In 2017, shortly after getting married Kyle and I paid off all of our student loans, car payments, and credit cards. That’s right – we paid off all $48,000 of debt before quitting our jobs to travel the world. You’ll notice that our story is not one of impulse or spur-of-the-moment type deals.
Although we love a good adventure, the plan took YEARS to create and to execute. At the very beginning of the plan was when we decided to become debt-free! Really, before we even decided to travel the world or to be entrepreneurs, we knew getting out of debt would open so many other doors regardless of what the future looks like.
How did we get the debt?
Our debt was all with student loans, credit cards, and a couple of car loans. I’ll explain how we accumulated all of the debt in each category (and made terrible money decisions along the way).
Student Loans
Kyle and I both lived within our means from a very early age (maybe me more than him). So, how did we owe creditors almost $50,000?!? Like most people, we had a lot of student loan debt. In fact, most of the debt was student loans. Would you believe that I had a full scholarship to college and still ended up with debt? But, I will get into that soon.
Unless you live outside of the US, you know about the “student debt crisis” every financial media outlet can’t stop talking about. According to Forbes, 45 million Americans owe a total of $1.6 trillion just in student loans. Prices of colleges and universities are getting more and more expensive for the average student who is forced to take out student loans and spend 10+ years paying it off. The average college graduate has at least $30,000 in student loan debt. Some of our close friends have over $100,000 in debt from expensive private out-of-state universities.
We owed $41,000 total in student loans – I had $16,000 and Kyle had $25,000. As I’m writing this, I’m aware that that total amount is ‘not bad’ for two adults with 3 degrees between them.
Like I said in the beginning, I had a full scholarship to NC A&T SU. My student debt is completely from studying abroad. Even back then, I knew how important travel was in my life. I went on the most expensive study abroad program that I could find, laughably. My study abroad program was Semester at Sea that costs $21,279 for a single semester (where I took acting and public speaking courses). While I’m sarcastically talking about my dumb financial decisions, Semester at Sea changed my life and if I could do it again, I would tomorrow. But back to the costs – I got mostly scholarships and paid for the remainder of program fees with student loans (plus some spending money).
All of Kyle’s student loan debt is from the last two years and one summer of college. Initially, he received a scholarship to cover all four years but after a C in Engineering Statics with the toughest teacher (who started class faithfully at 8 am sharp), he was no longer eligible for the scholarship. He ended up paying for the last two years of college plus one session in summer school. This covered tuition and fees for an out-of-state top engineering school.
While we are very blessed for the college that was paid for with scholarships, we regret getting all of the debt with it. Maybe not regret because I don’t regret much but I wish things could’ve been different. You (hopefully) get what I’m trying to say.
Credit Cards
Wait, did I just say that we live minimally?! Yes, I did but we had credit card debt. We spend a lot of money on experiences and gifts on each other.
One example of this was when I surprised Kyle with a birthday trip to Las Vegas, NV while in graduate school that I paid for by maxing out credit cards. I literally funded my boyfriend’s (at the time) birthday trip out of state. I can laugh at 24-year-old Melanie now but I had no business spending $1,000+ of money I didn’t have.
Both of our credit cards stayed maxed out. Luckily the banks didn’t give us very high limits back then. We had a total of about $2,000 in credit card debt total.
I don’t know how a graduate school student without an income got approved for anybody’s credit cards but there we were living the ballin’ life at the slot machines in Vegas on credit.
Car Payments
In 2011, I bought a black Dodge Caliber (named Buffy Da Body for her big butt and chocolate skin) that I couldn’t afford and owed about $3,000. By the time, we decided to get out of debt in 5 years later, I still owed about $2,000 on it. I don’t know how that math works out and I have an M.S in mathematics.
Kyle also bought a car after he graduated in 2012 – he purchased a silver Volkswagen GTI (unnamed) that he owed $3,000 on in 2017 when we started the debt-free journey.
This category surprises me the most because it could’ve been much worst. I think we both made decent decisions when it comes to cars. The average loan for a used car is over $20K. Thankfully, we only had about $5,000 in car loans.
Why did we pay off everything?
Kyle really started the idea of being debt-free. At this time, we were already engaged. And we always disliked the idea of paying for a wedding with debt. I never had grand gestures of a wedding that I also couldn’t afford. The average wedding costs $30K and I wanted to pay for ours without maxing out credit cards.
Kyle read The Total Money Makeover by Dave Ramsey and was so fired up by the concept of not having all of this debt hanging over us as we start the next chapter in holy matrimony. He calculated that in total, we paid $1,000 per month in debt between the student loans, car payments, and credit cards. This blew my mind. Do you know what I could do with an extra $1,000 per month?!? Shortly after that conversation, I read The Total Money Makeover and was sold.
It was mindset shift before we could even get out of debt. Kyle and I are manifesting/ dreaming/ hustling to be wealthy. Â Having all of this debt was really the equivalent to hustling backward. We actually woke up more broke every day because interest on the loans was not letting up. I actually only used $13,000 for my study abroad program but within two years of interest, it grew to $16,000. *mind blown
Without debt, we knew that it would be so much easier to achieve our wealth goals.
