On the outside, Danielle and Jonathan (J) might look like the perfect couple: young, beautiful, successful.
But the truth is they were more than $70,000 in debt — mostly because of student loans.
Then, two years ago, they decided to do something about it.
“I simply wanted financial freedom, to be able to lay my head down on my pillow at night and not ever have to worry about where the next dollar would come from to pay an outstanding bill,” explains Danielle, who blogs under her first name only at The Pennies We Saved.
They’ve since paid off $52,000 of debt — while starting a family. Here’s their story as well as some helpful tips to pay off debt.
‘We don’t make enough money for that’
It was May 2015. J worked in business systems analysis, and Danielle worked in the insurance department at a large hospital. They made a good combined income — between $85,000 and $110,000 — especially given the low cost of living in Minnesota.
But they were $73,000 in debt: $60,000 from student loans and the rest from medical bills and car payments.
Their wake-up call came, as it usually does, in an unexpected place.
They were on vacation, driving along the coast in Danielle’s home state of California, when she turned to J and asked, “Can you imagine what it would be like to wake up every day and walk to the beach?”
His response: “We don’t make enough money for that.”
At that moment, they realized it was time for a change. If they ever wanted their surf-and-sand dreams to come true, they couldn’t wait any longer.
Their first step? Tackling that debt.
“We [had] been in debt for years, and we absolutely hated its guts,” Danielle writes. “So together, J and I created a goal: to become completely debt free (except for the house) by 2020.”
How they started paying off debt
When they returned from vacation, they created a budget and sold whatever they could. They also started following Dave Ramsey and using the debt snowball technique he recommends.
Here’s how it works: You write out your debt obligations from smallest to largest and focus on paying off the smallest one first. Although it makes more financial sense to pay off your highest-interest debt, this technique gives you an immediate psychological boost.
“I would only recommend the debt snowball for those who have a hard time waiting to see progress,” says Danielle. “It allows for the small and fast wins.”
Once they made some progress and no longer needed the thrill of small gains to stay on track, Danielle and J transitioned to the debt avalanche technique (which involves paying off your highest-interest debt first).
They continue to be “very frugal,” according to Danielle, who explains, “We like to keep a substantial amount of money in our savings, and anything beyond that we throw to our debt.”
They also have side hustles: She freelance writes, and he buys and flips bicycles. “It takes a lot of commitment,” she says. “But in the end, it will be worth it.”
Along came baby: Pausing debt payoff
Like many people in their generation, Danielle and J knew they wanted to start a family but hesitated because of their financial situation.
“We quickly realized that being financially ready for a baby would likely never happen,” she says. “So we simply changed the way we approached paying off our debt.”
Here’s what they did:
- They continued to pay their bills but paused the debt snowball.
- Instead of putting their extra money toward debt, they popped it into a savings account.
- By the time their daughter was born, they’d saved the equivalent of 35 percent of their annual income.
“When you are expecting, stop the debt snowball and focus on your savings,” Danielle writes. “You never want to assume that you won’t face any financial hardships prior to or after your delivery day.”
After their daughter was born, Danielle quit her full-time position. She now works from 2 to 7 p.m. each weekday as a secretary in the health care system.
“The hours work out perfectly because we are able to arrange care for our daughter with family and friends rather than paying for daycare,” she says.
5 favorite tips for paying off debt
Danielle and J have paid off $52,000 of debt in two years — an unimaginable feat for most people.
But they aren’t done yet; they hope to extinguish all their debt (besides their mortgage, of which $150,000 remains) by the end of this year. They have about $21,000 to go.
They’d also like to retire by age 50 — just 20 years from now.
Currently, they’re investing only up to their companies’ matches in their 401(k)s. But Danielle says, “Once we pay off all of our debt, we will start looking into mutual funds. Shouldn’t be too much longer!”
Do you want to become debt-free like Danielle and J? Here are five of their favorite tips to pay off debt:
- Find an accountability partner: “Having the support of my husband keeps me extremely focused, especially since we are in this together,” Danielle writes.
- Tape your goal on walls and mirrors around your house: “It’ll keep the fire lit underneath you,” she says.
- Join debt-free living communities on social media: Danielle recommends Facebook and Instagram for finding inspiration from like-minded people.
- Read books and blogs and listen to podcasts: She loves The Dave Ramsey Show — especially the “debt-free screams.”
- Give yourself rewards: Danielle and J plan to take a long vacation when they finish paying off their remaining debt.
Although Danielle and J found Ramsey’s teachings to be invaluable, they don’t think any debt payoff technique is one-size-fits-all.
“Don’t feel pressured into following one method to a T,” says Danielle. “Find what works best for you. Tweak things around, but make sure you remain focused and make progress.”
And even if it feels overwhelming, don’t wait.
“Everyone has to start somewhere,” she says. “If you don’t start your debt payoff plan today, you’ll never get out of debt.”
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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 5.87% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 5.87% 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 firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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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
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|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|