Consider the incredible story of Cory and Erica. They decided not to allow debts to control their lives and finances, paying off over $145,000 in 35 months, and here is their story—this story highlight how you can take control of your finances and begin paying off debts.
Wrong Decisions that Plunged Them in Debt
When Cory and Erica got married, they thought they were in an excellent financial situation. They bought a new car, new TV, furniture, and new household stuff since they believed they could afford the monthly payments. Erica admits that they spent carelessly throughout the month, leaving them with little to no money at month-end. “We were also not saving for retirement or doing any type of savings,” she says. One year after they married, Erica says she began being frustrated by the colossal amount of money they spent on debt.
Cory admits that, unlike Erica, who was a natural saver and good with money, he spent all the money he received without saving a dime. He lived in the moment with no thought about the accrued debt, the future, or retirement. Cory says, “I also received an email from my mom about a student loan, meaning I owed my parents and the bank money for a student loan that was accruing interest rates. He also realized that it would take him 30 years to clear the debt with the minimum repayment he was doing.
The couple revealed that they were putting $1000 toward student loans monthly, which they calculated would amount to paying the loan for 30 years. A month after their conversation on student loans, they invited friends over for thanksgiving, and a discussion ensued about managing finances.
A friend suggested Dave Ramsey’s Total Money Makeover highlighting a practical financial plan to help families pay off the debt in shorter periods. Erica read the book and convinced Cory that they could pay off their debt in 31/2 years. They also poured themselves listening to financial gurus on podcasts and YouTube videos on practical steps that could set them free from the debt chain.
Deciding on How to Get Out of Debt in 3 years
They jumped into action immediately after completing the book, starting their journey to be debt-free in January 2015. By November 2017, the couple had paid off a total of $145,000 and were debt-free. Cory was working full-time for a tech company when they began their debt-free journey. He would work 20 hours a week throughout the year for an annual salary of $45,000.
Cory took on the recommendation from the Total Money Makeover and took on extra on a second job as a freelancer after work for 4 hours after work and made around $450 a month. Additionally, he tutored neighboring kids at home on the weekends for two hours, earning a total of $200 a month.
Erica was also working full-time as an accountant in a refinery company bringing home a $37,000 annual salary. Additionally, she took an extra job as a freelance writer after work for 3 hours earning approximately $300 a month. This combined income and other behavioral changes help this couple tackle their debt with success.
Implementing Dave Ramsey’s Snowball and Lifestyle Change.
From financial videos and the book they read, the couple realized that personal finances are about 80% behavior and 20% head knowledge and math. They admit that it wasn’t easy to make the necessary changes, but it is worth it. The following baby steps worked for them:
1. Creating a Budget
Erica and Cory took control of their finances using Quicken’s free budget calculator to see where their money was going and create a plan to pay down debt, grow their savings, and meet their long-term financial goals. Every day “we sat down and examined our budget, how far off we didn’t stick to it, what was remaining, and how we could improve the next day.” They limited their shopping while selling stuff they did not use. Additionally, they tracked their spending, thus eliminating TV and Cable subscriptions, and they are happy sticking to these habits even after they are debt-free.
2. Use the Snowball Method
The snowball method advocates lining up your debts from the smallest to the biggest and begins attacking the smallest with a vengeance. Once you are done with the smallest debt, take the money you used to pay the first debt plus any other money you can squeeze out of your budget and throw it to number two lowest debt. The process will snowball up until you can pay off the biggest debt.
Erica and Cory agree that though this method may not make sense mathematically, it works, as it gives you the satisfaction of seeing debts zeroed out. It also helps them see the result of changed behavior and the rewards of cutting down spending while increasing savings.
3. Live Below Your Means – How to Get Out of Debt in 3 years
After examining their spending for some months before beginning the debt-free journey, they realized some spending they would cut off the budget, such as eating out, unnecessary subscriptions, and shopping less. Cory admits that this strategy was not easy to implement, but after a while, their lives adjusted, and the things they spent money on in an auto-pilot dropped.
4. Control the Content You Consume
You are the average of five people you associate with regularly. Cory and Erica immersed themselves in watching YouTube videos with several financial experts that normalized living below one’s means. This gave them the needed motivation to be aware of ways to improve in managing personal finances. It also meant that they avoid content that encouraged excessive spending and fashion influencers.
5. Increase Your Income
Though getting out of debt feels like managing your spending and cutting your cost, making more money is also a huge part of the process. The couple picks up a turn of side hustle such as freelancing and tutoring to increasing their income. You could also do ubering, lifting, door-dashing, cleaning, and so on.
What are their Future Plans?
Now that this family is out of debt, they are not taking a break. They are looking for several investment opportunities. Their focus is geared towards real estate investment as they grow their income every month. Their discipline cultivated from debt-free journeys has also helped them improve their saving for future investments in stocks. Looking back, they say, the journey took self-sacrifice and endurance. Their advice is that it takes accepting short-term comfortabilities to acquire long-term financial peace.
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