My wife and I got married on Aug 27, 2011.
It was one of the happiest days of my life.
But also one of the lowest points – financially.
Madly in love, we decided to get married just a few months after we graduated from our respective universities.
I just finished my MBA. My wife had recently completed Nursing school.
Combined we had a total of $105,000 in student loan. $87,000 of that being mine.
In addition, we decided to have an epic wedding – that was pretty popular back then apparently – and spent pretty much every penny we had.
We were not only broke – we were starting our marriage with this huge weight on our shoulder.
Fast forward a few years, after 3.5 years, we were able to declare ourselves debt free.
We successfully paid off all $105,000 of debt.
And we were able to do this while having two kids, Cohabitating with my aging parents and successfully growing our respective careers.
So how were we able to do this?
In this article, I want to share the steps that my wife and I took to pay off our $105,000 of student loan debt and break down some of the important details I hope you would find helpful to your own debt pay down journey.
1 - We Organized Our Finances
When we have financial issues, we usually feel it in our gut first
We either have debt that we’ve been neglecting or have spending habit that we don’t want to confront
However, unless we are willing to face our problems and see it for what it is, we can’t begin to fix it.
Peter Drucker, the management consultant had a saying
“What gets measured gets managed”
Essentially unless we can measure our current situation, we can’t begin to manage it. We can’t begin to work on the problem.
After the wedding, I knew I wasn’t doing well financially.
I had a pile of student loan documents sitting on my desk.
I had a bunch of wedding bills I was still paying off.
And all my savings had been depleted.
I knew I wasn’t at a good place. But I didn’t want to face the truth. It would be too painful to see the actual numbers.
But I also knew this was what I had to start with if I really wanted to start the process of paying down my debt.
I went through all my files and organized how much I had in my bank account, how much student loans both my wife and I owed and how much I could apply to paying down the debt each month.
You can use a simple spreadsheet or online platforms like mint or personal capital.
But you want to organize all your finances first so you can get a holistic view of the problem you’ll be tackling.
2 - We Invested In Our Financial Education
What really got the fire inside my wife and I to start our debt pay down journey was attending a Dave Ramsey Conference.
It was my first personal finance conference and it hit me like a freight train.
A statement that really resonated with me was
“Debt is Not a Tool. The Borrower is Slave to the Lender.”
It went against everything I learned about money up to that point.
I was conditioned to believe that some debts were actually good.
Student loans are good because you are investing in yourself and it increases your earning potential down the line.
But when I was honest to myself, I took out a student loan because it was convenient.
If I was serious about my personal finances, I could have figured out ways to get my MBA at a much cheaper cost – lower my cost of housing by having roommates, packing my lunch instead of going out with my classmates and calling it “networking.” Pursuing jobs at companies that sponsored education as part of their hiring practice.
After the conference, I couldn’t get enough personal finance education.
I bought the DVD set and devoured it – forcing my wife to watch it with me during dinner.
I got my hands on all the personal books I could find.
You can find a link to a post about my favorite personal book here.
I listened to personal finance podcasts and consumed personal finance youtube videos.
I was catching up on years of personal finance education I missed.
I never wanted to be in this vulnerable position again and I knew financial literacy was key.
3 - We Cut Back Our Expenses
This is the real key step.
Many people get stuck here, especially if you are not used to cutting back.
The sexy topics around personal finance are usually investing or real estate.
You’d be hard pressed to find someone excited about cutting back.
It feels so stifling and depressing.
However, if you are serious about paying down debt and making progress financially, you can’t skip this step.
You need to learn to manage your expenses and not let it manage you.
I know many people who have very good salaries – $200, $300, even $400 thousand dollars a year and still have their student debt years after they’ve graduated school.
If you are in a certain professional career, you might feel you need to live a certain elevated lifestyle. And you might even come to believe that you actually deserve that lifestyle because you work so hard.
However, what you actually deserve is to be debt free.
MBAs usually lead to good salaries at respectable companies. Many of my friends from my business school, myself included, were privileged to be in this position.
However, instead of flashing our new salaries by purchasing new cars and renting nice downtown apartments, my wife and I decided to go the other way.
No more ‘networking’ lunch outings. I packed my lunch and brewed my own coffee.
No more car upgrades. While my classmates were showing off their brand new luxury cars they bought with their investment banking bonus I continued to drive our reliable 2008 Honda Civic to work.
We were very very careful about lifestyle inflation.
Usually after a couple gets married, you feel you need new furniture, new utensils, new toys to fill your love nest.
We brought over all our bachelor pad furniture and vowed to not buy any new piece of furniture until all our debt was paid off.
4 - We Implemented Dave Ramsey's Debt Snowball Method
The basic premise behind this method is that we are more emotional beings than logical beings when it comes to making financial decisions.
If we were completely logical, it would make sense to pay off our highest interest loan first then pay off debt with the next high interest rate.
However, we aren’t logical beings.
If we were logical and rational individuals, we wouldn’t have student loans in the first place.
