Happy Monday! I have another post in what may or my not be a series, The Power of Debt Freedom. Today we’re sharing the story of Amanda from Centsibly Rich. Amanda and her husband paid off $100,000 in debt and are now living life happily consumer debt free. My hope and prayer is that by sharing these stories, you’ll find the motivation you need to start your own journey to debt freedom.Also, if you’re interested in finding out how to start paying off debt when your debt situation is completely overwhelming you, read my article on Centsibly Rich.
How We Almost Lost it All
My husband and I started off married life in debt. We married when I was still in grad school and by the time I graduated, we had student loans totaling $40,000. Within a few months, we added a car payment and mortgage to the tally.
As life circumstances changed quickly, we bought and sold three houses and two cars within the first few years. Needless to say, all this buying, selling, and trading added greatly to our growing debt.
When our son was born, my job didn’t pay well enough to cover the cost of child care and I can’t deny the burning desire to be home with my baby. It was then that we made the decision to become a one-income family.
Within 3 months of becoming a single income household, we moved into a fixer upper. The “new” home came with a larger mortgage and added to our already negative net worth.
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In the meantime, our daughter was born. To pay the bills, we had to develop some super frugal living habits. I cooked all meals from scratch and all of the kids clothing and toys were second-hand. I even made my own baby wipes! (I credit Amy Dacyczyn’s The Complete Tightwad Gazette for many of the frugal habits developed during this time.)
And then we were sued. It’s been 13 years, but I remember the day well. A knock at the door with the messenger asking us to sign for the papers. The lawsuit was for an “undisclosed” amount of money from a minor fender bender (think 5 mph) we had 3 years prior.
I was terrified. Panic ensued. Images of the worst scenarios ran through my head: we would lose our home, the small amount in our bank accounts, our cars. My level-headed husband proceeded to do his homework and reassured me they couldn’t take our home. The most comforting thing he told me was we had nothing for them to take. With very little money in our bank accounts and loads of debt, what could they possibly get?
Recommended Reading: Love Your Life, Not Theirs: 7 Money Habits for Living the Life You Want
The lawsuit was settled out of court and we came out relatively unscathed (with the exception of a higher insurance premium), but we felt the urge to do something, anything to keep that fear we felt during the lawsuit from becoming a reality. We knew we had to do something to protect our young family from financial disaster.
Paying Off Student Loan Debt
The debt was a huge factor to our financial instability, so it became a priority. We simultaneously built an emergency fund and threw extra money at the student loans. We sold some collectibles and other stuff, I cleaned my mom’s house, and sold baked goods to my husband’s coworkers at Christmastime. Our already frugal habits kicked into high gear and we saved wherever we could.
Eventually, our student loans were paid off, but it wasn’t one of those lightning fast success stories you hear about. I admire those that are able to pay off their debt in record time, but living on one, moderate, 5-figure income, meant paying off the loans was a slow process. It took us around 5 years to pay off approximately $40,000 in student loans. But we did it and it felt great!
In the meantime, my husband’s income rose to a more comfortable level (yet still 5 figures, even today) and we didn’t have the weight of the student loans, so we let up on the reins. And we got lost.
Ending the Debt Cycle
We soon traded and financed yet another new(ish) car and, eventually, a new camper. Though we had good intentions of becoming debt free each time, we would pay off the car loan only to turn around and get ourselves back into consumer debt with another vehicle.
There is no rhyme nor reason why we did this. Maybe the new cars represented financial success to us? More than anything, I think we got a little high each time we got a “good deal” on the next car. Though the exact explanation isn’t clear, we continued the debt cycle over and over.
And, honestly, the only way we continued to take on debt, pay it off and repeat the cycle is because we continued to live frugally in almost every other aspect of our lives.
Several years ago, I discovered personal finance blogs and, eventually, I happened across Mr. Money Mustache. I devoured his site. We made the decision to stop the debt cycle once and for all and work on saving for an early retirement. We finally had direction and a goal to work toward, providing the motivation we needed to stop taking on debt.
Once all the consumer loans were paid off, we had a decent emergency fund, and were contributing to retirement accounts at a higher rate, our financial stress was virtually nonexistent.
We do still have a mortgage and though we aren’t 100% debt free, it isn’t a source of stress for us.* It’s cheaper than rent, plus we have enough equity in the house to sell it and buy a smaller house if we want or need to.
What Does it Feel Like to Not Have Consumer Debt or a Big Mortgage Payment?
Honestly, I rarely worry about money anymore. And the worries I do have pale in comparison to what they did back in the days of consumer debt. Now, I do get uncomfortable when the emergency fund has to be used, but am grateful the money is there when we need it.
Today, if we get an unexpectedly high bill in the mail, whether it’s medical bills, insurance, or anything else, we don’t worry how we will pay them. When we were in debt and living paycheck to paycheck, we often scrambled and had to shuffle money around to cover unexpected bills.
I sleep at night. I know my kids will be taken care of if the worst happens. If my husband and I were to die tomorrow, it would not cause a financial burden for my family.
