Life and Marriage

September 7, 2019

Why We’re Doing The Debt-Free Journey

Nowadays, it seems impossible for anyone to be debt free. Between car and student loans, mortgages, credit cards and so many other little things that adds up, we rarely take a look at the bottom line of how much we truly owe. I know when I finally got fed up of paying so many bills, I went into all of our accounts and looked at how much everything was together and it was truly surprising! Between my husband and I, we owe just under $300,000! That’s a number I never thought I would see in my life, and especially in the negative. After being inspired by others I have seen on Instagram going through the debt-free journey, I thought we would give it a try.

What is it?

The debt-free journey is a conscious effort to put every last penny toward paying off debt with the goal to get it down to zero. Now, with a daughter, it’s even more important for us to look at what we owe and ways to pay it off in hopes of saving more money in the future. We currently have two student loans, two car loans, a mortgage, FOUR (!!!!) credit cards, two medical bills and a payment account that all add up. With a conscious effort, we can have everything except our mortgage paid off in 2.5 years! Imagine being almost debt-free in 2.5 years. It feels impossible and requires a lot of sacrifice, but we’re prepared for the challenge in hopes for a better life in the long-term.

Why are you doing it?

To be honest, it all started because I was completely over stressed by the amount of bills we pay. My husband is always complaining that we make so much money and yet we never have any to spend on ourselves. And yes, it would be nice to have a few more things (like a new bed) but we can’t financially afford them with all of our bills, and realistically, almost 75% of our bills are debt, so why not try to get rid of those bills if I can? It would eliminate so much stress and allow us to save a lot more money towards our daughter’s college fund and our retirement, as well as afford some nicer things like bigger vacations.

How are you doing it?

Well, first it started with writing out all of our debt. I made a spreadsheet that listed all of our debt accounts, how much we owe and how much we’re currently paying. I ranked each account based on value and pay off time -“Aggressive” Means pay off within 6 months, “Moderate” means paid off within a year “Later” means aggressive payments after all aggressive and moderate accounts are paid off, and “Exact” are accounts I pay exactly what I am told to pay because they will be the last to get paid off (like a mortgage).

*all numbers are fake and not our true balances in this post

 

Then I took the “low hanging fruit” and gave us a deadline to pay them off and divided the value by how many monthly payments I want to make. These are mostly the smaller accounts that can be paid off within 6 months with some serious increases in payment amounts. For example, if one credit card has $2500 in debt and I want to pay it off in 6 months, I would estimate to pay approximately $420 per month to get it paid off in the time I wish (plus interest).

Then, I created a payment chart of each account that shows how much each payment is every month. For some accounts, the payment amount increases over time as more cash is freed up from paying off the small accounts, and eventually you will see the end of the line where all of the accounts show $0.