about, memorable annual vacations together and parents that didn’t stress about money. Without this ‘why’, I don’t think I would have ever changed my path.
Take a moment to think about what would be your “Why” for getting out of debt today.
Would getting out of debt allow you to … Change into a different career that you love? Give to a charity you feel passionate about? Help out a friend in need? Vacation more? Own your dream car?
Write down your “Why” and keep it as a strong reminder to help you on your journey to becoming debt free.
Debt Destruction is a Team Sport
If you’re married or thinking of getting married soon, share your life and financial goals with your partner and ask them to do the same with you. In order for you to succeed, your partner needs to be on the same page.
Remember this is not about “paying off debt” … it is about reaching those BIG goals together. What I mean is that if you start the conversation off by saying, “Hey baby, I want you to spend less money so we can pay off our debt! Sound good?!” … you’re going to get crickets.
Alternatively, you could say “Hey baby, how would you like to go on a tropical vacation with me every year and not feel guilty about the expense?” I think they would be a little more responsive to the latter.
Once you learn about what your spouse’s goals are, write them down and put them together with yours. Sit down on the comfy couch, review the goals and dream about how amazing your lives will be when you achieve them.
After that, you’ll be motivated to pay off that debt … as a team.
Budget to Win
Spending less than you earn is the key to getting out of debt fast. The more money you have coming in (income) and less you have going out (expenses), the better off you’ll be.
The best way to get a handle on what you have coming in and what you have going out is to develop a budget. Just like a smart business, your family needs a monthly budget to ensure you’re not spending more than you earn.
You can do this on a piece of paper, in excel or through online programs like Mint, Every Dollar or YNAB (You Need a Budget). Our family started with an excel document since we didn’t have a lot of expense categories in the beginning, but then moved over to Mint a few years ago.
I’d highly recommend checking out Mint. It is FREE, it has a very intuitive app and it syncs up with your accounts to track your spending. We use it and love it.
If you’re not into the online tools, don’t let that stop you from getting started. Grab a piece of paper, write down how much money you make each month and subtract that amount of the money you spend each month. If you don’t know how much you make or spend each month, take advantage of this moment and find out right now. It’ll make a monumental difference in your life.
Once Nicole and I understood what debt we had, we wanted to get rid of it fast, but we also wanted to be motivated.
After reading a few different books on personal finance, one author really resonated with me. Dave Ramsey’s Total Money Makeover had excellent step by step processes called the “baby steps” that were easy to follow, allowed us to see our progress and kept us motivated along the way.
One area that was extremely helpful was when Dave Ramsey talked about using the Debt Snowball method. The idea is that you categorize your debts from the smallest amounts to largest amounts and pay off the smallest ones first. That way you can get some quick wins early in the process to keep you motivated.
For example, if you have $5,000 in credit card debt, a $500 medical debt and a $10,000 car loan, you would start by paying off the $500 medical debt. Once that debt was paid off, you would take the same amount of money you’ve been using to pay off the medical debt and throw it toward the credit card debt. Then the process repeats with the car loan until you’re debt free. Think about a giant snowball rolling down a hill consuming your debt as it grows bigger …
The Debt Snowball method is proven and it works. Nicole and I used this process and found it to be extremely helpful in Project: Debt Destruction.