Best of all, we have options we never had before. Options such as:
- When our kids want to do an activity, we can say yes (within reason – we’re still frugal!).
- We will be able to retire early.
- We aren’t worried about a job loss because we have enough to get by for quite some time.
- We are now pursuing dreams, business and otherwise, we’ve both had for many years.
Amanda and her family are able to have the financial peace of mind they have and to make spending decisions not on whether or not they have the money, but on whether or not they think the purchase is a good decision for their family. Now, that’s freedom! If you’re interested in starting your own journey to financial freedom, check out this post series.
How and Why You Should Get Out of Debt, Intro
How and Why You Should Get Out of Debt, Part 1, First Things First
How and Why You Should Get Out of Debt, Part 2, Getting Through the Rough Spots
How and Why You Should Get Out of Debt, Part 3, Staying the Course
*The mortgage is manageable leverage we’ve chosen to keep, at least for now. The most important thing when buying a house is to buy a house you can afford. I have no idea what the banks would have qualified us for, but I bet it’s nearly double what we spent. When we purchased our home, we decided how much we would spend according to our budget.
Thanks for sharing Amanda. I can relate to not having stress/worry about money. Once you build a plan and eliminate debt it feels like a weight is lifted. Continue success!
Thanks for sharing your story, Amanda! It’s awesome that you’ve been able to make such a turn-around, even while having a family and living on one income. It just goes to show the power of change and frugality, that after all this, you were able to get out consumer debt and will be able to retire early.
There really is a huge difference between consumer debt and mortgage debt. For whatever reason, we lumped them together when we were on the Dave Ramsey plan, and just paid off the low interest mortgage after our student loans & credit cards. After a few delightful years of being debt free, we let the math do the talking and took out another mortgage, so we could invest the funds. So we’re right back where we started.
Still, there really is something to the low-stress nature of being debt free. Nothing quite like it.
Congratulations on paying off your debt. I bet your story inspires a lot of people to do the same.
Thank you! I hope by sharing, it helps other people realize how life changing debt freedom can be.
I think the mortgage is such an individual decision. Some people really like the peace of mind that comes along with being completely debt free (and I can only imagine how amazing that must feel). We’ve come to the conclusion that we are comfortable with it (at least for now) because keeping it allows us to work on other financial goals.
I couldn’t imagine getting served a legal summons for either of the fender benders I’ve been responsible for. Thankfully it’s been about 4 years since the last one.
Thanks for sharing your story & how you manage your finances to keep out of debt. Not living paycheck to paycheck is probably one of the best feelings in the world, next to be 100% healthy or holding a baby for the first time.
Thanks, Josh! Health, financial stability, and holding a baby are all wonderful things to be grateful for! 🙂
I have to agree with you. Getting out of debt was the best thing that I ever did. Not having that anchor hanging around me is such a freeing feeling and makes me feel like I can do anything I want.
It’s allowed me to take on more interesting projects at work and not worry about being fired. I think so what if I get fired, they can’t take my house.
Since then I’m more relaxed, I’ve actually gotten promoted twice and was given more responsibility. I think if I still had a mortgage that I would be playing it safer and still be in the tiny corner cubicle.
So for me paying off debt has been crucial to where I am in life.
Thanks, MSM! Debt freedom is definitely life changing!
It’s interesting how your outlook on your job changed (and congrats on the promotions!). Though we aren’t mortgage free, my husband has mentioned the same feeling about his job. He doesn’t feel compelled to put in 80 hour weeks, even when others do.
Amanda, it’s great to read your story! I’m glad you shared your experience of paying off $40,000 in student loans in 5 years on a modest income. Many people on a modest income feel stuck, and examples like yours are inspiring. I absolutely get the “Let’s spend more because we’re earning more,” compulsion – and the yo-yo debting syndrome. Ugh! So glad you discovered MMM to get off that track. All the best as you continue to work your way to financial freedom!
Thanks so much, Ruth! We definitely don’t have a speedy debt payoff story. It took years to finally get to where we are today. And we’re no where near perfect, but we are much more comfortable and have a sense of freedom we never had before.
What an inspiring story! It’s amazing what people do and learn to get out of debt. Each story is always unique.
Not being in debt great. I’m not at financial independence yet, but it’s nice to know that I’m financially stable and don’t need to constantly worry.
Thanks, Andrew! It’s great that you aren’t in debt – it definitely eases the stress!
Thanks for sharing this wonderful story of Amanda. There are really other possible ways to pay off more quickly, and I think we just have to find these ways that work for us best.
Thank you, Jayson!
Congrats on getting out of the debt cycle. I got stuck in that and if it wasn’t for Mrs. SSC, I’d probably still be stuck in it. Seriously, I suck at the discipline needed for good personal finance. It’s a hard cycle to break.
It has been nice having those similar feelings as you, knowing that if we both died, the kids would be fine financially, or if either one of us died, the other would be fine financially. The same with losing a job, it’s just nice having that peace of mind.
Thanks Mr. SSC! I agree, it is a hard cycle to break, but once you get a taste of the freedom and peace of mind being debt free brings, it convinces you never to go back! 🙂
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