How My Millennial Family Paid off Over $99k of Debt in 5 Years.

by Sahirenys Pierce

Starting our debt-free journey

When we first started our journey towards financial freedom, I never considered being debt-free. This just became something we accomplished along the way towards reaching real goal of financial freedom. As a young minority couple we realized that the textbook way of handling our finances wasn’t working for us. That’s when we first learned about Dave Ramsey and really started to look at our debt a little differently. It became pretty clear that our debt was holding us back from starting a family, a business, and most importantly living the lifestyle we wanted.

One of the hardest parts about getting out of debt was paying off something I’ve already had or enjoyed. I wasn’t getting the adrenalin of buying a new car or go on a big vacation. It felt like I was sacrificing to paying off a YOLO moment or a financial regret. Those were some of the battles I had to face in order to truly change my mindset about debt. My turning point was realizing that it didn’t matter how bad I wanted something, giving up my freedom wasn’t the answer.

Our situation vs. the numbers

Now, to be honest, paying off $99,102 in debt took a total of 5 years with many ups and downs due to family emergencies. It also came with a lot of side hustle income and working way over 40 hours a week to make this dream a reality. Let me note that we were not popular around this time, as our family and friends didn’t see our vision or agreed with the sacrifices. But, our family’s financial stability was our top priority during these past few years no matter what. We made a decision to sacrifice now and live the remainder of our days with less financial stress. This meant trading nights out for nights in, eating out for eating in, and vacations for a staycation.

Once we finish cash-flowing our wedding and got out of $45,000 of student loan debt, we decided to focus our energy on the life we wanted. Our goal was to start our own business, start a family and do it all under one roof. We felt comfortable taking this leap once saving for our emergency fund and staying one month ahead of our bills. Once we started the business we started feeling a need to up our emergency fund and lower our cost of living. We wondered what our game plan would be if we didn’t get paid on time or if we lost a contract. So we focused on paying off my husband’s car to remove that bill from our monthly cost of living.

Our Struggle

But life had bigger challenges come our way, with our son being diagnosed with a heart defect (Tetralogy of Fallot) that would require open-heart surgery. To not distract us from our main priority, our family, we continued to stay ahead of our bills and paid off my cars on schedule with no rush. The month of my son’s surgery was so hectic, we had a death in the family and my husband wasn’t able to work for a whole month. Thankfully our son’s surgery was a success and we had money saved to pay our bills. With all of that happening, we ended up overpaying on taxes and the following year we got a tax refund. That allowed us to pay my car off in full two years earlier and finally become debt-free.

If you want to hear more about how we overcame the hardest year of our marriage click the link
A Poised Conversation with my husband – Audio Conversation

How we got out of debt

The big question I’ve been getting is “how did we get out of debt?” even with all those obstacles. Well, it took some praying, planning, and a whole lot of strategy. Here I’ll share the steps we took during our journey to paying off $45,000 of student loans and $53,102 of car loans. But take caution that these steps have nothing to do with the mindset you need to get out of debt and the sacrifice it takes. That means it’s going to take some patience and some lifestyle change, not just financial changes to reach debt-freedom.

Our Debt-free Steps:

  1. Start budgeting together
  2. List out the debt you owe
  3. Prioritized debt & use the snowball method
  4. Pause and focus on emergency fund/cash flowing needs
  5. Pay off remaining debt & uses the avalanche method

1. Start budgeting together

At the beginning of 2014, my babe popped the big question and of course, I said yes. This is when we seriously started budgeting together as a team and started cash flowing our wedding. Budgeting together meant holding each other accountable by both lowering our play (spending) money. This allowed us to really see where our money was going to push towards our student loans and pay cash for our wedding. The best way we budgeted together was by sharing a Google Sheets and linking our accounts on the Mint app. We did all of this while engaged to prepare for dealing with money as a married couple.

