Our Debt Payoff Journey, Part One
Happy New Year! With the New Year comes New Year’s Resolutions and ours is a doozy, at least I think so…
We had been fortunate to live a debt free lifestyle from the time we were married until this last year (we had a baby and started living on one income). We used to live on 60% of our income all while giving generously to causes that were precious to us. Before we got married, we paid off any debts we had individually. (I had more than he did, let’s just say I learned my lesson on the dangers of irresponsibly using credit cards, young.) Then, as we started learning how to merge not only our finances but our budgeting styles, we called most of our service providers and either negotiated lower rates or canceled services (goodbye, cable!) This allowed us to live on a percentage of our income, save for emergencies and large, planned purchases, and invest in our future. What a blessing! This was definitely the Lord allowing us to prepare for last year!
Come last year and we had several financial setbacks, which led to stress on us both emotionally and financially. First, after becoming pregnant, I became very sick, causing me to miss work and eventually leave a job I absolutely loved (and had worked hard for!). Throughout a difficult pregnancy, our medical bills started to accumulate. Then, like a perfect storm, BOTH of our vehicles broke down. We had accumulated a large amount of debt, our savings was starting to dwindle, and then I had to have a small procedure towards the end of the year, which brought about more medical bills.
Bring On The New Year’s Resolution…Debt Payoff
We still live according to our budget and have budgeted in payments for our debt, but we know we can pay our debt off faster using a few different methods.
Negotiating Balances and Expenses
First, gather ALL of your debt statements. For us, this was each medical bill (it’s really annoying that for one stay at one place you get a ton of different bills from different providers), and a couple credit card statements. For a majority of the medical bills, we were able to call the billing department and ask for/receive a discount for paying the balance in full vs being put on a no interest payment plan. This was a huge money saver even though we did have to pay a couple of them with credit. (See next method)
Next, we went back to what we did when we were first married and called all of our service providers and tried to negotiate a lower payment or canceled service. Doing this has saved us about $250/month so far!
Save On Interest
We also called up our credit card companies and asked for a lower interest rate. One of our cards asked for updated financial info (income, debt, etc. they did not pull our credit) and we were approved for a 3% lower interest rate! The other card denied the request because the account was still fairly new.
We decided to open a new credit card account that is no interest for 21 months. This way we could take advantage of savings for paying off invoices in full now and still save on interest if we pay off the balance before the 21 months is up.
I want to mention another option we researched, but ultimately decided was not for us at this time, personal loans. These are low-interest loans with the purpose of consolidating debt. Allowing for debt payments to easily fit in your budget with fixed payments and pay off schedules. To us, we feel fairly confident we should be able to achieve the same goal with the credit card accounts we currently have.
Debt Payoff Plan
And now, the meat and potatoes, now that we have reduced our expenses the best we can, it is time to pay off this debt. It may take the next year to two years, so expect a follow-up post later this year with follow up info. We have read many books about frugal living and paying off debt. My two favorite author’s being Mary Hunt and Dave Ramsey. Mary Hunt’s book, “How to Debt-Proof Your Marriage” (affiliate link) was the first frugal living book I had ever read (at age 19). I loved her ideas, especially because I was already doing quite a bit of them before I even picked her book up!
I mix both of their ideas and make sure we have at least a minimum amount saved as suggested by Dave Ramsey, and then budget what we can afford to put towards debt. Which is now about $275/month more than what all the minimums added together are. So, we have paid 1 bill off! We are just starting and even though it was a small balance, paying it off was a big boost of encouragement for us. So, now we will take the extra $300ish we have saved after negotiated lower rates, canceling some services, and the minimum payment amount from the bill we paid off and apply it to the next largest balance. And will continue with each debt until everything is paid off!
So, I know everyone wishes they could make more money because that would definitely help to pay off debt. I love to write and am experienced in marketing and branding, so while I have been home, I have helped a few friends with local businesses. They have given me gifts as thanks. This has been a great way to bring in some extra cash, but opportunities have come few and far between since I am mostly home with Bubba. So, I have decided to start freelancing to try to actually use and market my skills as a small business and bring in some extra cash to help pay off our debt faster and see if this may help me to afford to stay home permanently with Bubba.
Well, that is it for now. I look forward to hearing ideas you have for paying off debt and/or making some extra income. I plan to add some more posts about freelancing and if/when I am successful, will share with you how to best make money from home! See you next time as we continue to explore new ways of living on less!