How We Paid Off $8,500 In Debt Last Month

When I first met my husband his credit was very low. He was about to be evicted from his apartment and wasn't making a lot from his job. It was a situation all parents would dread for their daughter. A week into dating he was invited to live with me and my roommates. After a few months, our relationship had progressed and we moved into our own place.

Up until that point, I had savings and a good credit score. Years later our combined finances had taken a toll on our financial health. He ultimately found a job that made him very happy, but it paid very little. Meanwhile, I finished my degree and absolutely hated what I was doing for a living despite being paid reasonably well.

Over time our savings had dwindled and each bump in our path drove us further into debt. One day we found ourselves contacting bankruptcy attorneys, we were living with family, and our relationship was at the rockiest it had ever been.

That was nearly five years ago now. We have made a lot of changes and over time we have developed strategies to manage our money. In February we managed to pay off $8,500 in debt. Getting out of debt is completely possible, but will require some work. The strategies listed below are also rated in terms of effort from easy to hard.

Disclaimer: I am not paid or sponsored by any of the companies mentioned below at this time.

1. Mindset

Effort: Medium

I rated this as a medium effort because changing our way of doing things is challenging. We are creatures of habit. Making the change from spenders to savers means changing how you think about money. You may want a fancy car but do you need it? Do you really not have anything to eat in your fridge or are you just craving something from DoorDash?

One of the best ways to change your mindset is to create SMART goals for yourself. This means setting goals that are Specific, Measurable, Achievable, Realistic, and Time-Based. An example of this would be to save $1,000 in the next 90 days by setting aside $85 each week.

By creating a goal for yourself you are setting it as a priority. It's very difficult to achieve something that isn't really a priority. Mostly because other things we've actually given priority will continue to sabotage progress towards anything else.

2. Sign up for Acorns or Auto-Savings

Effort: Easy

One of the ways that we found a lot of was actually from one of the easiest changes that we made. We decided to start paying ourselves first. Remember that SMART goal example from earlier? That was the first SMART goal that we put in place.

We signed up for Acorns, which is a very convenient app that can connect with your bank account and the cards you use to make purchases. When you make a purchase the transaction will be rounded up and the change deposited into your Acorns account. You can also specify amounts to withdraw weekly.

When you want to use it Acorns will need around 3 to 6 business days to put it back in your account. So keep in mind that this should mostly be to discourage spending, but shouldn't take the place of an emergency savings account.

So you can add secondary automated savings as well. We added a $40 withdrawal amount into Acorns each week, plus also automated another $40 each week from our checking into our savings through our regular bank. With roundups from Acorns, we often exceeded the other $5 we needed to reach our goal every week.

While $85 a week can seem like a lot of money, imagine the scenario below.

You have a hard Monday and really don't want to cook so you order $35 in delivery from DoorDash. Then Wednesday comes around and you had another hard day at the office and troll Amazon for one of their Lightning Deals. You find something on sale for $9.99, which doesn't seem like much. After shipping, you end up paying nearly $20. Thursday your office has a special lunch and a vendor comes by. You brought your lunch, but don't want to miss out so you pay a hefty $8 for tacos and chips.

You can see where I'm going with this. There are many things that we run to our credit card for on a whim, but paying ourselves first is rarely second-nature. When you automate your savings you are making your savings a priority. Boom! Strategies one and two!

3. Create A Budget

Effort: Medium

This one is a medium effort because it requires really getting your numbers in a row. Pull up Excel, jot it down on a journal page, or get a printable worksheet from Google. Whichever way is easiest for you is the right way. This doesn't need to be rocket science or calculus.

Simply put, a budget should account for every penny you have coming in each month and each penny going out for the month. Do not leave a single penny unaccounted for and be completely honest. Take note of all of your fixed expenses, like rent and subscriptions, that don't change from month to month. Then jot down your variable expenses, like groceries and gas money, that tend to fluctuate each month.