2. List out the debt you owe

How much you owe

We constantly checked how much we owed on our student loans every time we paid on it. But, the numbers always seem to be a little higher since the payoff amount includes interest. Therefore, it’s super important to check what you actually owe each month because that number will constantly be going up.

Minimum payments on all debts

When you look up how much you owe, make sure you see what the minimum payment on those loans is. One thing that we did was to round up about $25 on every minimum owed. So if the minimum of one student loan was $175 we would round up $25 and paid $200. This made us feel like we could pay down the loans faster and not just get stuck on paying interest. When listing out your debt, you can either put the actual minimum or round up the amount. That is just one thing that we did to keep us motivated.

Interest rates on all debts

The next thing we did was to list out the interest rates on all of our debts. It’s very important to see which loans are killing you with interest because you might be mainly paying interest. For us, our interest rates weren’t too bad, which allowed us to focus on which loans we wanted to pay off first. But for many, interest rates might be higher than you realize and negotiating them down might be a good option. Having everything written out can definitely help you make a better decision on picking a debt-repayment plan.

3. Prioritize the lowest debt & use the snowball method

For us, our top priority was paying off the oldest debt, which was our student loans. Our student loans were also being split. This created more of an urgency to pay them off and get away from having them split into more minimum payments. We decided that we needed a debt repayment plan that reduced how many loans we owed. So we decided to go with the snowball method.

What’s the snowball method?

The snowball method is pretty much when you aggressively pay off your smallest loan up to your largest loan. Once the smallest loan is paid off you push all of that money towards the next smallest loan and so on. All while paying the minimum payments on the rest of your loans until they’re all paid in full. This method allows you to stay motivated and have fewer loans that you owe to. This was a great help when our student loans started getting split up.

4. Pause and focus on emergency fund/cash flowing wants

After paying off our student loans, we decided to pause our debt-free journey to focus on our emergency fund. This is definitely agents Dave Ramsey’s initial baby steps, but this is what worked for us. We started by using one of our savings accounts as our emergency fund account and started savings as much as possible. We saved one month of expenses until we got to 3 months and then focused on ways to lower our cost of living.

Having our emergency fund also allowed my husband to take the risk and start his own business. This allowed us to have some type of safety net available during this transition. Again your emergency fund should be 3-6 months of expenses. As a result, pausing our debt-free journey and focusing on our emergency prepared us for life-changing events we later faced.   

5. Pay off remainder debt & use the avalanche method

Once we got to a comfortable place “life-wise” we decided to continue paying off our debt, which was our cars. Now, this took a little longer to pay off since we stopped our debt-free journey. Once you slow down the gazelle intensity of paying off the debt, it can be a little hard to get back on it. So we decided to completely pay off the cars from highest interest rate to lowest, aka the avalanche method.

What’s the avalanche method?

The avalanche method is pretty much aggressively paying off your highest-interest loan first and then paying your lowest-interest loan last. This method saves you the most money in the long run because you’re paying less on interest by paying off your highest-interest loan first. For the average person this method is not very motivating since they don’t knock out loans, just the amount owed. Some don’t mind it and have the financial discipline to use this method. Both methods are extremely productive and actionable in most situations.

Ending Thoughts

Paying off debt isn’t the most glamours task. It took a lot of free time, extra money, and lifestyle changes during the process to undo the debt we had. When I talk to people from the #debtfreecommunity on Instagram, many have also mixed how they achieved debt-freedom. It is up to you to figure out how you want to pay off debt and with which method you want to use. The goal of reaching debt-freedom is very difficult to do without a strong community and family goals.

I promote everyone to join this community because the temptation of family and friends going into debt to live their best lives is a bit uncomfortable. This allows you to feel a little less crazy for getting a hold on your finances and connect with others going through the same journey.

Question? Do you think being debt free is overrated? Listen to a conversation I had with my husband about that exact subject.
A Poised Conversation with my Husband – Is Being Debt-free Overrated – Audio Conversation

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