How We Paid off Six Figures of Debt

How we got to six figures of non-mortgage debt:

In the summer of 2012, we found an opportunity to purchase an office building for our small business. We had been renting for over 10 years and we were ready to find a property to move our business to and eventually build our net worth.

Everything looked great on paper. Our business was doing very well, and we were excited about the opportunity to own a property outside of our home. Also, the monthly mortgage payment was less than our rent payment. What could possibly go wrong?

After the first year, the new business debt weighed on me. Aside from the mortgage, we also added equipment and renovation loans with the purchase, and we had a student loan. Our non-mortgage loans totaled over six figures.

By the summer of 2013, we found ourselves in a pickle–we had too much debt and not enough cash flow.

Overwhelmed with everything, I wrote our first Debt Freedom Plan based on Dave Ramey’s 7 Baby Step strategy but tailored to our lifestyle. We spent the next 6 years focused on paying off all of our non-mortgage debts.

How We Paid off Six Figures on Non-Mortgage Debt:

Our non-mortgage debt was in the six figures when we wrote Our Debt Freedom plan and included 5 loans. With that much debt, we needed some go big or go home heavy hitters that would make a big impact on debt reduction.  While reducing our day to day spending would certainly help, we needed to reduce large chunks of debt at a time to pay off six figures quickly.

We followed Dave Ramsey’s debt snowball method for debt reduction. We started with 5 loans and paid the smallest loan off first while making the minimum payments on the other 4 loans. When the smallest loan was paid off, we put that minimum payment towards the next smallest loan. When that loan was paid off, we put that full amount towards the third loan and this continued until September 2019. It turned out that our last loan was also the loan with the smallest interest rate, so the math nerds can relax. 😉

The Heavy Hitters:

1. We increased our income.

My husband and I divide and conquer in many aspects of our lives. Financially speaking, he focuses on building the business and I focus on managing our home and finances. When I first approached him about paying off these debts early, he said to me, “it’s not going to happen by clipping coupons. We need to increase our income.”

At our business, we focused on our mission of helping more patients and have had steady growth over the years. Also, we both have side hustles. I don’t make a lot of income on this blog, and it has definitely decreased recently as I’ve reduced my hours spent blogging. However, it produces a small part-time income from side-bar ads and affiliate commissions. My husband has side income from swim coaching and private lessons. This side hustle income was mainly used for the fun stuff, such as camping, home renovations & repairs, and needs for our kids.

2. We stopped retirement contributions.

This is a very controversial decision and you need to make decisions based on what’s best for you, not based on my actions.

I’ll be honest, I would never have come up with this idea on my own. But at the beginning of our journey to pay off the debt, I was listening to Dave Ramsey on the radio. As part of his baby steps, he does not advocate contributing to retirement until after you’ve paid off non-mortgage debts and saved 3-6 months of expenses in an emergency fund.

When I first heard Dave Ramsey talk about holding off on retirement contributions, I shrugged it off. Both my husband and I have been contributing to (and for many years maxing out) our retirement savings since our 20’s–way before marriage and children–and there was no way we were going to stop.

However, we were never going to make any substantial headway on paying off these loans early unless we had some heavy hitters and our monthly retirement contribution was a heavy hitter. As hard as it was to do, we stopped contributing to our retirement for about three years and applied that money to these loans.

The good news is that the consistency my husband and I both had prior to 2013 allowed us to build a decent amount in our retirement. The bad news is that we were in our prime earning & investing years when we stopped contributing.

While we don’t regret the decision to pause retirement contributions, since it’s a big reason why we were able to pay off so much debt, we did start to feel uneasy.  We’re no spring chickens, so in November 2016, we started contributing again to our retirement. We didn’t max out our contributions, but we were at least contributing something and while it prolonged our pay off period, it was a compromise that made us both feel better.

3. Small home = Low Expenses

In September 2001, we bought a 1700 square foot home with a one-car garage and ONE full bathroom. At that time, we didn’t have children, so we considered this home to be a starter home that we would eventually outgrow.

