How to Get Rid of $106,000 in Debt

I love real-life stories of people making very positive changes in their finances because 1) they usually illustrate tried-and-true principles and 2) the nay-sayers can't dispute them (they can't say, "this won't work" because the illustration just proved that it did work.)

So today I'm excited to feature a story about how a family eliminated $106,000 in debt in five years. No, they didn't earn $200,000 a year (the best I can figure, they earned about $60k per year at the start of this effort), but they did take two practical steps to get rid of the debt -- they increased their income and decreased their expenses. Some of the details:

• Kandy and Russell eliminated discretionary spending. Kandy began buying generic food and frequenting thrift stores for clothing purchases. They stopped exchanging Christmas and birthday gifts with each other and their relatives.

• Russell took on a second job cleaning a local grocery store several nights a week from midnight to 4:30 a.m. He would arrive home from his day job, eat dinner, catch a few hours of sleep and head to work. After his shift, he would go back home, sleep a few more hours and then get up for his day job.

• For about a year, the Hildebrandts made do with one car, until they received a used van from Kandy's family.

• Even so, "they didn't let anything deter them from progress," Humburg says. "If the money wasn't available, they simply did without." Equally, important the Hildebrandts kept their goal — becoming debt-free — in mind.

• After the first few years, the Hildebrandts' efforts finally seemed to be bearing fruit. Their card balances were coming down, and some were getting paid off. As one card reached zero, CCCS would apply the money that had gone to it to the remaining balances. As a result, those cards would get paid off even more quickly.

A few thoughts on this:

1. To pay down debt quickly, you must cut costs and/or increase income. The more you can do both, the faster you'll be able to pay off the debt.

2. The first bills are the hardest to get rid of because you're paying all of them at once. But as soon as one is retired, you have that money that can now be put to the second-most-important debt. And once that is gone, you have even more money to pay off the other debts. And so on and so on. That's why Dave Ramsey call this a debt snowball -- it builds and builds like a snowball rolling downhill.

3. They sacrificed to become debt free and they stuck with it even though it was tough and took five years. These are the qualities that separate them from the pack. Most people are not willing to suck it up, live more frugally, and keep at it -- and that's why they aren't out of debt. These people were, and that's why they are out of debt.

4. If you'd like to earn some extra money moonlighting like Russell did, here are some tips for how to go about it.

I wish there were some more details on where they cut, how much they cut, how much they earned, etc. But the information we have here is still impressive. Getting rid of over $100k in debt is no small matter and they are to be commended for their efforts.

Comments

[Susan]

Good for them for working so hard towards eliminating their debt. But personally I think the 2nd job from 12-4:30am is a bit insane. More power to him for doing it, but I don't think that's realistic for most people. I'd rather take longer to pay off debt than sacrafice my health like that. Everything, even debt repayment, needs to be put in perspective.

[Doc S]

I am in a very similar boat with a 6 figure number of debt (mainly student loans). I have seen great strides but recently it has lost steam due to CC issues. I have seasonal second job (refereeing) that picks up come winter so the increase in income will occur, as well as the decrease in expenses (I have zero personal time b/c refereeing takes up all off work hours). Any amount of debt is possible to pay off, but your right you have to make the sacrifices and stick to them.

[Head N Space]

Every step forward I've made in the past year seems to have been reversed by my credit card companies increasing the interest rates. So, I'm still about where I was last year, but with most balances a little bit lower. I've taken some I would pay off debt and invested it. I figure if I can earn interest at 20%, that's more than the rate on most of my credit cards. I can grow my money as well as pay off debt.

[nooney]

I had $56,000 in student loans last September, but now my balance is only $12,000. I paid off $44,000 in one year! Sacrificing in the short-term definitely pays off in the long-term.

[rxjohnk]

Why don't you ever hear about people going "crazy" like this to get AHEAD?!? It seems like its always to get out of debt!

[Jack @ Master Your Card]

I agree - that graveyard shift is pretty hardcore. But it's really what it takes - taking down that amount of debt is really an Olympian feat! Very inspiring.

[guinness416]

More power to them. Maybe I scanned over it, but what was the prize?

I'm all for second jobs (my husband has had one as long as I've known one) but what I'd personally be afraid of with a schedule as described is the burnout or lack of sleep affecting my performance at my main source of income. Most employers don't want to hear you're burning the midnight oil working for someone else when you're wiped out at your desk/station. Obviously worked for them though!

