Pay Off All Your Debt in Less than One Year

I love stories of real people who have taken the financial bull by the horns, applied some solid principles to their lives, become disciplined, and as a result made great progress in their finances. Some examples I've covered in past posts include:

• How to Create Wealth: Lessons from a New Retiree

• Think You Can't Overcome Your Financial Circumstances? This Guy Did -- And He Was Worse Off than Almost Anyone

• Yes, You Can Erase 15 Years of Debt in 14 Months

• How the Middle Class Can Get Back on Solid Financial Ground (see last section)

• Becoming a Millionaire -- A Real-Life Example

Now, I have another example to add to this list. Here's a newly married couple that paid off $30k in wedding debt in less than a year. How did they do it? The used the basic principles anyone needs to use to get out of debt. A few of the details on their specific situation:

• Eating out was costing us $1,200 a month. After the wedding, that couldn't continue so we went out only once every two weeks and packed lunches.

• We found cheaper ways to hang out with friends, such as grilling in our backyard. I cut out shopping, and Doug stopped buying pricey toys like ATVs.

• There were some unexpected expenses ($1,000 for Doug's back surgery, for example), but each month we mailed a check to our credit-card company.

• We just downsized into Doug's previous home, which has no mortgage; I sold my SUV for a smaller car.

Yes, it's basic personal finance -- but it works. Just like the simple steps you need to take to get rich.

Comments

[traineeinvestor]

This is a great series of articles. Tending to personal finances is a life long task which, at times, can feel a bit daunting. Reading about real life success stories is a great what to keep motivated and focused.

[Kira]

Somehow it's not quite as inspiring for people who spent more than I make in a month on discretionary spending to pay off debts.. It will never be that easy for most people.

[Dan]

I read that in Money magazine just yesterday, and a couple of things caught my attention:

"I cut out shopping, and Doug stopped buying pricey toys like ATVs." Huh? What did he do, drop his membership in the ATV-of-the-month club? I guess I never viewed something like an ATV as a casual purchase.

And this: "We just downsized into Doug's previous home, which has no mortgage;" Uh, yeah. That's an option for most people.

Without question, theirs is a great example of paying off debt. But as Kira pointed out, I'm not sure this is a real inspiring example. It's not as if these are two average people struggling to make ends meet or achieve financial independence. They haven't really had to sacrifice to get out of debt, they've just had to stop being so undisciplined. Big difference.

[FMF]

"they've just had to stop being so undisciplined."

Exactly! That's the issue for most people. It's not that they can't get out of debt, they just don't have the discipline to do it. This couple did.

[Dan]

Sure they did. But I'm just pointing out that cutting out casual spending like ATVs isn't really making much of a sacrifice. (For me, extravagant casual spending would be DVDs or something, and this guy's buying ATVs?) And moving into a mortgage-free house isn't really an option for most people. I guess what I'm saying is, while their effort is certainly noble, they're probably not the best example as they probably haven't had to work or sacrifice nearly as much as most of us would have with a comparable debt load. What they did just isn't realistic for most people.

[FMF]

It's interesting to me that everytime I share a real-life example like this, there's always a commenter who suggests that it was "easier for them", this "wasn't a fair example", etc. I'm not sure if it's a way of making others feel better (or not) -- but to me, such comments just seem to help others justify why they are in debt and can not get out. This is the opposite effect of what I'm trying to accomplish here.

Maybe that's not your intention or maybe it is. Either way, the facts are still the same: These people took the steps needed to get themselves out of debt. And while you may think there was little or no sacrifice involved, they seemed to think it wasn't a piece of cake.

Furthermore, the fact that they gave up spending on what you consider over-the-top luxuries, really isn't different than what most other people need to do to get out of debt -- the luxuries are just different. For instance, some people need to stop buying a new car every 2-3 years, some people need to stop spending $500 a month on clothes, some need to get rid of a boat, summer cabin, etc. No matter what the money is spent on, the vast majority of people are in debt because they are simply buying items they can't afford (like these people were). The difference between these people and most others: they were disciplined enough to stop it and get back on track. Most people aren't.

My main point is that whether it's "easy" or "hard" for any given person, individuals can get out of debt if they take similar steps: spend less than they earn and use the difference to pay off debt.

[J Martin]

My fiance and I started discussing our wedding budget this weekend. If we are disciplined and play our cards right, not only can we be debt free by the wedding, but also pay for the wedding outright. We were watching Bridzillas on tv last night, and a $102,000 wedding?! Get real! $15,000 for flowers?! Our whole wedding won't cost that much. I intend to have a very nice wedding, but expensive doesn't always mean nicer.

[Wishing to Remain Anonymous]

My wife and I paid off our wedding in less than six months, and I felt like that was too long. Then again, we budgeted out wedding down to around $8000, most of it being the reception, of course (we maxed out the food options and had completely open bar)...

I think what makes most people who read your site angry about examples such as this couple, is that most of us would never have gotten into debt in the first place if we were in that couple's shoes. FMF, I imagine that many of your readers are in a similar position to myself: zero credit card debt, making Roth IRA and 401K contributions, budgeting extra "rainy day fund" savings, living without lattes and cable, paying down the mortgage as fast as possible.

In my case, I'm at the end. All that's left to pay off is the student loan and the mortgage, and I'm doing so as fast as our income will support, with no excesses remaining in the budget, except perhaps groceries. If I can just figure out how to live on water alone... Managing to cut any regular expense by a mere $5/month would be a victory at this point, because everything that can be cut has already been cut. In my opinion, your typical reader is CERTAINLY not out buying ATVs all the time, and that's why this type of story is a joke.