We’re STILL here! And I’ll be honest, I don’t always love living in a small home. In fact, I dream often of having more space, but small homes have much lower expenses. My husband reminds me of this every time I surf Zillow.

While our income has grown over the years, our home expenses have stayed the same. We have thought about moving to a larger home with more space, but a smaller home means lower utility bills, homeowners’ insurance premiums, maintenance, and property taxes.

I will most likely continue to surf Zillow, and we will most likely stay put for the foreseeable future.

4. Health Sharing Ministry

We weren’t in the market to leave our traditional health insurance plan until the monthly premiums became more than our home mortgage back in November 2016. We could no longer afford traditional health insurance, so we researched other options and took a leap of faith with a health sharing ministry. Our premium dropped $500 a month in the first year. We applied some of this extra cash towards debt and the balance was saved for medical expenses.

In these posts, I go into a lot of detail about our experience with Medi-Share, the health sharing ministry that we chose:

• Why We Left Traditional Health Insurance
• Why We Chose Medi-Share, an affordable solution to traditional health insurance
• An Update on Medi-Share – September 2017
• Medi-Share Update: One Year Later
• One of these days, I’m going to write another update. In 2020, we still use and are thankful for Medi-share. Our monthly costs have gone up since 2017, but we’re still paying much less than we would with traditional health insurance.

5. We drive older cars.

We buy reliable vehicle brands that are built to drive for many many years. My Honda Odyssey is almost 13 years old and has about 167k miles on it. My husband drives a 2012 Nissan that we bought used in 2017 to replace a 2001 Honda Civic. We have had to put money into wear and tear repairs for the van in the past year, but both vehicles still drive very well, and we haven’t had car payments in many years.

Home and auto expenses are two big budget categories and by keeping these expenses low, we were able to put more aside to our debts.

SMALL changes add up to BIG results:

With our home, auto, and medical expenses low, we nickel and dimed the rest of our budget and found some extra funds each month to send to our debts.

1. Groceries

I have written this many times, “the grocery budget is the easiest budget category to get out of control and the easiest budget category to control.” By planning our meals and grocery list, I am able to maintain our grocery budget and still eat very well. When we started our Debt Freedom Plan, our kids were 8 & 6 and I worked hard to keep our grocery bill about $400-500 a month.

My grocery strategies: How to Save Money on Groceries

My kids are now almost 15 and 12 and eat as much as adults! I spend closer to $900 now and thankfully, paying off that non-mortgage debt gave us some wiggle room.

2. Restaurants

We LOVE to go out to dinner! Who doesn’t? Someone else cooks and cleans up–it’s truly awesome! But at one time, we ate out quite a bit. In fact, there would be entire weekends that we ate at a restaurant for every single meal–breakfasts, lunch, and dinner…AND ice cream cones for dessert!

But once we started our Debt Freedom Plan, we cut restaurants back to once a week. We didn’t eliminate eating out completely, but just cutting back the splurge to once a week drastically reduced how much we spent.

When we did eat out, we followed these rules: 15 Smart Tips to Save Money When Eating Out

3. We stopped paying for our gym membership. 

We didn’t stop going to the gym, but my husband figured out how to get a free membership, freeing up $67/month.

Read: How to Get a FREE Gym Membership

4. We cut cable tv and our landline. 

Years ago, our cable bill doubled in price. When I called the cable company hoping for some relief, they instead told me that there was nothing they could do about the price.

So my husband set up an antenna and we walked away from cable completely, saving us about $50 a month.

Read: How We Watch Great TV without Cable

How do you eat an elephant?

Living a life focused on paying off debt is not always easy. We said NO a lot. We moved the goal post multiple times. There were months we were able to send a lot of money to our debts and then there were months where we could only make our minimum payments. We struggled with envy and FOMO, but we continued to make progress and bite by bite, we ate an elephant.

Related Reading:

• How Our Debt Freedom Plan Prepared us for the Pandemic
• We Did It! We just ate an elephant!