[LotharBot]

"Why don't you ever hear about people going "crazy" like this to get AHEAD?!?"

There are plenty of people who DO take a second job, cut expenses, make do with one car, etc. in order to get ahead (though I'd think a midnight-4am job would qualify someone as a "workaholic" if they didn't have a debt-reduction goal in mind.) Still, you don't hear about it much. It's not quite as inspiring of a story to say "I've saved $100k" as "I got out of $100k of debt" even if the methods are essentially the same. And (speaking as someone in that boat) I don't generally like talking about it unless someone is asking me for advice.

[Matt H]

Head N Space: what you said worries me. You're "investing" and expecting to make 20%? Sounds like a scam to me. Just keep paying down the credit cards. Paying them down is the best investment you have available to you. Otherwise the only investments that make 20% per year carry a ton of risk. The correct term for that is not investing, it's speculating.

[Moo]

We have some debt ($23,000 + car + mortgage), and I have considered doing something like this. The problem is time. I have the option to either spend time with my family and serving (I help at Church with the scout and youth programs) or I could get a second job.

I would really hate to miss this year of my kids lives (ages 3 and 1). The interest is worth it to me!

So, we continue with payments, plus whatever we can.

[Lola]

Very inspiring...the goal can be taken in reverse...how to make $106,000 in five years to make a big purchase. Very inspiring.

[Rich A.]

Their story, and Moo's comment, inspired me to write a post on my blog about how to make a major change like this and deal with the important issue of work-life balance. Here's the brief version:

1. Have a specific goal in mind. This family made a serious commitment to get out of debt. Other potential reasons why it may be ok: Start a business (full or part-time), go back to school, or any other major goal or commitment that will help bring more freedom into your life.

2. Find a way to impact multiple life areas. This isn't always possible, but you'll move ahead farther, faster, if you can work on several life areas at the same time. For example, this family's decision to pay off debt positively impacted their "financial" life area, but it also was going to do good things long-term for their "career", "family", "health" life areas too, by giving them less stress and more freedom to do what they wanted in the future.

3. Consider the cost up-front. They decided that, to get out of debt, dad was going to have to work more, and they were going to have to spend less on other activities. In other words, they realized that some things are going to have to suffer short-term in order to achieve the long-term goal. People get into huge trouble, and stress, when they think they can make a major change in one area while also trying to keep all the other areas moving along at the same speed.

4. Agree on a specific time frame. They decided to make these changes for a specific purpose and a specific time frame. They were all looking forward to the day when their goal would be reached. Once it was, the dad was able to quit his extra job.

5. Commit to regular check-ups. Whenever we're making some major change in our lives, we need to do regular check-ups with everyone that is affected. Make sure everyone's still on the same page, that they see light at the end of the tunnel, that they're still working toward the same goal for the reason that was decided on at the beginning. Without these check-ups, people can lose heart.

6. Plan rewards at milestones. Set some intermediate goals or milestones along the way, and find a way to celebrate those. It gives people hope, and helps them see the progress that is being made toward the big goal.

[Clf]

There is only one way to approach serious times in my opinion. Start living like a Monk and working like a slave. Take time to adjust, eat less and read more.

[Tamara Holmes]

there are many people who are not aware of the existence of personal grants. It is indeed a great opportunity for you. You shouldn't miss any grant that you are eligible for and you should fully utilize it to reduce your burden of debt. You will definitely be able to improve your financial situation.

[Tarah]

My family is in the middle of our debt snowball. We're one year into it and our motivation is flagging.

We make $50K/year and last year we paid off $20K. We still have $55k left. My husband and I are both working two jobs and we brought our groceries down to $50/week. Last week we had some unforseen expenses and had to bring the grocery bill down to $28 for the week, including diapers.

It's very difficult this time of year because my husband is a mechanic and this is the slow season. On top of that, it's winter and it's hard to keep your energy up during this time of year. Does anyone have any tips on how to stay motivated?

[FMF]

Tarah --

I'll post your question as a "help a reader" post later in January. FMF readers can then give you some suggestions.

Good luck!

[Tarah]

Thank you, FMF. I should also add that every time we think we're going to get a snowball, our gas, electricity etc goes up. So we're paying out 1000/month in minimum payments.