So what Dave Ramsey proposes here is to actually pay off our debt from the smallest to largest.
This allows us to get quick wins and motivates us to keep going with our plan.
Paying down debt is a marathon not a sprint. So you need all the motivation you can get to keep going.
On a spreadsheet, I listed out all our student loans from smallest to largest ignoring interest rate.
While still paying the minimum for all other student loans, we would tackle the smallest one with all available extra money we had until it was paid off.
Once it was paid off, I would leave it on my spreadsheet but just strike it out.
Then we would tackle the next one. Because there was one less minimum payment, we could apply more to the next loan.
Essentially we kept “snowballing” our payments until we were tackling the last and the largest loan with all available money we had.
By the time I got to my last loan, I remember I was so laser focused and motivated to pay it off, I would scrummage through our car and any hidden crevice around the house to find loose change I could apply against this loan.
5 - We Grew Our Careers and Our Income
So this is the other half of basic personal finance 101
There is a limit to how much you can cut, but there’s no limit to how much you can make.
If you really want to speed things up in your debt pay down journey, you need to make more money.
This is where the benefit of a multigenerational family really kicked in for us
Most often when couples are thinking about children, they also need to think about how to handle the logistics that comes with having a child
Do one parent stay home with the child before he or she is old enough for school?
Do you find a local daycare?
Can you afford to hire a nanny?
For us, because we decided to cohabitate with my parents, my mom was able to thankfully fill that role.
We did pay her, but the biggest factor in this arrangement was that we trusted her to take care of her grandchildren
Feeling secure that someone was watching our baby when we left for work, both my wife and I were able to continually dedicate ourselves to our careers and really grow it
We could take on travel assignment that might take us out of town for few days
We could take on hard duties that kept us later at work
We were so focused on paying down our debt, we were willing to make the sacrifice now so we could enjoy debt freedom as soon as possible
We were also willing to make these sacrifices now so we wouldn’t have to make it later when the kids were older
Whether you have a normal 9-5 job like us or have your own business, if you want to pay down your debt as soon as possible, think of ways where you can increase your income either by pursuing that new promotion or taking on additional clients.
It is going to be hard, but Dave Ramsey has a saying
“If you will live like no one else, later you can live like no one else.” – Dave Ramsey
Make sacrifice today so you don’t have to make the sacrifice tomorrow
6 - We Remained Committed To The Vision
Debt paydown is a long journey.
Unless you have very high income and are able to cut your expenses down drastically overnight, it’s going to take you years.
I’ve seen people who were able to do it within 2-3 years. But others who took many more years.
Everyone’s pathway is different so don’t compare yourself to others.
What matters is your pathway.
And even once you lay out your plan, you are going to have distractions.
Things that might throw you off the rail.
For us this was having kids.
A year into our debt paydown journey, my wife was pregnant with our first child.
This could have completely thrown us off our initial goal of paying down our student loan as soon as possible.
Having a child is a very emotional process and as first time parents, you are terrified of making mistakes.
One way we overcompensate this insecurity is by buying all the best and greatest gears for your baby. The best stroller. The best crib. The best car seat.
I admit, I did go down this dark pathway with several of our items.
Once you start down the car seat shopping route, don’t be surprised if you come out the other end with a baby car seat suitable for F-22 Jet Pilots
It’s easy to get discouraged and throw in the towel moment you are distracted or make one mistake in your debt paydown journey.
But be patient. Anticipate that you will make mistakes and things won’t go the way you initially planned.
We had a saying in the military
“No plan survives first contact.” – Random Army General
Very rarely does a plan work out exactly as initially intended. Life happens and the key to success is how we handle those unexpected events while keeping the long term goal in perspective.
Stay committed to the vision
Few ways that can help you do this is to curate your information feed
One of the big reasons why I went down the baby gear shopping back hole was because I was allowing myself to be influenced by other parents on social media and their new shiny strollers or car seats
Instead, of allowing yourself to be influenced by what other people are buying these days, allow yourself to be influenced by people and feeds that supports your goals
Personal finance books, Personal finance youtubes, podcasts
And outside social media, try to find other people who are pursuing the same journey as you.
If you have people around you that don’t support your vision, don’t feel bad about distancing yourself from them for now.
You have a vision and a goal you are trying to achieve, and you need to prioritize that
7 - Don't Underestimate What You Can Achieve
Humans tend to overestimate what we can accomplish in the short-term but underestimate what we can accomplish in the long-run.
When my wife and I look back at our debt pay down journey, we are in awe of what we were able to do.
If someone told us at the beginning of our journey we would have paid off $105,000 of student loans in 3.5 years, we would have laughed, very nervously.
But by focusing on the day to day progress and our ultimate goal, we stuck through it
We were a tortoise that just kept moving despite how slow our progress was.
I’ll never forget the day I made that last payment and said goodbye to student loans forever.
I believe you will one day reach that day as well. I’m rooting for you.
Do you have student loans? How do they make you feel? Are you thinking about paying them off early? Take small actions today and you’d be amazed by your progress!