Our process of debt freedom
We began paying off debt in 2017 immediately after our wedding. I remember making the lump sum payment with money saved but not spent on the wedding. In 8 months, we were totally debt-free. During those 8 months, we put ALL extra money toward the debt.
A process it was! The first step was that we got on the same page. Although we decided to get out of this hole while we were engaged, we didn’t put action into anything until after the wedding. (We saved for two years for the wedding and didn’t combine finances until after the marriage certificate was legal.) We believe God blesses our union and when we are in agreement, we make way for God to show out in our lives. That’s why I emphasized for us being on the same page. Reading the same book, helped us get on the same page. *pun intended LOL
We had to say that we were DONE – That’s it – No more debt. We had to stop using the credit cards so that we could actually stop getting further in debt. It was a never-ending cycle of paying off the maxed-out credit card just to put that same amount right back on it. To break the cycle, we saved $1,000 for a temporary emergency fund that allowed us to give the credit cards a rest. This emergency fund was only for things that came up and we needed to pay. Since we paid everything off in 8 months, we never used this. No emergencies came up during the 8 months (all God).
After saving $1,000, we decided to use the debt snowball method because the psychology behind the idea makes sense to me. The Debt Snowball method is where you pay your debts in order from smallest to largest balance. The psychology behind it would quickly knock out the smaller debts (for example my credit card with $1,000) and be motivated to continue and tackle the big ones. It’s easier to see progress when those initial accounts reach a zero balance. Having a lot of debt is overwhelming, this method allowed us to see wins early and often. In the first month, we paid several accounts that were all about $1,000 each.
The snowball grew and grew after that until the last few that were $8,000+. Every month we paid between $5,000-$6,000 until it was over.
Another Process- That Didn’t Work For Us
It’s worth mentioning that some people will say that the math makes more sense to pay off debts with higher interest rates because they are costing you the most. Interest is constantly accruing so paying those off first will avoid some interest and save some money. We did not choose this route although it works for some. You basically order your debts in order from largest to smallest interest rates and pay off in that order.
I’m not a fan of this method because in general more people are motivated by quick, easy wins. I’ll use an example to show the difference.
Suppose, you have one student loan and one credit card with $3K and $10K balances respectively. If I do the debt snowball method, I would pay off the student loan one first. It’s a lot easier for me to pay off $3K vs $10K. We paid $5K per month and I can pay off my entire student loan in the first month. I’d be very excited when I see the balance go to $0.00. Conversely, if I start with the larger balance. It will take me two months to pay that off and I might get discouraged when I don’t see any results the first month.
While this is a simple example, you can imagine if you were paying off $200K+ mortgage in $1K increments per month compared to smaller credit card balances.
Resources that Fast-Tracked Our Debt Payoff
We paid off our debt in less than a year because we put all extra month towards the debt. Either method could work for us because the amount of time was short.
Our momentum was due to being in agreement, the debt snowball method, as well as several books.
We read The Total Money Makeover prior to getting out of debt but we also read Master the Game by Tony Robbins. This book accelerated our journey because it breaks down the game to wealth in an easy to understand way. Be warned- the book is very long but very informative.
Between these two books, we are confident that we are on the right path to our wealth goals.
How We Continue to Stay out of Debt
Getting out of debt is only half of the battle, the real test is the rest of life. It’s been 3 years and we still don’t have any debt. Immediately. after celebrating being debt-free, we knew we could not go back. At one point, I was totally against having credit cards because I thought they were the first stumble down the slippery steps to mountains of debt. I was ready to burn (more like cut up) our credit cards.
Now my view has relaxed. Between the two of us, we have about 6 credit cards. Every month those credit cards have a balance of zero. We use credit cards with different travel perks that save us tons of money while we travel.
Even more important than responsibly use credit cards, is a properly equipped emergency fund. The reason why so many people depend on credit cards is not having the money to cover emergencies. It’s easy to reach for the credit cards when the house needs repairs or the car is breaking down. To combat these scenarios, we have $20K saved for emergencies. The general rule of thumb is 3-6 months of expenses. While our emergency fund is larger it covers, travel emergencies, and timeline until we get jobs again.
The short answer on how we continue to stay out of debt is responsible spending and an emergency fund.
How Being Debt-Free Changed Our Lives
Now that we are debt-free and commit to being debt-free, there are several ways in which our lives have improved.
While we were getting out of debt, it was difficult to miss expensive social outings. We bought less extravagant gifts in order to pour all of our money into one goal.
Without being debt-free, quitting our jobs to travel the world would be drastically harder. I would’ve been much more nervous about taking the risk. Would we have ever hiked Patagonia or biked 5 wineries in Mendoza or lived in Colombia for 3 months? I doubt it.
This is only the beginning for what’s to come but I know that we are in a much better financial position.
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