How I Gave Up Debt: How Two Teachers Wiped Out Over $53,000

NerdWallet

In this series, NerdWallet sheds light on people’s debt repayment journeys. This month, Jae Bratton shares how she and her husband focused on erasing debt, fueled by the hope of starting a family.

Jae Bratton

Paid: Over $53,000 in 3 years

My story of letting go of over $53,046 in debt over two teachers’ salaries is one of pain, perseverance and cooperation. But it’s also a lot of love. My husband and I started paying off our debts shortly after we got married in 2016, and we made the final payment three years later, just before our son was born.

I was adamant that we wouldn’t start a family until we got rid of the debt. Rumor has it that kids are expensive, so I wanted to free up space in our budget for the inevitable medical bills, childcare, and college funds.

This rumor turned out to be a chilling fact.

Our four main strategies provide a roadmap for others working towards financial independence.

1. Create a battle plan

Debt is an adversary, a monster to be defeated before you can move on to the next level. This requires a well thought out plan of attack.

First, we gauged our opponent by identifying our debts and organizing them in a Google sheet. We had seven debts, including student loans, two car loans, a home improvement loan, and the remaining balance on my engagement ring. As each debt was conquered, I removed it from the spreadsheet, and oh, the satisfaction.

We chose the Debt snowball repayment method, where you focus all the extra payment money on the smaller debt while continuing to pay minimums on the others. I needed a few quick wins to stay motivated before tackling bigger and more daunting sales. We cleared our smallest debt in the first three months, $926.

Do not panic if you prefer the avalanche method, which attacks the most important debt first. Simply choosing one that suits your lifestyle and personality is more important than the approach. Snowball and avalanche are just two different paths to the same result.

2. Coherent budget

After listing the debts and deciding on a strategy, we drew up a budget every month. First, we calculated our combined income. At the start of our debt-free journey in August 2016, my husband and I brought home $4,694 a month. By subtracting mandatory expenses such as mortgage and utilities, groceries, and minimum debt payment, we knew how much money we had for additional debt payment.

Some months we paid the minimum on the debts and that was it. Then, when the money was more plentiful, we made additional payments, some months up to $3,500. In both cases, the budget determined how we spent every dollar and kept us disciplined. Did we stick to the budget each month? Absolutely not. But every month we tried. And when this month ended, we started again, with the aim of doing better than the previous one.

Many budget strategies, tools, and apps can help you write and stick to a budget. Pen and paper work well too. (My budgets were on sticky notes and dry erase boards.) Whether you prefer the 50/30/20 budget or like to fill cash envelopes, know that any budget is better than none. Without it, you risk forgetting bills, running out of money before payday, and delaying your debt repayment date.

3. Earn or find extra money to pay off your debts faster

Send extra money to debt

Most of the big cash inflows left our bank account before we were tempted to spend it: tax refunds, work bonuses, and earnings from second jobs. For example, my husband received an allowance to coach basketball, and I taught at the summer school. We both sacrificed time to earn more money, but somehow I got it back with interest: now I can be with my son after my working day is over rather than changing of work. This time spent with him is truly priceless.

Increase your income

I spent two years getting a professional certification which increased my salary by 12%, increasing my take home pay by $250. At that time, my car loan was $223 per month, so it was like an extra payment for the car.

Many jobs reward employees for adding certifications or credentials. If not, consider negotiating a raise or looking for a better paying job.

Adjust withholding tax, if necessary

If you receive a refund after filing your taxes, that means too much of your paycheck is going to the IRS, without interest. Of course, that money is eventually returned in one lump sum, but you receive smaller paychecks throughout the year.

After I got married, I filed a new W-4 to change my filing status from “single” to “married filing jointly.” At the same time, I adjusted my deductions after using the IRS Withholding Tax Estimator Tool. This increased my take home pay by $269.

4. Reduce expenses

“Just skip the daily trip to Starbucks.” This advice has become a cliché. But paying off thousands of debts requires bolder steps — and more painful sacrifices — than letting the slats go. So here’s what I did instead.

Charitable donations suspended

Some people will disagree with my decision to eliminate donations during debt repayment. When to give, how much and to whom are very personal choices. For my husband and I, briefly suspending charitable donations worked. You decide if it’s right for you.

lean lived

Reducing or eliminating expenses is inevitable if you are trying to pay off your debts. The good news: there are countless ways to do this. Check your bank and credit card statements and look for discount opportunities. Here are some ways we’ve lowered our cost of living:

  • My husband found a job closer to home, reducing his 31 mile commute to 6 miles and saving on gas.
  • We waited a year to take our honeymoon, which was mostly paid for with cash wedding gifts.
  • We saved as much as possible: I started shopping at a cheaper supermarket. My husband, an avid bowler, suspended play in one league to save about $20 a week in fees. He even switched to a cheaper brand of razor.

5. Save strategically

I constantly built my family emergency fundexceeding the $1,000 that some say is enough for those who discharge their debts.

This decision indeed delayed our debt-free date, but on the other hand, a healthy emergency fund gave me an invaluable financial cushion and peace of mind. I knew I could cover expenses in a financial emergency without going into debt again.

Imagine your life after debt

Fuel yourself for the debt repayment journey by imagining life after.

I felt light and a deep sense of accomplishment when I submitted the last debt payment in 2019. For three years I was so focused on our journey. I alternated between regretting financial mistakes and moping about things I couldn’t afford. After paying off $53,000 in debt, I looked outward and started giving back to causes and giving to others. Even better, I was free to start a family.

Photo courtesy of Jae Bratton.

Perry A. Thomasson