Cherie Lowe had it all: a husband, a home, a healthy daughter, and another on the way. She also had $127,000 worth of debt. “We didn’t have a plan for our money,” Cherie says.
By 2008, the couple had $80,000 worth of student loan debt from undergrad and graduate school and the remaining sum was a mixed bag of car loans, credit card bills, medical debt, furniture they had on a payment plan, and a gap loan from when they were unemployed. But, with a second child about to come into the mix, the pair knew they had to get their finances in order.
Four years later, Cherie and her husband Brian tackled the $127,482.30 (but who’s counting?) of debt. Here’s how they did it.
How to pay off debt like Cherie and Brian
There were no financial advisors involved to explain how to pay off the debt or secret investment tips for Cherie and Brian. Instead, they followed a very basic strategy: Dave Ramsey’s Baby Steps plan. You pay off the smallest debt first, working your way up to the largest, regardless of interest rates.
“It became a game to us,” says Cherie. “Every week we’d ask ourselves what could we do to make more money and what can we do to save more money. We used the difference to pay off the debt. It’s not complex, it’s just not easy.”
The first step to reach that goal was choosing an actual start date to turn their financial lives around. “Having a second child was a crystallizing moment because you realize there’s another mouth to feed and college to pay for, and we couldn’t do that with our debt,” she says. “So, on April 2, 2008, we started our journey to pay off the $127,000.”
Setting the start date was just the initial tactic the couple used, but it was these little hacks and shifts that helped Cherie and her husband. “We thought it would take us 15 years to pay it all off, or just over seven if we were aggressive,” says Cherie. “But, with a bunch of tweaks in our lifestyle over a few years, we were able to tackle it in just four years.”
If you want to pay off your debt, too, here’s her best advice.
1. Adjust your tax withholdings
“The very first thing we did was adjust our withholdings on our paychecks,” says Cherie. Rather than waiting for a lump sum at the end of the year, Cherie decided to get a little bit more in her paycheck every month to help pay off debts.
“We knew we wouldn’t get a few thousand dollar[s] refund once a year, but we got an extra $100 every month. That was money we could put towards the debt every month.” In fact, that one tip alone helped them knock out a small department store debt almost immediately.
And with the average student leaving college with about $37,172 in student loan debt, you’re looking at a monthly payment of $351. An extra $100 a month is almost a third of the payment right there.
2. Don’t eat out for a month
“While meal planning, in general, was certainly something that helped us save a lot of money, it was when we stopped going out to eat altogether that we saw a huge difference,” says Cherie.
A year and a half into their debt-slaying journey, Brian decided to give up restaurants entirely. Even if he had a business meeting, Brian simply wouldn’t eat. Cherie eventually joined in his endeavor until their debt was paid off.
“We saved around $240 a month not eating out and paid under $100 a week for our grocery bill when we were in the thick of paying off the debt,” says Cherie. “But, we still don’t go to a restaurant for the month of January to help us save some money and reboot after a crazier holiday spending season.”
She swears that seeing the success of such a small change can become addicting. Start with one month of not eating out and see how long you can continue the trend. “We still meal plan and will choose one day a week where we’ll go out for dinner,” she says. “This actually makes going out more fun because it’s special and you’re saving money.”
The key for how to pay off debt is always taking those savings and putting it toward what you owe.
3. Name your debt
Even Cherie admits this is a bit of a quirky hack, but it helped keep her marriage strong and debt-paying mission on track. “We decided to personify our debt and named it the dragon,” she says. “We would do things like write letters to the dragon and it was a good practice to realize we weren’t fighting each other, but we had a common enemy.”
Personifying the debt, according to Cherie, helps you get perspective and makes you realize that it threatens the person you want to be financially, personally and emotionally. “When debt has a name, you can attack him or her for negatively affecting your life,” she says. “It’s a weird psychological tool, but it works.”
4. Give up meat
Again, another unique tactic, but Cherie swears by this hack. “We gave up meat for the last six months of our debt-paying journey because we didn’t want that extra expense,” she says. “We could eat more effectively by doing grains, pasta, and veggies. So, whatever money was spent on meat went towards paying off the debt.”
Cherie started by just eating meat on the weekend, but toward the end gave it up entirely. She also realized that most fruits and vegetables kept her family fuller for longer and bulk grains, legumes, and beans were really affordable. Those bulk items were also a good source of protein for her family while they gave up eating meat. She got creative with her meals using these items, and it helped trim the grocery bill by $10 to $15 a week.
5. Budget bills with your utility company
While Cherie and her family were doing everything they could to reduce their utility bills (think wearing sweaters and turning down the heat or keeping everything unplugged), they decided to put their gas bill on a budget plan.
In the summer, their gas bill was only $18, but in the harsh Indiana winters, it would spike to over $100. So, they worked out a budget billing system with their utility company.
“Most utility companies (lights and gas) have some sort of budget billing,” says Cherie. “They will look at your bills for the calendar and will break it up into a set payment instead of basing your payment on usage. This means you get the same bill every month and they’ll usually give you a discount.”
She adds, “This helped us to know how to budget for our utilities every month so we could know exactly how much we had to pay off our debt rather than it fluctuating constantly.” The utility company will adjust your bill from year to year, but at least you have a steady amount you owe no matter what.
Cherie said there is a chance you could overpay slightly using this tip, but the electrical company will just adjust the following year. The same holds true if you’re underpaying for your usage. The main point is that it helps you maintain a more steady budget, which helps when trying to pay down debt on an aggressive schedule.
Learning how to pay off debts doesn’t happen overnight
“In the end,” says Cherie. “We just kept playing that game of what can we do to save money and make money. There were no major overnight overhauls, it was a slow process of incremental changes and sacrifices that led to huge results.”
She adds, “If you make smaller changes and keep them in place over time, you’re going to have a lot more success. Otherwise, you make too hard of shift in a short period of time. You can’t sustain a change that’s too dramatic.”
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate||Visit SoFi|
|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|