This is a guest post by Alicia Lawrence who has been doing a Spending Fast. -Anna
It’s been one year since my husband and I started our Spending Fast. Since then we have knocked out over $25K in debt (not including what we paid in interest). Anna has asked me to share my journey to getting out of college debt free and how we are tackling my husband’s debt now.
After I graduated college, I was one of the few that made it debt free. But that freedom was short-lived as I married someone who did have debt, and surprisingly more than he had anticipated. The average student loan debt is $27K, my husband had accumulated almost $60K. After our honeymoon, it was a rude awakening when my father-in-law sent me the passwords and links so we could start paying it off. I knew my husband had some debt but the real amount was twice what either of us expected.
For one, coming from money-wise parents, I couldn’t understand how they didn’t know about the amount of their debt. My husband was never encouraged to find the best loans or figure out how to get scholarships. Me, on the other hand, was searching and applying for scholarships since sophomore year in high school.
Start While You’re Young
Even before that, my parents had started a 529 Plan when I was born. Growing up in Alaska, each year every resident receives a Permanent Fund Dividend (around $1,000). Instead of giving that money to me they placed it in my 529 Plan to grow interest until college. By the time I left for college, I had over $30K in my 529 Plan to help me pay for lodging, books, classes and any other student finances I would need.
On a side note, I also worked summers and part-time jobs through college. I placed 35% in savings and the rest was used for living expenses and spending. After college, I had saved over $5K for emergencies. Glad I did since my husband and I didn’t find steady jobs till three months after our wedding. During those three months, I created budgets and action plans on how to pay off the debt quick, but you need money to pay off debt and that wasn’t something we had at the time.
We both got multiple retail jobs hoping it would hold us through till we could get “real” jobs, which finally happened a few months later. So now you know the back story, let me tell you what we are doing now.
How We Made Our Way Through Our Debt…
The Action Plan
At the first of every month, I take time to write out a budget based on our needs from the previous month and figure out where we can cut a little more. I keep track of all our spending in a mini notebook. Each page covers an area, like food, and beside it the total amount we can spend. I plan our meals out weekly so I know exactly how much we will be spending each week so I don’t go over budget. I usually cook our meals in bulk so we have it for lunches through the week.
Here’s the usual breakdown of where our money goes:
40% living expenses
5% entertainment and gifts
10% emergency fund/savings
When it comes to paying off each loan, we targeted the ones with highest interest rate first. Remember, up to a certain point the interest from your debt is deductible on taxes.
While living on bare essentials is no fun, it’s a necessary part of paying off debt quick. We also picked up side jobs to help get a little extra money. Take a babysitting job or check out Craigslist for easy gigs. This Christmas, we are planning on making our friends and family members’ gifts instead of buying them something. I remember when my sister was trying to get out of debt, instead of gifts she did acts of kindness or volunteer work and then told us what she did for us.
It’s amazing once you put your mind to becoming debt free and figuring out your expenses how much money you really don’t need to spend. We moved into a cheap apartment, skipped on cable, and bought the majority of our furniture from garage sales or got it free from friends.
My husband and I planning to be debt free by 2015, if not before. To encourage us to work towards the goal, we are planning a fun vacation to celebrate being debt free. The 10% emergency fund/savings we set aside each month will be used towards buying a house the year following 2015, except for $3K of it. While we both want kids, we’ve decided it wouldn’t be wise to have a baby when we are still trying to pay off debt so we are holding off till we get a house.
Getting rid of our debt quickly now will definitely bring a brighter and more enjoyable future. It’s like taking off a Band-Aid. Even though you think taking it off slowly will cause less pain, in the end ripping it off fast is really what will cause the least amount of pain in the end.
I hope through my story you will feel confident that there is a light at the end of the debt tunnel for you too. Feel free to ask any questions in the comments below.
What is the biggest obstacle you see or imagine when it comes to facing your debt and making your way out of it?
P.S. Ready to get out of debt ASAP? Check out the Spending Fast Bootcamp!