I'm almost discouraged that I've made so much progress, because there's little more to be made. What should I do next? I think that many of your readers are in the same boat, and seeing a story like this, where the subject of the story (the silver-spoon couple, in this case) can so easily make progress, because the spending excesses are so readily apparent, and the sacrifices so easy to make that it's almost a farce to read.

What I want to read is how someone who is doing everything right and cut the budget to the bone figures out how to continue making progress, rather than simply being in a holding pattern at the 'top' of the frugal ladder.

I apologize for this rant, and for using a different name than usual, but I really value your site and I don't want you to think I'm discrediting everything you do... I just get disillusioned when I see that people can still make such easy progress as the couple in this article.

[FMF]

Wishing --

I had to read that a couple times to get your point. I think it is:

"What I want to read is how someone who is doing everything right and cut the budget to the bone figures out how to continue making progress, rather than simply being in a holding pattern at the 'top' of the frugal ladder."

Is that correct?

If so, there's really no easy answer (as there is none for getting out of any sort of debt). Your only options are to increase income (either on a regular basis -- like getting a raise at work -- or a one-time basis -- like selling some items to raise cash) or decrease expenses. But that's the price of debt -- and hence the reason I rant against it so often. It's a very hard price to pay.

No, I don't think the average FMF reader buys ATVs, but that's not my point. My point is, given their situation, these people were disciplined enough to get out of debt. Many people (and even many people reading this blog) would not have the discipline to do it. They'd just keep on spending on ATVs and whatever else they wanted -- racking up debt like it's no one's business.

The fact that they realized they were on the wrong path, then took steps to change is commendable. And while some may want to discredit it as "I wouldn't do that" or "it would be easy if I were in their shoes," I'm saying that it's not that simple to make that comparison. You never know what you'd do in their shoes and, in my opinion, most people would not have had the discipline to make a course correction.

[Dan]

I'm just like Wishing in that I have literally no debt beyond student loans and the mortgage. I'm also at or near the top of the "frugal ladder" as he put it. So my posts were not an attempt to justify any lack of discipline on my part; I do just fine.

My only point is that these people really didn't have to change course or discipline themselves. All they had to do was dial back their spending from "insanely ludicrous" to "moderately outrageous." Give me a mortgage-free house and I'll pay off $30K in a year too, on half the income.

What I sense Wishing is saying, and what I'm saying, is that we'd rather read about real people to whom $30K might actually mean something and who have to make meaningful, substantive changes in their lives to pay it off.

I enjoy your site as well, and I don't mean to be argumentative. I'm just a little lukewarm to this example of financial discipline. And I say that as an extremely financially disciplined person.

[twins15]

$1200/month eating out? I didn't even know that was possible!

[J Martin]

Wonder where they eat. LOL

[Chris Naaden]

I too smell horse manure here. You don't give people high-fives for things they're SUPPOSED to do. You want to be inspiring? Go negative net worth, THEN get out of debt. Geesh. I wouldn't applaud the government for stopping spending, I'd say thanks a lot, Sherlock.

[Tony]

yeah! those people don't know what it's about! Try learning that you have to sell everything (including your house) just to pay some of your debt so that the government doesn't swoop in and sell it for little of nothing and put you in jail to boot. run your credit rating from 820 to 550 inn 3 years!watch your kids gathering up their toys to sell!

[James M]

Cutting out the expensive dinners and toys is a good start but "downsizing" to a mortgage free home isn't a step forward in my opinion. The more real estate you have the higher your net worth.

[rocketc]

I am a big FMF fan, but my wife and had a wonderful, memorable and beautiful wedding for right around $2000. We are now in debt more than we would like and are doing everything we can to get out. Personally, stories like this are almost discouraging to us. We rejoice when we find an extra $10 to put toward debt retirement. These people were spending $1200 on food a month?!! $1200 constitutes 6 months of our family of five's food budget. This isn't class envy on my part. I do not begrudge anyone's wealth. I think that everyone should be able to make as much money as possible and I understand that you want to recognize them for doing what they had to do to get out of debt. I appreciate that, but that for many of us, it just seems that they didn't have to do very much.

[Sandra L]

There are two sides to the debt equation..how much you spend and how much you earn. I grew up below the poverty level and after my first job in high school making minimum wage, I realized I'd never get ahead even if I worked 2 jobs, unless I found a job that paid well. So, in college, my goals centered around earning potential...I went to engineering school (high entry level salary). My husband and I both make above average salaries. This allowed us to pay off debt faster, do the 401K, emergency fund, may down mortgage, remodel, etc... It took almost 15 years to get to this place..and certainly gets harder when the kids started coming, but it wasn't "easy".

My husband and I both worked 30+ hours a week while going to engineering school full time. (we met later) The comment on "they didn't have do very much." Perhaps this couple made huge sacrifices earlier in life to get to the point where they earn more now. I know we personally sacrificed years of sleep and fun in our college years to be where we are today. I don't begrudge people like doctors for earning a higher salary than me. I've seen friends go through medical school and residency and it's not pretty...taking 10+ years out of your life and coming out with $100K plus in debt.

So perhaps those posters who "wished" they had that much disposible income try finding a career that pays better, go back to school, and lose a few years of your life studying+working nonstop to achieve that goal. It gets harder when you get older, but I know an incredible single mom who got her PhD while working full time in her late 30s. Anything's possible. There's tons of financial aid out there for people who need it.

When you know what it's like to be really poor, some people feel hopeless and trapped, and that life's just not fair..others use every shred of energy + willpower to find a way to dig out of the hole. Which type of person are you?