When you've listed them all, and honest assessments of what each one costs, look for areas you can trim some of the fat. Do you need Cable? Or that Netflix subscription? What about that gym membership you haven't used in two months? These are opportunities to turn previous expenses into areas of savings.

Once you've set your budget look for your leftovers. That will give you an idea of what your take-home should be. When I first did my budget I lied to myself about how much we were spending. Being honest made me realize two things. The first is that I was truly embarrassed. And the second was that I had been completely oblivious to how much we were spending on garbage.

There was a very solid gap between what we were making and what expenses we had to budget coming out. The difference was incredible. One thing that was our highest variable expense was food! We were spending nearly double our food budget for just two people. Sometimes writing a budget can help us locate where we tend to hemorrhage money.

4. Make More Money

Effort: Hard

Okay, this is one of the hardest parts of debt management. For some, this actually may come easily. But for those of us who are a little more introverted and have trouble fighting for ourselves, this can get a little rough.

This doesn't necessarily mean getting a second job, though that's not a bad idea either. Since time is limited and free time should be a reward for our labor, getting a second job isn't necessarily the first option. That should be something that comes as a last resort when it comes to bringing in income.

So, take a look at your current job. This may be time to do a little Google. When you look at the average salary of your current job title are you above it or below it? If you are below it, you should definitely consider your options. Are you able to ask for a raise? Asking can be really scary and difficult, but don't undervalue yourself and your skills. There are other companies out there willing to pay you more.

Is there a way to get overtime? Or perhaps to transition into another role at your current company that would pay you more? By evaluating your situation with your current job you may be able to take advantage of opportunities to be paid more for what you currently do or boost yourself into a better paying position.

My husband and I both had to work on this. We built our budget for where we were but needed to find ways to create more breathing room so we could still add to savings and make bigger contributions to our debts. My husband was a rockstar at the job he loved but hadn't made it clear that he wanted to do more. When he started to ask for more leadership opportunities his company didn't respond with enthusiasm. They were more than happy to keep him where he was.

So he dusted off the resume and used his network to look for places that wanted his skills and potential. Within a few months of looking, he found an amazing job that put him right into a leadership position and paid him a lot more. The extra funds made an incredible difference in what we could throw into debt each month.

Additional money being earned or surprise money that we aren't anticipating should be tracked just like your budget. Remember, it should be every penny that comes in and every penny that goes out being accounted for. Windfalls are also important to budget. You can't reach goals you aren't actively tracking.

5. Snowball Your Debt

Effort: Easy

This is one of the most valuable tools in managing your finances. The snowball method is a great technique for paying off debt. List out your debts from smallest to largest. Don't worry about interest for now. If you have two equal debts list the highest interest first, but this isn't meant to take a lot of math.

When you pay extra to your debt each month, pick the lowest one and put all of the extra just on the one debt. When that debt is finished, put the extra money, plus the amount that went to the previous bill, towards the next highest debt. So all of your other debt will be the minimum payment and leftover funds should be focused on just one debt.

Here's an example of what it would look like:

Over time, this really adds up. It's important to remember that increased income should not mean increased spending. It gets really tempting as the debt goes down and income goes up to start looking at all of the things you could buy. Aside from Hollywood, most rich people don't spend a whole lot of money. Or if they do it sounds like a lot to those of us who aren't wealthy but is a very small fraction of their income.

Paying off debt isn't about getting rich. It's about enriching the life you currently have.

Wrapping it all up

There are a lot of different strategies for decreasing debt. It is important to set your budget to help track and create accountability regarding your spending habits. Automate your savings to make sure you have enough put away for emergencies.

Focus your efforts on your smaller debts and then when it's finished roll over what you have already budgeted to pay towards the next debt for maximum impact. Set SMART goals to keep you moving in the right direction. Lastly, don't undervalue yourself and the skills you already possess when it comes to increasing your income now.

Photo credit to Mikhail Nilov from Pexels.